Archives For corporate crime

Jon Macey insightfully wrote in the WSJ that the Galleon case illustrates the need to distinguish “trading on the basis of information that was legitimately ferreted out from trading on the basis of information that has been wrongfully obtained through fraud or theft.”

Macey notes that the SEC’s refusal to clarify the distinction between the mountain of trading on non-public information from the molehill of stolen information (which could include the information about Clearwire Rajaratnam paid Rajiv Goel for in violation of the latter’s duty to Intel) fosters an ambiguity that “increases the SEC’s power and allows government lawyers to pick and choose among prosecution targets.” He concludes that “the government should be compelled to provide clear guidance as to what constitutes illegal insider trading and what constitutes legitimate, albeit aggressive, research.”

That’s true for all insider trading cases, but especially true for criminal cases.  Business people will stay a long way from conduct that has any chance of being characterized as criminal.  Indeed, that deterrence is why we use powerful criminal sanctions.  But the avoided trading, including the industrious digging that characterized much of Rajaratnam’s activities. could bring valuable information into the market that enhances its efficiency.  Moreover, empowering prosecutors with vague laws invites a host of abuses in cases against corporate agents that sully our criminal justice system.

The SEC might argue that clarifying the scope of illegal insider trading could limit its ability to catch the really bad trading based on theft or fraud.  The government needs to sweep broadly in order to bore down into the facts that reveal serious misconduct.  But even if this is true, we need to balance the benefits of catching a few more theft cases against the costs of compromising market efficiency and encouraging prosecutorial abuse. 

In balancing costs and benefits, we should keep in mind that illegal insider trading is basically just another type of agency cost, like any fiduciary breach.  This sort of conduct is generally handled by firms’ contracts and discipline, as I noted recently regarding David Sokol’s trades and discussed at more length in my Federalism and Insider Trading, 6 Supreme Court Economic Review, 123 (1998).  Intel has ample incentive to punish Goel if he’s profited from personal use of information that is essentially a corporate asset.  And if the managers disregard shareholders’ interests in failing to impose discipline, the shareholders can sue derivatively as has been done in the Sokol case.

It’s no wonder that the SEC would want the public to see Rajatnaram sitting in the dock day after day to show that the SEC is protecting public markets.  But this spectacle is not a substitute for the work the SEC should be doing in guarding against future Madoffs.

Tom Kirkendall rightly criticizes a Gretchen Morgenson “newsitorial” in the NYT on the absence of criminal prosecutions from the financial meltdown. Even pairing Morgenson with a real reporter can’t hide the true nature of this diatribe, which picks up where Inside Job’s Charles Ferguson left off on Oscar night.  Morgenson’s screed even trots out quotes from Inside Job’s star, cause lawyer Robert Gnaizda. 

The long article is replete with insinuations of coverup and conspiracy to squelch a true reckoning spanning several presidents and such supposed shady characters as Andrew Cuomo, Tim Geithner and the the members of the Financial Crisis Inquiry Commission.  Morgenson brushes aside commonsense recognition of the potential costs and uncertainty of criminal proceedings.  In place of evidence of criminal conduct is the accusation that costly and disruptive investigations might have uncovered some.

After reading this Morgenscreed, you might want to see my article on the dangers of pressuring prosecutors to scapegoat financial disaster, and be thankful they have so far been resisted.

Walter Olson has been posting on a Colorado plan to give bonuses to prosecutors based on conviction rates.  His latest post on why this is a bad idea says “[v]ery similar logic helps explain the historically prevailing ban on contingency fees for lawyers in most Western legal systems.” 

Actually, this is worse. 

First, there’s a problem of measuring the value of prosecutors’ output. As discussed in the current version of my draft paper Agents Prosecuting Agents:

Designing incentive compensation for prosecutors presents significant challenges.  Even in private law firms in which lawyers produce a clear financial output in the form of fees, there is controversy over whether billable hours or lockstep seniority-based compensation provides the best overall incentives.  The compensation design challenge is greater for prosecutors because there is no measure of the value of prosecutorial efforts.  Obviously a simple metric such as number of prosecutions would skew incentives, in that it may induce prosecutors to ignore the social costs of misguided prosecutions.  One author has proposed compensation based on convictions of charged crimes with deductions for findings of prosecutorial misconduct [citing Tracey L. Meares, Rewards For Good Behavior: Influencing Prosecutorial Discretion & Conduct With Financial Incentives, 64 Fordham L. Rev. 851, 901-02 (1995)].   However, this could skew incentives toward, for example, undercharging defendants and over-caution [citing Stephanos Bibas, Rewarding Prosecutors for Performance, 6 Ohio St. J. Crim. L. 441, 449 (2009)].   On the other hand, tests that try to take more factors into account would be very costly to apply [id at 447].

