06.28.10

Comment On The Supreme Court Decision In Free Enterprise Fund v. Public Company Accounting Oversight Board

[The Supreme Court today issued a ruling in Free Enterprise Fund v. Public Company Accounting Oversight Board. In a 5 to 4 decision, the Court found unconstitutional a provision of the Sarbanes-Oxley Act, the anti-fraud law Congress enacted in the aftermath of the Enron and WorldCom accounting scandals. Overturning decisions by the D.C. District Court and the D.C. Circuit Court, the Supreme Court held that the composition of the Public Company Accounting Oversight Board violated Separation of Powers principles found in the Constitution because its members are not under the direct control of the President.  Senator Leahy was a co-sponsor of the Sarbanes-Oxley Act of 2002 and a principle author of the whistleblower protections established by the Act.]

“I am disappointed by today’s decision in which a bare majority of the Supreme Court found a key provision of the Sarbanes-Oxley Act unconstitutional but am pleased that the decision will allow the Public Company Accounting Oversight Board to continue its important anti-fraud work.  This important legislation has been a critical tool for protecting American taxpayers from fraud and corruption.

“A key reform enacted by the Sarbanes-Oxley Act was the establishment of the independent Public Company Accounting Oversight Board to regulate accounting firms whose use of convoluted, often fraudulent, accounting schemes misled investors and rocked the financial world.  Their deception and greed cost Americans hundreds of billions of dollars.  Corporate conservatives attacked this Board as unconstitutional because its members are not under the direct control of the President.  A slim majority of the Supreme Court agreed with these corporate interests that the way in which the members are hired and removed from office violates the Constitution’s Separation of Powers principles.  Unfortunately, this case is bigger than just the Sarbanes-Oxley Act.  As Justice Breyer noted in a vigorous dissent today, this decision may call into question the constitutionality of various mechanisms fashioned by Congress to combat inefficiency and fraud in both the public and business sectors and ‘threatens to disrupt severely the fair and efficient administration of the laws.’  Congress has established dozens of agencies which serve as indispensible corporate watchdogs and whose oversight provides a check on the power of Wall Street. I am concerned that the Court’s decision today may call into question the ability of these agencies to adequately protect the public.  

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