The federal appeals court opinion that upheld the constitutionality of the Public Company Accounting Oversight Board was a disastrous decision that undermines the president’s ability to supervise federal officers, say Jones Day lawyers who want the Supreme Court to review the case.
The lawyers, Michael Carvin, Noel Francisco, and Christian Vergonis, who are representing the Free Enterprise Fund and the accounting firm Beckstead and Watts, filed a petition for certiorari this week. The lawyers are urging the Court to review a split decision in August in which a U.S. Court of Appeals for the D.C. Circuit panel rejected a challenge of the PCAOB. Judge Brett Kavanaugh dissented from Judges Judith Rogers and Janice Rogers Brown.
The appellate court majority held that the board, the controversial centerpiece of the Sarbanes-Oxley Act of 2002, does not violate the appointments clause or separation of powers. The board regulates accounting firms that audit public companies. The Securities and Exchange Commission—and not the president—governs the appointment and removal of the board’s five members. The SEC has no control over PCAOB decisions to investigate accounting firms. Congress passed the Sarbanes-Oxley Act in reaction to corporate scandals that involved Enron, WorldCom, and Arthur Andersen, among other companies.
Kavanaugh wrote a 58-page dissent in which he called the case the most important separation-of-powers litigation to reach the courts in more than 20 years. The purpose of the statute, Kavanaugh wrote, was to create an independent accounting board, not one that is directed and supervised by the SEC.
“We are urging the Supreme Court to hear the case because the closely divided decision of the court of appeals upholding the board authorizes congressional restrictions on the president's ability to direct and supervise federal officers unlike any ever before seen in U.S. history,” Vergonis says. The PCAOB case, Vergonis says, has “profound implications for future efforts by Congress to ‘insulate’ regulatory or executive agencies” from political accountability.
Georgetown University law professor Viet Dinh, principal of Bancroft Associates, and Kenneth Starr, dean of Pepperdine University law school, are additional counsel for the petitioners. Baker Botts partner Jeffrey Lamken, who heads the firm’s Supreme Court and appellate practice, argued for the PCAOB in the D.C. Circuit.