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Awesome. Also, after many years of reading your work, this is the first time I've ever heard your voice. I use to live in New Zealand (I went to Rutherford High School in Te Atatu near Auckland), so it's refreshing to hear you accent. The slides are also great and are easier to read in the video than in many podcast lectures.
Toggle Commented Mar 1, 2018 on Seminars on Youtube at Arcadian Gravity
Glad you had a good trip. I'll be in Southern California later this month college tripping there at schools like UCLA U. of Southern Cal., Cal Tech, and Harvey Mudd, with my younger child who is planning a major in engineering, math or science. My eldest is in college in Maine and after learning from her what the weather there is like, my youngest has decided to get as far away from that as possible without moving to Hawaii. ;)
Commented Mar 1, 2018 on How the future looks today at Arcadian Gravity
I think its notable that your in America and welcome you to Turtle Island (a historic native American name for the continent)! I also remain intrigued by the ribbon material you posted a chart from. Do you have any links to your earlier work on ribbons? I've had computers die in the interim and lost a lot of my old references.
Toggle Commented Feb 20, 2018 on Remembering the Ribbon Spectrum at Arcadian Gravity
Tech. Essential to finding truth and simultaneously its most vigorous adversary. Life is nuts sometimes. Grin and bear it. Have a good one.
Toggle Commented Nov 26, 2017 on Yes, well then at Arcadian Gravity
Some of the more interesting for a practicing attorney questions along this line are: 1. How much do judges care about being reversed on appeal? 2. How much are judges motivated by a desire to reduce their caseloads? 3. How does a judge decide how much care to use in evaluating a question before the judge? 4. What issues does a judge delegate to clerk's and why? How much deference does the judge give to a clerk's opinion? 5. How is a judge's evaluation of credibility influenced by the fact that a witness or litigant is repeat player in the system? 6. Do judges really disregard irrelevant information that they are privy to in making their decisions? 7. How much do judges consider the probably consequences of their decisions? 8. What factors cause a judge's decision making to change over time? 9. What fact patterns cause a judge to take special interest (for good or ill) in a party or a case?
"The chilling effect may be accentuated in the context of a management-led buyout, in which the incumbent buyer presumably has the best knowledge about the company's prospects and therefore presumably has priced the company properly[.]" Thus, there are really two analytically distinct issues with MBOs. One is the conflict of interest issue which can be resolved by determining if the control premium over trading price in the MBO deal is comparable to the control premium over trading price in comparable takeover bids by non-managers. But, an examination of comparable control premiums in comparable takeover bids by non-managers does not capture the information asymmetry issues between management which has access to both inside information and public information about the target, and non-managers who have access only to public information about the target. Moreover, in essentially every case of an MBO that is not contemporaneous with a non-manager buy out attempt, we can safely assume that the inside information tends to show that the target is undervalued. If there was no gain to be had from control and there was no gain attributable to information asymmetry, management wouldn't make an MBO. And, if there was gain to be had from control but no gain attributable to information asymmetry, non-managers would be making buy out attempts. So, an MBO brought when there are no non-manager buy out attempts pending can safely be presumed to be motivated by inside information available to the managers, making the buyout but not to non-managers. And, there is no public information available from which it is possible to quantify how much of an information asymmetry premium over and above a typical control premium in the case of a particular MBO. For example, consider an oil company in which management has inside information that suggests that its exploratory wells are likely to lead to more future oil production than previous public information would suggest. Say it is trading at $10 a share, and a control premium in comparable non-management takeover attempts would be 50% (i.e. $5 a share of premium bringing the non-manager takeover strike price to $15 a share). Depending upon the details of the insider information about the exploratory wells, the company could be worth anything from $16 a share to $100+ a share to management. But, the only way to evaluate that would be to have access to management's inside information, and management, in fact, is likely to offer no more than about $16a share (i.e. only enough to deter non-management bidders) whether the true value to management is $16 a share or $100+ a share. Suppose in the same example, that the true value of controlling the company to management given its insider information is $60 per share. The value of the company if it were publicly traded after this information was disclosed would be $40 per share (discounting the value for lack of control). So, if there is an MBO for $16 a share and mere disclosure of the inside information would have led to a day to day market price of the company of $40 per share, the shareholders at the time of the MBO are losing $24 per share of inside information which is equitably their property to management, which could easily be a boon of many billions of dollars to management secured by concealing material information, which they probably had a legal duty to disclose to the public, from their shareholders. So, the Delaware's Chancery court's close scrutiny of MBO transactions certainly has plausible justification. There are two problems with it, however. 