Legal News

D.C. Circuit Affirms Constitutionality of Accounting Oversight Board

By Dan Slater

In addition to an unwieldy name, some believe the Public Company Accounting Oversight Board has constitutional problems, too. As we’ve noted, a Nevada accounting firm called Beckstead & Watts sued over the Board, arguing that PCAOB’s “structure and operation, including its freedom from Presidential oversight and control and the method by which its members are appointed, contravene” the Constitution’s separation of powers principles and Appointments clause. Click here for a copy of the complaint.

The initial complaint was dismissed in March of last year, but Beckstead appealed to the D.C. Circuit. Today, the firm lost again. Here’s the Bloomberg report.

Writing for a 2-1 majority of the Court of Appeals for the D.C. Circuit, Judge Judith Rogers ruled that PCAOB members are “not required to be appointed by the president.” Here’s the opinion.

SEC Chairman Christopher Cox said the decision was “welcome news for the commission, investors and U.S. capital markets.” The SEC appoints the board’s five members, approves the $144.6 million budget and any rules before they take effect.

Beckstead will appeal either to the U.S. Supreme Court or seek a hearing before the full appeals court, said Christian Vergonis, a Jones Day partner who’s repping Beckstead, in an interview with Bloomberg. “We’re going to do one of those but we haven’t decided which one.”

Beckstead’s other legal firepower included Ken Starr, Georgetown’s Viet Dinh and Jones Day’s Michael Carvin have all worked on its behalf.

Full post as published by Law Blog - WSJ.com on August 22, 2008 (boomark / email).