Are fairness opinions fair? That’s among the questions likely to be posed today to Goldman Sachs’s CEO, Henry Paulson Jr., by Massachusetts securities regulators. The closely watched investigation of Procter & Gamble’s takeover of Gillette has spotlighted, some say, another Wall Street practice that screams conflict of interest.

According to Nell Minow, editor of the Corporate Library and the self-described “ultimate cynic on fairness opinions,” such statements are “rote and meaningless. You get what you pay for.”

Echoing this view, there are numerous inquiries under way into the common practice of investment banks issuing opinions validating deals in which they stand to profit handsomely. Call us crazy, but it does seem the sort of activity that’s out of sync with today’s righteous business atmosphere.

Fairness opinions typically are drawn up at the request of boards of directors who are asked to sign off on transactions such as mergers or acquisitions. The opinion attests to the reasonableness of the deal, based on comparisons with similar purchases, an assessment of the ongoing concern value of the company, and other methods that could help determine price. Quite often, the investment bank that has been working feverishly to bring a deal to a close is the same group that drafts the opinion.

The potential for self-serving analysis has always existed; lately, critics of the status quo have turned up the volume. The pending takeover of Gillette by P&G has caused an especially loud outcry, resulting in a full-fledged inquiry by Massachusetts’s secretary of the commonwealth, William Galvin, and the meeting today with Mr. Paulson.

One of the aspects of the deal that has raised hackles is that James Kilts, Gillette’s CEO, stands to benefit enormously. He will be paid an estimated $165 million, partly because of anti-takeover measures (golden parachutes) adopted in the late 1980s, and also because additional monies were negotiated as part of the deal.

Mr. Kilts will continue with the combined companies: Critics point out that such a lump-sum payment is almost unheard of in a case where the CEO remains on the payroll, or for that matter, in a friendly deal. The ISS, which ultimately recommended that its members vote in favor of the deal, nonetheless called the retention package for Mr. Kilts “troubling.”

Second, Goldman Sachs and UBS Securities, which are both involved in the deal and rendering fairness opinions for Gillette, are due to collect huge fees if the acquisition takes place. Goldman, according to proxy materials, has collected $1.9 million from Gillette for services rendered since November 2002, and $11.4 million from P&G. More important, should the deal go through, the company will be paid up to $30 million by Gillette. The same fee applies to UBS.

Really, how likely is it that either company is going to sour the deal by deciding that the price for Gillette is too low? On the one hand, there is no group better qualified to determine the value of Gillette than the bankers who have worked for months on the deal. On the other hand, they are not impartial.

In fact, the proxy material is not very convincing. On Page 50 of Chapter 1, Merrill Lynch (providing the fairness opinion for P&G) presents a list of comparable deals involving takeovers of consumer-products makers. The average price paid for these companies was a premium over the pre-deal stock price of 55.5%. The premium in the Gillette deal was 20.1%. On the surface, quite a bargain.

What does Mr. Galvin hope to accomplish? According to his spokesman, if the Massachusetts Securities Division decides that the fairness opinion is flawed, and in violation of state securities regulations, the state could issue a complaint against the investment banks. The deal is widely viewed as likely to proceed in spite of the inquiry.

What else does Mr. Galvin hope to accomplish? It has been reported that Mr. Galvin may have his eye on next year’s gubernatorial contest in Massachusetts. It can’t have escaped his notice that a certain New York attorney general has furthered his own political career by pummeling the financial services industry. Indeed, Mr. Galvin has already gotten in on the act by going after Putnam Investments for market timing.

P&G’s acquisition of Gillette is not the only proposed deal currently under scrutiny for conflicts of interest. Some observers consider the New York Stock Exchange’s proposed combination with Archipelago even more controversial. In that transaction, Goldman Sachs, owner of a sizeable interest in the target firm, is acting as banker and, again, offering up the fairness opinion. Also, the CEO of the NYSE, John Thain, came from Goldman.