The United States Supreme Court
Photo: Stacey Cramp
The U.S. Supreme Court appeared inclined to leave well enough alone Monday and not tinker with the structure of an accounting oversight board created by the Sarbanes-Oxley Act of 2002.
"My goodness, there are so many shapes and sizes" for government agencies, said Justice Stephen Breyer at one point during oral argument in Free Enterprise Fund v. Public Company Accounting Oversight Board. Breyer seemed to suggest it would be hard to single out the Public Accounting Oversight Board as uniquely unconstitutional.
Congress created the board in the aftermath of the Enron and WorldCom accounting scandals, giving the board broad and independent power to regulate accounting firms, which had been self-regulated before.
Its five members are appointed by the U.S. Securities and Exchange Commission, not the president. And the board's members, like those of the commission, can only be fired "for cause," not merely for policy disagreements.
This "double for-cause" feature of the law triggered a lawsuit challenging the board's constitutionality as too insulated from presidential power. The Free Enterprise Fund and a Nevada accounting firm under audit by the board mounted the challenge.
The U.S. District Court for the District of Columbia and the U.S. Court of Appeals for the D.C. Circuit upheld the board. In dissent, D.C. Circuit judge Brett Kavanaugh said presidential control over the accounting board's members is too attenuated, hampering his ability to control the executive branch. Kavanaugh also called the dispute "the most important separation-of-powers case regarding the President's appointment and removal powers to reach the courts in the last 20 years."
Some business groups view the case as a chance to weaken the law, if the Court strikes down the board. And the case comes against the backdrop of a long-running debate over the so-called "unitary executive," a theory of the presidency that would hold the president accountable for all executive branch actions.
Michael Carvin of Jones Day, representing the plaintiffs, made some headway with an impassioned plea that "the board is unique among federal agencies" in its insulation from presidential control. He urged that it be held unconstitutional as a violation of the appointments clause of the Constitution, which is "designed to achieve accountability."
But Solicitor General Elena Kagan, representing the SEC, and Jeffrey Lamken of Molo Lamken, representing the accounting board, seemed successful in reassuring the Court that the president has "constitutionally sufficient control" over the accounting board, as Kagan put it. He exerts this control, Kagan said, through his authority over the SEC -- which, in turn, has "full control" over "anything and everything" the board does.
Kagan also said Congress, in creating the accounting board, sought to make it independent from the accounting industry, not from the SEC.
Asked by Chief Justice John Roberts Jr. to name other agencies that have "double for-cause" insulation from the president, Lamken said a range of employees, from administrative law judges to postal inspectors general are in a similar posture.
"The president has the same control over the SEC that he has over any other independent agency, and the SEC has pervasive control over the board," said Lamken.