1. The odds of the inside information that motivates the MBO being disclosed in appraisal litigation in Chancery court is not necessarily particularly high. 2. Even if you know how much management is willing to pay in an MBO (as oppose to merely what it is willing to offer to carry out the MBO), it is still impossible to distinguish between an MBO motivated by a management assessment of existing public information such as expected future oil prices and expected future interest rates, as opposed to inside information like undisclosed positive prospects from oil exploration operations. Also, if honest managers in an oil company have a better than the general public assessment of existing public information, can still make sense for them to do an MBO instead of targeting a third party company, because they already have an investment in the target of an MBO to start with and because they can at a minimum avoid the risk that some other company's public information is materially inaccurate or incomplete while they know that the public information about their own company really is materially accurate and complete. (Query if inside knowledge that the company really is make accurate and complete public disclosures as required by law, itself, constitutes inside information, and if it does, if there is anything wrong with allowing management to benefit from this particular bit of insider information as a reward for obeying the law in circumstances were it is easy to avoid being caught violating the law.) Even in this case, though, one has to ask if managers doing an MBO because they have more bullish than the market assessment of publicly available information, don't use the even greater capital available to the company than to them personally to acquire other businesses in the same market for the company, benefitting shareholders as well, rather than simply acting for their own personal benefit in the MBO. This smells like appropriating a corporate opportunity which violates the duty of loyalty that management owes to its shareholders. But, again, if it is based on an assessment of publicly available information, management hasn't really taken anything from shareholders or the market that it couldn't have secured itself by making the same more accurate assessment. Still, since an MBO will also always be leveraged and managements own holdings will typically be a pretty modest percentage of the company (often in single digits), the prospects of an MBO based merely on different assessments of publicly available information may be limited, because the more ideosyncratic management's assessment of publicly available information is, the less likely it is that it can find financial backers willing to take huge downside risk for modest upside benefit. Thus, so long as there is substantial leverage involved, an MBO made when no other offers are pending and based upon inside information is a more likely scenario than an MBO based upon a contrarian assessment of publicly available information.
"only 64% of M&A deals were litigated" I can't imagine any other context in which a 64% litigation rate over any type of negotiated contract between private parties would be a good thing or would be considered low.
The status quo, in which C-level executives are paid mostly in the form of stock options mostly due to tax code incentives to do so, is certainly not an optimal one. This gives executives upside gain without downside risk, which incentivizes risks greater than what shareholders who face both upside and downside risk have an incentive to choose. Heads I win, tails you lose is a recipe for moral hazard. Yet, corporations are strongly encouraged to structure compensation this way through the tax code and the compensation norms that have arisen from it. Certainly, any solution would require some adjustments to the tax code which created the current situation, so tax issues under the current code aren't really a fair objection.
Nothing prevents a party in securities litigation from hiring an expert witness to testify concerning what is and is not material to an investor, and indeed, this would be common practice. Also, one does not need a gap period to learn this. One can simply look at what is disclosed during conference calls, and whether it changes stock prices or not to learn this, with or without the gap. None of this necessarily argues against the notion that a corporation ought to be able to appropriate some of the value conferred by the news that it currently dispenses for free. But, that really goes to much deeper values about what is special about "publicly traded" shares, as this proposal wouldn't really advance empirical scholarship on materiality beyond that which is possible with existing data.
Is there really much demand out there for deviations for the default rules of corporate governance in the case of LLCs? In my experience, a desire to deviate from the corporate law mold with an LLC is pretty much limited to restrictions on transferability and an ability to modify priorities for return of capital or to allow someone to receive a share of profits without having a capital contribution. Indeed, it is not uncommon for clients to desire more easily transferrable shares than LLC law provides by default. (Clients also not infrequently want capital call provisions that push the boundaries of limited liability protection in the direction of general partnerships.) Outside the limited context of a single member LLC, I can't recall any instances where there was a genuine client desire to adopt non-standard management procedures that couldn't be just as easily obtained in a corporation with more than one class of stock and there is a frequent desire for greater legal predictability which can't be obtained with anomalous management structures, but can be attained by mimicking the corporate form. Closely held entity owners do tend to appreciate removing the board of directors middle man between member-owners, and manager's who are analogous to officers, in LLCs, however. In cases where there is a desire to have truly impotent investor owners, the limited liability limited partnership with a voting GP and non-voting LPs are favored relative to LLCs with custom management provisions, because the risk of tax uncertainty in the gift and estate tax context is lower.