Second, getting the incentives wrong has really bad consequences with respect to prosecutors.  Unlike other trial lawyers, whose output is disciplined by the adversary process, my article points out that prosecutors wield significant power to thwart this process. Among other things, prosecutors can threaten defendants and potential defense witnesses with significant loss of liberty — a threat that is far more intense than anything a civil lawyer can throw at a defendant.  The revolving door into politics and white collar crime defense already tempts prosecutors into over-zealotry. 

There’s a lot of worry going around about how financial rewards tempt corporate executives and bankers into bad behavior.  It would be very odd if we cared less about perverse incentives for people who have power over human liberty and even life.

More on Gupta-gate

Larry Ribstein —  19 March 2011

I first addressed what I call “Gupta gate” a week ago in a post on “the SEC’s shrinking credibility.” There I noted:

Guptagate is the SEC’s decision on March 1, the eve of its big Rajaratnam case, to file an administrative order against Rajat K. Gupta, former Goldman Sachs and P & G director, for tipping Rajaratnam about nonpublic information at the two companies.  Gupta had responded to a Wells notice only four days earlier, and the SEC made the decision after an unusually short weekend review.

I suggested that the SEC might be “in league with Justice to patch a gaping hole in its case against R by tainting a key witness.” 

Three days later I reported more evidence for this explanation.  I quoted John Carney’s story based on unnamed sources that the SEC evidently had rushed ahead with the Dodd-Frank proceeding because “[t]he evidence that Gupta seemed willing to provide was friendly toward Rajaratnam* * *The SEC, which views Rajaratnam a thoroughly bad guy, viewed this as an alarming development[.]”

The latest development is Gupta’s filing yesterday of a declaratory judgment action against SEC seeking to block the Dodd-Frank proceeding against Gupta.  The complaint notes, among other things:

  • The alleged conduct happened before Dodd-Frank, and there is no indication that the relevant provision (§929P) was to be applied retroactively.  [It is worth noting that this is no mere technicality.  Before Dodd-Frank, only broker-dealers knew they could be hauled in front of the securities industry’s main regulator in a non-judicial proceeding.  You might take this into account in deciding, among other things, whether you wanted to go into this line of work.  You did not take this risk merely by being a public corporation director like Gupta.  After 929P you might quit being a director if you thought your conduct might be subject to this extra level of scrutiny, or at least seek extra compensation for the extra scrutiny. Retroactivity denies regulated individuals this opportunity.]
  • The SEC’s order doesn’t allege that Gupta profited from tipping inside information or identify direct evidence that he conveyed material nonpublic information.
  • The first 27 Galleon related cases were filed in federal court.  This is the first administrative proceeding and the first use of the above Dodd-Frank provision against a non-broker dealer.
  • Procedures under the Dodd-Frank provision include an accelerated hearing schedule, no depositions, and the use of multiple layers of hearsay evidence.  This reduced level of procedural protection is especially critical in case like this which lacks direct evidence (i.e., a phone tap) that there was even a tip, and where it is especially important to be able to delve into the circumstances surrounding any allegedly culpable conversation.
  • Gupta emailed his Wells submission at 10:45 on Friday February 25, 2011 and delivered hard copy to the SEC the following Monday.  The Commission emailed a copy to the US Attorney’s office for use in Rajaratnam’s prosecution by Saturday and authorized proceeding against Gupta by Monday afternoon.  This haste suggests that the SEC could not be bothered with fine questions about Gupta’s guilt or innocence.  The only thing that mattered is the fact he wasn’t caving in.
  • Gupta was not informed before his submission of the possibility of administrative proceeding and had no opportunity to address this issue in his submission.

Gupta’s complaint states that “[t]he only plausible inference is that the Commission is proceeding how and where it is against Mr. Gupta for the bad faith purpose of shoring up a meritless case by disarming its adversary.”

