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Lewis Ferguson III was ready to step down as general counsel of the Public Company Accounting Oversight Board when the agency got hit with a potentially life-threatening lawsuit. Now Ferguson says he’ll stay on, at least for a while, to defend the agency in a case he says may go to the Supreme Court. Previously a partner at Williams & Connolly for 23 years, Ferguson became the oversight board’s first general counsel in 2004. The private nonprofit agency was created by Congress as part of the Sarbanes-Oxley Act. Its job is to oversee auditors of public companies and ensure that there won’t be another accounting scandal like Enron Corp. The Securities and Exchange Commission appoints the board members of the agency, though the PCAOB’s budget is independent of the SEC. The agency’s unusual hybrid nature is what led to the Feb. 7 suit by the Free Enterprise Fund, a D.C.-based advocacy group, and Beckstead & Watts, a small accounting firm located in Henderson, Nev. The suit claims the PCAOB is unconstitutional for three reasons. First, it violates the separation of powers doctrine because it passes rules and then enforces them without the authority to do so. Second, the agency violates the appointment clause because the SEC doesn’t have the constitutional authority to appoint its members. Finally, the agency is an unlawful delegation of legislative power. According to lead plaintiffs attorney Michael Carvin of Jones Day, “The [PCAOB] is unique among federal agencies to the extent that it [is] completely immune to oversight by elected officials.”
Sue Reisinger is a reporter for Corporate Counsel , a sister ALM publication.

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