This model is also useful to distinguish areas where establishment liberals and conservatives have common cause regarding a shift from a neo-feudal to post-feudal arrangement (relative to a significant number of labor liberals and populist conservatives), and areas where they may be at partisan odds (whether the non-employer taking responsibility is a for profit corporations, a cooperative or non-profit, a union, or a governmental entity).
A concept that I've found useful in thinking about these issues to think of Prussian style employer based welfare states (particularly popular in modern Japan and in the 1950s in the U.S. particularly in union shops) as a "neo-feudal" model. In the neo-feudal model, an employee works generally works full time for a single company for a long time and usually a lifetime, and a large share of an employee's consumption and investment (particularly health insurance, retirement savings, at least some life insurance, unemployment insurance, work related and sometimes all disability insurance, "employee assistance programs", sometimes employee housing, day care, economic support for periods of illness, etc.) is mediated through the employer. Employees aren't true serfs, but when lifetime employment is the norm and the employer is actively involved in how compensation is spent and takes responsibility for seeing that employees spend money on essentials, it comes close. One can view a lot of subsequent political developments shifting responsibilities to government or to third-parties (like IRA providers, cafeteria plan providers, Obama-care market health insurance providers) etc. as a shift from a "neo-feudal model" to a "post-feudal model" in which almost no consumer consumption or investment is mediated through an employer. The third-party could be either government or a union, a trade association, or a private sector third-party (such as a bank or insurance company), but in any of these case, the employer cedes responsibility and involvement in the non-work life of its employees. In some fields (e.g. live theater, TV and the movies) an industry based union fills this role; in small and medium sized law firms or medical practices, the state bar association or medical association often acts as that third party. The pressure to shift from a neo-feudal model to a post-feudal model, in part, stems from an employer desire for staffing flexibility that reaches its peak in areas like construction or the movies where employers almost always operate on a one project at a time employment basis ill suited to the neo-feudal model and involving constant reshuffling of employees based on the needs associated with the current task. Employers who hire only the employees needed for the current task are more efficient because they don't have unnecessary slack and are more robust because they can rapidly respond to economic demands in a changing economic environment. Another part of the pressure to shift to a post-feudal model stems from employee desire, particularly fueled by increasing numbers of two parent households and an ideology that both men and women in a couple should participate significantly, actively, personally and directly in child rearing and household chores, for employees to be able to work less than full time jobs which is an approach that is strongly institutionally penalized in a neo-feudal economy, but it not nearly so problematic in a post-feudal model. Economic efficiency favors this trend as well because it expands the size of the available skilled workforce, rather than sidelining lots of homemakers with valuable skills who feel a moral obligation to parent in a manner inconsistent with the full time plus job expected in a neo-feudal arrangement.
Perhaps the failure to define is a function of the inherent poor fit of the concept with any rule based definition, with the intent that the trier of fact apply the phrase directly to the facts without further definition. Arguably all of the phrases trigger essentially the same analysis which is an interpretation of the facts in the context of the often unanticipated or unknowable particular circumstances. (To the extent that the term is ambiguous, there would usually be ample funds to high expert witnesses to opine regarding the view held by commercial lawyers drafting such contracts regarding what it means in order to resolve the ambiguity as the meaning of a contract term is a question of fact to the extent that it has ambiguity as applied.) In much the same way, we do not allow judge made caselaw to significantly further define the concept of "negligence" in tort law even though that means that different triers of fact can reach different conclusions based upon precisely the same facts. A perfect video reconstruction of an accident and completely undisputed factual record is not sufficient in many cases to know if there was or was not negligence because the nature of the beast is the application of the term to specific facts involves a separate determination of what constitutes negligence in particular circumstances (when negligence per se is not present). The same concept is behind the rule that in cases where an equitable remedy is sought, an appeal may be denied even there is absolutely no dispute of fact, because the equitable remedies are generally discretionary and depend upon inferences and judgments drawn from the facts that are in the trial judge's discretion, rather than merely from the facts itself. Then again, I am sympathetic to the notion that one could pick the most favorable description of the standard found in any majority or dissenting case in any jurisdiction and put it in a definition, and that the failure to define and disconnect between subjective attorney understandings and court applied standards may be due to overspecialization with few M&A transaction lawyers in the large firms that do this work having any M&A litigation experience. More charitably, M&A transactions are often conducted between parties that each have significant bargaining power who both want the deal to happen, so a rational cost-benefit analysis may be that bargaining for a more broad or more narrow definition may not be worth the risk of queering the deal or spending time haggling in a process likely to land on a default definition from existing case law.
