University of Colorado Law Review
Volume 76, Issue 1, Winter 2005
FOREWORD
In our lead article, Incomparability and the Passive Virtues of Ad Hoc Privacy Policy, James P. Nehf addresses the fact that in the United States, information privacy policy in the private sector relies heavily on individuals to self-police their privacy interests. Professor Nehf contends that by taking a passive approach to privacy regulation outside government agencies, Congress and oversight agencies have defaulted to a voluntary, market-oriented model that puts the burden on individuals to guard the integrity of their own data records and protect personal information from unintended use. This condition exists because policy makers have treated privacy as a consumer policy problem and have primarily used cost-benefit analysis to determine the appropriate balance of privacy protection. Professor Nehf's article demonstrates that cost-benefit analysis is a deficient decision-making method because debates about information privacy pit fundamentally incomparable values against each other. Business interests have little trouble identifying the costs of restricting data collection and sharing, while privacy advocates have difficulty quantifying the costs of data proliferation or the benefits of data protection. Rather than proposing an alternative normative theory supporting information privacy protection, Professor Nehf advocates an inductive approach that takes stock of lessons learned from the passive approach. After forty years of self-regulation supplemented by ad hoc privacy regulation, several norms, preferences, and shared values are emerging. Policy makers should recognize the emerging norms and take appropriate measures to ensure their full evolution.
In our second article, Enron, Fraud, and Securities Reform: An Enron Prosecutor's Perspective, John R. Kroger provides a unique look at Enron's collapse and the current state of securities regulation in the United States. Professor Kroger, one of the federal prosecutors on the Enron case from 2002 to 2003, begins by discussing the events leading up to Enron's bankruptcy. He argues that Enron was forced to raise capital to meet escalating expenses caused by a disastrous diversification strategy and uncontrolled overhead costs. Instead of reporting this borrowing to the Securities and Exchange Commission ("SEC") and investors, Enron used a host of deceptive accounting gimmicks to hide its true debt position. At the same time, Enron used similar deceptions to inflate its reported revenue and cash flow. As a result, investors reading Enron's reported financial data received an inaccurate impression of Enron's true financial position. After describing the Enron collapse, Professor Kroger analyzes the failure of institutional watchdogs, including the SEC, independent auditors, Enron's Board of Directors, and Wall Street analysts, to prevent this massive deception or uncover it before it was too late. Professor Kroger suggests that our current regulatory system does a poor job of deterring and revealing serious fraud. Next, Professor Kroger assesses the reforms since Enron's collapse, including the Sarbanes-Oxley legislation, to determine whether these new measures adequately shore up our securities regulation system. While several reforms are positive, Professor Kroger argues that some are actually counterproductive—notably, new responsibilities for audit committees and new ethics code requirements. Finally, Professor Kroger concludes that additional reforms are needed in order to prevent Enron-style disasters in the future, including an overhaul of the SEC, criminalization of negligent behavior by corporate executives, and the implementation of mandatory auditor rotation.
Our third article, Inequality of Bargaining Power, by Daniel D. Barnhizer, examines the disconnect between the judicial approach to the legal concept of inequality of bargaining power in contract law and the analysis of power in general by the social sciences, negotiators, military strategists, business people, and politicians. In accord with this disconnect, courts have largely ignored the complex and dynamic nature of power as actually used by contracting parties. Instead, courts focus upon crude heuristics such as the availability of meaningful alternatives, opportunities for negotiation, and a series of fixed, status-based party characteristics to assess relative bargaining power disparities. As a result, small businesses, middle-income consumers, and similar entities have largely been denied access to contract doctrines that employ the legal concept of inequality of bargaining power (explicitly or implicitly), including unconscionability, adhesion contract analysis, and, to a lesser extent, duress, fraud, parol evidence, consideration, and public policy analysis. Professor Barnhizer recommends that courts develop more sophisticated models to assess power imbalances in contract relationships as complex and dynamic influences subject to radical changes throughout the parties' interaction.
In our first student comment, Ending Pay-to-Play in the Municipal Securities Business: MSRB Rule G-37 Ten Years Later, Kevin Opp analyzes the Municipal Securities Rulemaking Board's ("MSRB") General Rule 37 ("G-37"). Implemented in 1994, G-37 was designed to purge so-called "pay-to-play" activities in the municipal securities industry. Mr. Opp examines whether G-37 has accomplished that goal. After describing G-37, its loopholes, the legal issues it raises, he concludes that G-37 has not ended the appearance of pay-to-play. He further concludes that it has harshly punished minor violations and infringed on the First Amendment rights of thousands of municipal finance professionals. Therefore, Mr. Opp recommends that the MSRB revise G-37 and change the way it thinks about the problem of pay-to-play.
Our second student comment, Congressional Reporting Requirements: Testing the Limits of the Oversight Power, by Jonathan G. Pray, addresses the phenomenon of congressional reporting requirements and examines their constitutional implications. Reporting requirements which are used with astounding frequency, are simply statutory demands that the Executive Branch inform Congress of actions it has taken or provide it with factual information on a specified subject. Mr. Pray first examines the history and frequency of reporting requirements. He then turns to the question of whether refusal by the Executive Branch to comply with a reporting requirement could give rise to litigation and proposes a framework for analysis. Finally, Mr. Pray examines the way in which Congress recently employed reporting requirements in the Sudan Peace Act in order to address the devastating civil was in southern Sudan, and then applies the proposed analytic framework to those requirements.
THE EDITORS