The complaint not only makes a strong case for dismissal against Gupta, but raises a significant issue as to whether the Rajaratnam prosecution has been tainted by this extraordinary proceeding against a potentially important witness.

And on a more general level, it’s past time to take a very hard look at the agency that Congress has entrusted to police our financial markets post Dodd-Frank.

Friday I wondered whether the SEC’s hurried decision to administratively charge former Goldman director Gupta with insider trading suggested it was “in league with Justice to patch a gaping hole in its case against R by tainting a key witness.” 

Then I updated with John Carney’s story that Justice actually opposed the SEC over these charges, and they seemed rather to be a power play by the SEC in its struggle for supremacy over Justice.

Now Carney reports that the SEC “pushed ahead with its insider trading case against Rajat Gupta because of his status as a sitting board member on public companies” “which made him a continuing threat to shareholders of those companies.” 

But I wonder:  since Gupta was denying wrongdoing, how did the SEC know he was a danger to shareholders?  Why couldn’t it take a little longer than a weekend to consider Gupta’s reply to the Wells notice? 

Carney’s story hints at an answer: 

When Gupta responded to the Wells Notice in February, his response raised additional red flags with investigators at the SEC. The evidence that Gupta seemed willing to provide was friendly toward Rajaratnam, according to a person familiar with the matter who is not at the SEC. The SEC, which views Rajaratnam a thoroughly bad guy, viewed this as an alarming development, according to a person familiar with the thinking inside the SEC. From their point of view, Gupta was continuing as a co-conspirator with Rajartnam. They were determined to take action quickly.

In other words, apart from all that “guilty until proven innocent” stuff that the SEC apparently doesn’t believe, the real problem seems to be that Gupta — why he was a “thoroughly bad guy” — is that he might help Raj, who the SEC is totally convinced is guilty despite the fact that he’s still on trial.

Maybe I was right in the first place. Stay tuned.

Fuld, Mozilo and Raj

Larry Ribstein —  12 March 2011

The WSJ reports that the investigation of Lehman’s collapse “has hit daunting hurdles that could result in no civil or criminal charges ever being filed against the company’s former executives.” The problem is that, despite Lehman’s examiner’s conclusion that Lehman used tricks (the famous Repo 105) to “paint a misleading picture of its financial condition,” Linklaters signed off on these transactions and Ernst & Young’s Lehman audit conformed with then-existing standards.

Prosecutors likely remember the acquittal of Bear Stearns’ hedge-fund managers despite some seemingly damaging emails.  They learned then that people don’t go to jail just for guessing wrong about the market.  This time, Lehman’s Fuld is saying he had “absolutely no recollection whatsoever of hearing anything” about Repo 105s and that Lehman sank because of “uncontrollable market forces” and the fact that the government decided not to rescue Lehman.

A couple of weeks ago Angelo Mozilo’s criminal investigation also ended without charges.  At the time I discussed a Holman Jenkins column explaining that

Mozilo basically got caught in a bubble.  * * * He didn’t foresee “unprecedented collapse in home prices” or “Countrywide’s own funding drying up overnight.” So Mozilo avoided jail for following the crowd and not foreseeing the unexpected.  That left him better off than Jeff Skilling or Ken Lay. 

But as Fuld and Mozilo go on with their lives, people are still howling for financier blood. It’s hard to believe that the trial of Raj Rajaratnam, who is facing 20 years in jail for trading in true information, doesn’t have something to do with that.

Peter Henning discusses “the SEC under fire”, specifically Beckergate, which I’ve already discussed, and Guptagate, which I’ve been mulling since Sorkin’s Dealbook column last Monday. Henning observes that “the questions being asked could undermine the agency’s credibility as an effective regulator of the securities markets.”

As for Beckergate, Henning notes (in addition to the issues discussed in my post earlier today) that ethics approval came 25 minutes after the request from an ethics officer who was supervised by Becker, and “did not consider whether there would be any appearance of impropriety even though work on the matter came within the letter of the conflict of interest rules.” 

Becker was involved in the SEC’s decision whether to clawback money from from a $1.54 million account in which he had an interest.  Does this seem like there might be an appearance of impropriety worth more than 25 minutes deliberation?  

Moreover, even if this is ok with the government, it might not be ok with the DC bar.  Henning points out that Becker’s judgment might well be “adversely affected by the lawyer’s * * * own financial, business, property, or personal interests,” and thus raising a question under DC attorney ethics rules.  

