In a case that may wind up in the Supreme Court, an unnamed accounting firm is poised to lodge a legal challenge questioning the constitutionality of the Public Company Accounting Oversight Board.
The lawsuit is expected to be filed shortly, according to published reports, and is being backed by the Competitiveness Enterprise Institute, a Washington, D.C.-based libertarian think tank funded by free-market groups.
Spokespeople for the involved organizations have declined to comment, though the CEI and anti-tax group the Free Enterprise Fund have scheduled a press conference for today to discuss over-regulation of industries by the government.
Hans Bader, counsel for special projects at the institute, published a paper in October 2005 entitled, "The Public Company Accounting Oversight Board: An Unconstitutional Assault on Government Accountability." The paper said that the board is "responsible for a mountain of red tape," but specifically made a case that the board's structure and method of appointing members violates the appointments clause of the U.S. Constitution.
The appointments clause requires senior federal officials to be named by the President and confirmed by the U.S. Senate, while the president, the courts or a department head may pick lesser officers.
When Congress created the five-member PCAOB in 2002, it established the board as a private, nonprofit corporation funded by corporate fees, leaving the appointment of board members to the Securities and Exchange Commission. Bader argued in his paper that the board members should be required to undergo Senate approval, but even if they are lower-level officials, the Constitution doesn't allow for their appointment through the five-member SEC.
Opponents of the PCAOB had thought a public company might challenge the legality of the board, arguing that the fees they pay are an unconstitutional tax, but published reports say that the case will be filed by a small accounting firm regulated by the PCAOB.Bader's paper, co-written by John Berlau, a fellow in economic policy at the institute, is available at www.cei.org/gencon/025,04873.cfm.
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