A couple of small observations: 1. Securities law has pretty steadfastly disavowed a distinction between simple common stock equity and other forms of securities in the fraud context. The definition has always focused on generating a return on an investment without active participation in the enterprise, not the specific bundle of legal rights involved in a particular security including equity, debt, investment contracts and hybrid instruments. There are circumstances when bond debt is economically similar to equity (e.g. the bondholders of an insolvent company on the eve of filing for Chapter 11 in which bond debt will likely be converted to equity in a reorganization). 2. Selling bond securities you know to be worthless (the usual form of insider trading involving debt although in principle insider knowledge of good news of a seemingly failing corporation could work the other way around) to someone who does not know that would frequently constitute common law fraudulent concealment, and the fact that the transactions may be conducted anonymously at arms length doesn't necessarily change that analysis. Indeed, in some sense the wrongfulness of the conduct is more rather than less clear in the case of bond securities, because bond holders haven't bargained for the same level of daily uncertainty that equity holders did. 3. Why doesn't the SEC have the authority to define insider trading as it sees fit, within reason? The whole point of the SEC was to define issues like that that Congress deemed to technical and the Exchange Act authorizes the SEC to issue regulations defining securities fraud.
I can't say that I'm very impressed with the profiteering involved in "Scalia Dissents" that is peddling content that is almost entirely in the public domain at $20.32 a pop. Even law school textbooks have far more law professor content. I have nothing against people reading the content widely, but the notion that it should sell at typical hardback book prices when it contains almost no original work from the person whose getting paid the royalties is pretty problematic.
I suspect that the older generation thinks that CEOs earn less than the younger generation does, because older people often anchor on prices and wages that were the norm when they were younger and never update that information psychologically.
The biggest problem with a military fight against ISIS is that we haven't done a good job of offering them an alternative that doesn't involve fighting back. Even a Sunni Arab who really dislikes what ISIS is doing isn't going to have much incentive to organize for change if the alternatives are rule by Syria's Assad, or returning to a Shiite dominated rump Iraq with strong ties to Iran. And, dissent without having foreign backing or the backing of an already viable resistance movement in ISIS territory (which doesn't seem to exist) is suicide. If we could offer the people living under the ISIS regime a decent alternative to the status quo, we might see defections from key leaders in ISIS controlled regions and a resistance movement. Instead, we have people who are stuck living in one circle of Hell with no alternatives but to fight to avoid ending up in a deeper circle of Hell if they lose. But, people who are cornered with no alternatives are going to fight to the death.
Your mix of reading by medium is interesting. I do almost 100% of my professional reading and a very large percentage of my non-fiction pleasure reading in an electronic format, but only about half of my pleasure fiction reading that way - electronic devices mess with the quiet and Zen of being away from the tools that are used for work when you are just relaxing. When I read electronically, it is almost always either at a laptop computer or at a Kindle. The Kindle is superior to the Nook and tablets in weight, versatility (e.g. in front and read aloud options), battery length, and being easy on the eyes, as well as having lots of titles available for download from the local library which the Nook does not offer although the laptop does (but is much heavier), The iPad really shines as a video-phone device, as a recipe display while cooking, and as a way to do surveys in malls, but makes too many compromises to be a good substitute for either a laptop or a Kindle.
Apart from one or two close end real estate development projects, I don't think that I've ever seen a for profit entity organized for any reason other than "any lawful purpose." Non-profit organizations sometimes have somewhat more specific authorizations in their charters, but they are still pretty rare and it would be unusual that such an organization couldn't engaged in a boycott germane to their purpose in some way, quite possibly very vaguely. Generally speaking such an ultra vires lawsuit would be frivolous and dismissed in short order.