Guptagate is the SEC’s decision on March 1, the eve of its big Rajaratnam case, to file an administrative order against Rajat K. Gupta, former Goldman Sachs and P & G director, for tipping Rajaratnam about nonpublic information at the two companies.  Gupta had responded to a Wells notice only four days earlier, and the SEC made the decision after an unusually short weekend review.

Moreover, the SEC chose this as the first insider trading case (and the first of the 26 Galleon related cases) to be brought under a new Dodd-Frank provision that gives the SEC the benefit of a “home court,” a lower evidentiary standard, and the opportunity to avoid judicial review.  (Betcha didn’t know this was what Dodd-Frank was for).  Yet just a few days later the SEC filed an insider trading case against a lawyer in federal court that involved only $27,400, much less than R supposedly made off Gupta’s information.

Sorkin notes that despite its extensive phone-tapping, the Gupta calls evidently weren’t recorded.  Also, “you have to imagine that if the evidence was truly overwhelming against him, Mr. Gupta might have sought to become a government witness to save himself.”

So is the SEC in league with Justice to patch a gaping hole in its case against R by tainting a key witness?  If so, it wouldn’t be the first time the government has used its power to threaten and taint potential defense witnesses to smooth its path to victory.  Indeed, as I’ve written, such abuse is a foreseeable result of giving great power to lightly supervised government agents. 

If we’re going to keep passing financial laws that beef up the SEC’s power, we need to watch carefully how that power is exercised.

Update:  Carney reports the SEC was actually at odds with Justice over the Gupta charges and that they were actually a power play by the SEC. So less bad for Justice, but arguably even worse for the SEC.


Mr. Bharara’s focus on insider trading has surprised many people on Wall Street. They had expected his office to instead bring criminal charges against top executives at the large banks that were at the center of the financial crisis.

The government’s gotten a lot of heat for not charging these executives, including at the Academy Awards. Bharara is well positioned to take a lot of that heat. He had to do something.

Rajaratnam must have seemed a tempting target.  He’s trading on non-public information.  The largely judge-made lines between legal and illegal trading are hazy and getting hazier, and Congress and the SEC have refused to define the illegality more precisely.  Surely if Bharara threw enough of his office’s prodigious resources at the problem he would come up with something.

Once Bharara decided to go after Rajaratnam, the hedge fund manager was all but doomed.  As Lattman points out, Bharara used “techniques traditionally used in pursuing organized crime,” including “173 secretly recorded telephone conversations.” He pursued the little guys and could threaten them with already draconian potential sentences. So “[n]ineteen traders in Mr. Rajaratnam’s orbit have already pleaded guilty to insider trading, several of whom are cooperating with the government and are expected to testify.”

Here’s one way of looking at this story.  Back in the glory days of Enron, Bharara might have been able to cook up something against one of the bankers. But a lot of those hard-to-prove cases flamed out and the prosecutors took some heat.  So a hedge fund manager finds himself being pursued as if he’s a mobster. 

While we’re condemning the actions of business criminals, we should save a little analysis for those who decide what conduct is criminal.

Angelo’s escape

Larry Ribstein —  23 February 2011

So Mozilo won’t be criminally prosecuted for Countrywide.  Holman Jenkins writes in today’s WSJ:

The incentive to bring a case against a vilified public figure, of course, is huge. Weighed against this, however, must be the chance of being humiliated by a judge, possibly censured, now that the legal system has started blowing the whistle on cases that strain to arrange the ill- fitting garments of criminal law around business defendants. * * *

Mr. Mozilo’s first thank-you note should probably go to Mark Belnick, the former Tyco executive whom a jury found did not commit “grand larceny” by accepting a bonus authorized by the company’s CEO. Mr. Belnick’s acquittal in 2004, in retrospect, was a harbinger.

There followed a pair of stock-option backdating cases thrown out by judges on grounds of “prosecutorial misconduct” that amounted to trying to make innocuous behavior appear nefarious. Two Bear Stearns executives were acquitted of the non-crime of losing money in the housing bubble. Capping off the trend was a Supreme Court decision last year disarming the “honest services” blunderbuss, which threatened to turn any self-interested behavior by a CEO into a crime.

