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Lewis Ferguson III was ready to step down as GC 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 PCAOB in a case he says may go to the U.S. Supreme Court. Previously a partner at Williams & Connolly in Washington, D.C., for 23 years, Ferguson became the PCAOB’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 the ones at Enron Corp. and elsewhere. The Securities and Exchange Commission appoints the board members of the PCAOB, though its budget is independent of the SEC. The PCAOB’s unusual hybrid nature is what led to the suit by the Free Enterprise Fund, a Washington, D.C.�based advocacy group, and Beckstead & Watts LLP, a small accounting firm located in Henderson, Nevada. The plaintiffs say that 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 the PCAOB’s members. Finally, the agency is an unlawful delegation of legislative power. According to lead plaintiffs attorney Michael Carvin, “The [PCAOB] is unique among federal agencies to the extent that it [is] completely immune to oversight by elected officials.” Carvin, a D.C.�based partner with Jones Day, has beaten the feds before. He successfully represented the tobacco industry against the U.S. Department of Justice, as well as plaintiffs who opposed the Line Item Veto Act and the Census Bureau’s use of statistical sampling. Though the suit has received little media attention, it raises significant and fundamental issues, Ferguson says. “There’s a reasonable shot this will end up in the Supreme Court,” he explains. “We are taking it very seriously, and so is the SEC and the Department of Justice.” The PCAOB announced on February 6 that Ferguson would leave the GC post at the end of March. But Ferguson changed his mind after the plaintiffs filed their suit on February 7. He says he will stay on “for some months, but not years,” if the case drags on.

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