In defense of the argument that "political contributions are special", which can also be applied to some other corporate expenditures (such as charitable contributions), the argument in part is that a political contribution can look a lot like a compensation payment to a director far in excess of the direct, disclosed and formally authorized compensation of a director. While a political contribution could, in principle, merely advance the corporation's interests in profitability and policies favorable to the corporation itself, often, it appears that corporations are financing political contributions that advance the personal objectives and goals of the directors even when they work to the detriment of the corporation itself (e.g. by alienating customers or potential business partners). The business judgment rule doesn't have a great deal of force, and certainly corporations may compensate their directors and routinely do so. But, to the extent that compensation is disguised as a corporate political contribution, the duty of a publicly held corporation to be transparent towards its shareholders is violated, and if revealed for what it is, the compensation of the directors benefitting from the political contribution may become excessive. Excessive compensation is particularly problematic if the director benefitted is also an officer of the corporation who receives a large executive suite compensation package, which also allows the officer-director to escape income taxation on what would otherwise be more compensation which is in turn spent on non-deductible political contributions by that officer. The rules of corporate law are to a great extent designed to discourage self-dealing that is harmful to to corporation, and political contributions by corporations are transactions where the risk of this kind of self-dealing are much greater than for most other kinds of expenses which a board of directors authorizes.
From a practical perspective, Sanchez, for better or for worse, seems to favor "insider shareholders" over "anonymous stranger" shareholders. For the most part, "insider shareholders" are owners of very significant shares of the company (usually 1% or more in publicly held companies that are often worth billions of dollars), such as members of the families that founded the company, former C-level and VP level executives of the company, current or former directors, critical private equity fund or bank representative investors, and the like who have first hand knowledge of the inner dynamics of the corporation's executive suites. Meanwhile "outsiders" who simply own stock but have never been privy to the inner workings of its management will rarely have meaningful access to that kind of information. This elitist rule isn't absolutely horrible. Companies with significant numbers of "insider shareholders" are probably more likely to have the non-economically motivated or corrupt management practices that can trigger a valid derivative suit, and this rule allows these insider shareholders who have a huge economic interest in protecting their investment to break ranks and have an easy derivative suit path if they small a rat ginned up by their fellow insiders. The web of personal relationships in that kind of company can lead pretty naturally to soap opera style scenarios that you often really do so in large closely held companies and smaller publicly held companies. In contrast, in companies where institutional investors and faceless small shareholders hold the bulk of ownership in the company, the likelihood of personal drama getting in the way of evaluating a potential derivative suit by a committee of putatively independent directors is probably significantly smaller. Also, an interested insider who is aggrieved (e.g. a CFO who owns only a token number of shares) can seek an ally who is a major outsider shareholder such as a mutual fund or life insurance company, and arm that ally with enough insider gossip to gain the political edge of an "insider shareholder" in connection with a derivative suit which is almost by definition a form of intra-corporate civil war. Thus, only in cases where an outsider shareholder has no ally anywhere in the pool of executive suite insiders will the lack of effective pre-litigation formal discovery pose an extra barrier, and if the insider pool of executive suite insiders are united in opposing a derivative suit, the odds that it lacks merit if a committee of putatively independent directors wouldn't back the suit, may be pretty high. Surely, the Sanchez rule will still result in the dismissal of some meritorious derivative suits due to insider conspiracies and corruptions. But, in a typical large privately held company or small publicly held company, there are probably at least a dozen or two insiders who have the knowledge necessary to convert the Sanchez rule into a speed bump without formal pre-litigation discovery, and the means and wherewithal to either mount a derivative suit with their own funds or to identify and recruit allies who have those means from the ranks of major shareholders. So, Sanchez still has enough give to allow meaty informed and well funded derivative actions to go forward even in the face of perfunctorily independent but biased review by a committee of putatively independent but practically speaking beholden directors. And, any rule that allows weak cases to be dismissed as a matter of course, without affording those protected by the rule to have absolute impunity has something to be said for it.