Jenkins explains that Mozilo’s supposed crime was trafficking in “whatever types of loans seemed to be acceptable in the marketplace to consumers and sellable to Wall Street as securities.” Mozilo basically got caught in a bubble.  He expected the company to be around to “pick up the pieces when the ‘innovators’ had exited,” as Jenkins says. He didn’t foresee “unprecedented collapse in home prices” or “Countrywide’s own funding drying up overnight.”

So Mozilo avoided jail for following the crowd and not foreseeing the unexpected.  That left him better off than Jeff Skilling or Ken Lay.  Hopefully this prosecutorial forbearance will become a trend.  But based on the incentives and institutions I discuss in my Agents Prosecuting Agents, I’m not so sure about that.

Death to insider traders

Larry Ribstein —  16 February 2011

NY U.S. Attorney Preet Bharara testified today at the U.S. Sentencing Commission for stiffer insider trading penalties.  He said “[t]he guidelines as they stand may be letting some defendants in some cases off with lighter sentences than they deserve” because stock market moves unrelated to the inside information reduced or eliminated profit on their trades.

The WSJ reports that  

One of the members of the commission, federal judge Beryl Howell, said she was “disappointed” Mr. Bharara’s testimony didn’t come with more specific details that would show the Justice Department’s “willingness to do the hard work” of updating the sentencing guidelines for such crimes. * * *

Marvin Pickholz, a former Securities and Exchange Commission lawyer now in private practice, said prosecutors like Mr. Bharara “already have all the weapons they need to pursue such cases.” Mr. Pickholz said that if penalties are stiffened for those who make little profit from insider trading, the practical effect could be a mandatory minimum sentence for convicted insider traders, which doesn’t exist currently.

Bharara’s complaint is just one of many possible illustrations of the disconnect between insider trading penalties and the actual harm caused by insider trading.  Most importantly, the trading itself generally helps the market by making it more efficient.  (The real problem is theft of the information, and this shouldn’t be a federal crime anyway.  See my article, Federalism and Insider Trading, 6 Supreme Court Economic Review, 123 (1998).)

Anyway, what Bharara and his ilk really want is draconian and automatic penalties that they can use to threaten potential defendants into submission so they don’t have to do the messy work of proving their case (e.g., by showing when expert networks actually violate the law). From this standpoint, while Bharara didn’t specify what he wanted, a mandatory death penalty would probably do just fine.

In general, the Sentencing Commission and other policymakers should keep in mind when deciding whether to give prosecutors more tools to use in going after corporate agents that prosecutors have their own agency problems.

Agents Prosecuting Agents

Larry Ribstein —  12 January 2011

I’ve been blogging over the years quite a bit about a problem I call “criminalizing agency costs,” which is a piece of the general problem of over-criminalization.  In fact, this problem was a big reason for my getting started in blogging almost seven years ago.

As I mentioned a couple of months ago, I presented a paper on this at George Mason’s “Over-criminalization 2.0” conference. Now the paper’s on SSRNAgents Prosecuting Agents. Here’s the abstract:

Significant questions have been raised concerning the efficiency of criminalizing agency costs and the problems of excessive prosecution of crimes committed by corporate agents. This paper provides a new perspective on these questions by analyzing them from the perspective of agency cost theory. It shows that there are close analogies between the agency costs associated with prosecutors in corporate crime cases and those of the agents being prosecuted. The important difference between the two contexts is that prosecutors are not subject to many of the standard mechanisms for dealing with corporate agency costs. An implication of this analysis is that society must decide if prosecuting corporate agents is worth incurring the agency costs of prosecutors.

It’s a simple concept:  If agency costs are a big enough deal to criminalize, we should worry about the agency costs on the prosecutors’ side as well.

Read it while it’s hot.

Henry G. Manne is Dean Emeritus of the George Mason University School of Law and Distinguished Visiting Professor at the Ave Maria School of Law.

The SEC is at it again, scandal mongering insider trading.  As usual this is the “biggest insider trading case yet,” as if they were trying for some Guinness record.  Since this story will be in the financial press for months and months to come, the well informed spectator – or participant – will want to understand that a lot of what is thought to be known about insider trading “ain’t necessarily so.”

1) Insider trading injures the stock traders who buy from or sell to the insider.

False: these outsiders are voluntarily transacting in an anonymous stock market and would be there and make or lose about the same amount regardless of the identity of the other party.