"The real party in interest in derivative litigation is the plaintiff’s attorney, not the nominal shareholder-plaintiff. In most cases, the bulk of any monetary benefits go to the plaintiffs’ lawyers rather than the corporation or its shareholders. In practice, such litigation is more likely to be a mere wealth transfer from corporations and their managers to the plaintiff bar than a significant deterrent to corporate criminality." While there are cases where this could be true, particularly in the case of publicly held corporations (derivative litigation almost always benefits the shareholders more than their lawyers in closely held company derivative suits), it would certainly not be true in the case of the thought experiment you proposed of a Delaware based VW in which the Plaintiffs lawyers learned that the Board of Directors expressly authorized criminal conduct on such a massive scale, to the extent that it destroyed 20%+ of the value of the company in a matter of days. The lost value would run into the billions and the attorneys fees would probably only be in the tens of millions. Also, the decision to violate the law would surely be a material fact pertinent to the value of the company's shares that was not disclosed to the shareholding public by the directors for many years. Wouldn't there be a duty to disclose this on a quarterly financial statement/SEC filing? And, wouldn't the shareholders have standing to sue in that capacity as well? Or, is that liability that would only run from the company (and perhaps from the executive required to sign the statements), and not from the other directors, since it is presumably the company and not the individual directors, who have the statutory duty to make disclosures? Then again, the net worth of the CEO signing the statement could easily exceed the net worth of the rest of the directors combined. The interesting damages question would be whether losses from the fraud should be offset by gains from the fraud. In the derivatives suit, this might very well be a plausible argument as you suggest with the authority in Note 16. But, in a securities fraud case, surely it would not be the case. Going back to the real world case and not your hypothetical, the other notable thing about this being a German corporation is that a majority of the directors minus one would probably have been union appointees, rather than directors elected by shareholders. It isn't clear to me whether, in that circumstance (under either German or Delaware law if a Delaware corporation were structured to elect its directors in that manner), if the union appointed directors would owe any duty of loyalty to the shareholders as a consequence of their generalized duty to the company, as opposed to the unionized employees who appointed them. The case that the employees came out ahead from this fraud by VW in the long run, is stronger than the case that the shareholders (collectively) did. Finally, while you deliberately dodge the Caremark issue, one can assume to almost a certainty that in real life the directors did not expressly direct the CEO to have VW flagrantly break the law and create cars designed to fake emissions tests in a resolution voted on at a director's meeting. At most, it was mentioned orally in a report or in opaque language that left no hint to a third party of what was going on, even if some or all of the directors were actually aware of what was going on through informal conversions and back channels. Quite possibly, the management team on the Board concealed it from the non-management directors (or almost all of them), and probably, not even all of the management team knew.
There have been ebbs and flows, without a doubt. A significant minority of opinions used to be a page or two of body text. I'd guess that the minimum average opinion length was probably sometime in the 1950s or early 1960s. On the other hand, truly unreadable opinions that restate almost the entire course of the factual proceedings in the case, and that regurgitate almost all of the authority found in both parties briefings and substantial parts of ALR articles located by the judges, before engaging in any meaningful analysis, were not uncommon sometime around the late 19th and early 20th century, and are fairly rare these days despite the increased bloating. Opinions today may be long, but they are readable and full of analysis. This is probably best attributed to the rise of word processing that makes cutting and pasting easy. I think that there has also been a widespread reaction against the once common practice of writing an opinion that carefully analyzes the strongest two or three arguments and then dismisses without analysis the other arguments that have been made to the court as "without merit" and not bearing further discussion. Judges these days seem to feel a much higher sense of obligation to provide an answer to every question posed to them even though doing so is laborious and it it produces ponderous opinions. This could even be a product of the practice for a couple of generations of grading bar exam essay questions in a manner that rewards the person examined for identifying every single potential issue in a question and analyzing it without much regard for whether or not one issue has more merit than another. Our legal education system does not reward people for cutting to the chase and getting the right answer.
Some sort of accountability would be nice. But, it is worth considering the situation that the EPA was dealing with here. The problem was entirely created by an unregulated private mining company that operated before mining regulation was enacted and is now probably long gone and defunct with all of its officers dead (this mine, IRCC, operated in the late 1800s). Basically, they left a ticking time bomb. The EPA was sent in as the bomb squad to deal with it. Nobody faults the bomb squad for every now and then being outwitted and failing to defuse a bomb with explosive results. Sometimes despite the purist motives and the greatest care they fail to get a perfect outcome. Similarly, nobody reasonably expects the ER to save every single patient who comes in no matter how dire. There are plenty of cases where government officials do engage in gross misconduct or just really fuck things up as a result of their deeply questionable choices (the cost overruns at VA's Veteran's Hospital which is more than billion dollars over budget is such a case), but the impression that I get from the news accounts about the spill, was that this was a case of slight bad judgment or unrecognized insufficient competence by the person doing the work for the EPA, and not gross negligence or even ordinary negligence. The problem was worse than there had been any reason to believe until it was too late.
Never would have pegged you for a Mac guy.