2) Legalizing insider trading would cause a great loss of confidence in the integrity of the stock market and thereby reduce capital investment, liquidity and trading.

False: Empirical studies strongly contradict this, and a robust stock market in the United States before the late 1960’s (when serious enforcement began) or in the rest of the world today (where serious enforcement has yet to begin) denies this.

3) Sensible enforcement of insider trading laws is feasible.

False: the ever larger, politically inspired, and inevitably unproductive SEC campaigns against insider trading demonstrate that significant enforcement is not only difficult, it is practically impossible.  And this is to say nothing of the logical impossibility of policing gains made by an insider’s knowing when not to buy or sell, a purely mental transaction that can never be policed.

4)  The SEC’s high-tech detection methods uncover illicit trading.

False: This claim has been made by the SEC from the beginning and is apparently not much more true today than it was fifty years ago.  Use of informants and wire tapping are the methods by which the SEC does most of its policing.

5)  There are no net social or economic costs to partial enforcement of these laws.

False:  The individuals who might be desirably motivated in their work by the right to trade on inside information are displaced (because they are so easily spotted and targeted by the SEC) by individuals with no claim to the value of the information but who are more difficult to identify and convict.

6)  We need regulation since the corporation itself has a property right in the information it produces, and the government can better protect this right than can the individual corporations.

False:  If the corporation had a real property right, then it could opt out of the regulation and allow its insiders to trade, something the SEC has steadfastly resisted.  And even if the government could enforce the rule more efficiently (highly dubious), there is no justification for this subsidy to certain companies.  (Even Steve Bainbridge gets this one wrong.)

7)  Insider trading does not contribute to the efficiency of stock market pricing.

False:  All trading has some marginal effect on price, and by definition any informed trading pushes the price in the correct direction, some of it quite noticeably and very quickly.  There are conflicting findings in the empirical literature on the strength of the short-term price effect of insider trading. But this probably reflects  differences in the pricing process resulting from varying trading and market conditions.  Further, nearly all empirical studies in this field are based on data representing legal and reported insider trading, a decidedly inappropriate way to measure the effect of illegal insider trading.

8)  If insiders are trading, market makers will have to broaden their bid-ask spreads and thus charge more to all traders.

False:  Careful research on this point concludes that market makers on stock exchanges do not feel harmed by the presence of insiders in the market and do not adjust their spreads in response.

9)  There is a clear definition of “insider trading” and of the level of “materiality” required for a violation of the law.

False:  Neither the SEC nor Congress has ever defined “inside information”, nor has either succeeded in specifying the level of significance the information must have to be the subject of a criminal violation.

10)  It is easy to distinguish the information insiders use illegally from that analysts secure in the legitimate course of their work.

False:  This line is so grey and the potential rewards so great that the line is easily and regularly overstepped, either inadvertently or intentionally.  The present prosecution is apparently based to some extent on the notion that assembling many small pieces of non-material information into a single “mosaic” of valuable information is illegal. Just what is it that the SEC wants analysts to do?

11)  Allowing trading on bad news as well as on good will create an incentive for executives to create bad news.

False:  All the motivating vectors in the market for managers point them in the direction of trying to increase their company’s stock price not lower it, and these pressures would overwhelm any slight increase in adverse motivation from insider trading.

12)  The criminalization of insider trading has no effect on the compensation of corporate employees.

False: Recent research demonstrates that when the right to trade on information is denied to executives, they must be paid additional compensating sums to substitute for this loss.  This must partially account for the enormous increases in executive salaries, bonuses and stock options we have witnessed in the past thirty years.

13)  Individuals within the company who were not responsible for the good news may profit from the knowledge and, therefore, insider trading serves no valuable reward function.

False: While it is very difficult to design an efficient compensation scheme to encourage innovation, allowing insider trading by everyone aware of new developments will create a corporate culture of innovation and risk taking without requiring the enormous option plans and bonuses currently used, which incidentally, and unlike insider trading, come out of the shareholders’ pockets.

14)  The SEC has studied the economics of insider trading and applied rigorous economic analysis to the phenomenon.

False:  If they have, they have certainly failed to disclose this significant bit of information to the public or to make any intellectual sophistication apparent.

15)  Fuzzy notions of fairness have a place in serious discussions of the economic costs and benefits of regulation.