The Securities and Exchange Commission and Department of Justice have formally supported the constitutionality of the Public Company Accounting Oversight Board with the filing of a 46-page legal brief just before Labor Day.
The brief outlines the government's arguments in support of the PCAOB's constitutionality and was submitted in the U.S. District Court for the District of Columbia in a case brought by the Free Enterprise Fund in February.
Joined by small Law Vegas auditing firm Beckstead and Watts LLP, the anti-tax think tank has argued that the PCAOB's structure violates the appointments clause of the Constitution. The five-member board is selected by the unanimous approval of the SEC, not by either the president -- which would require Senate approval -- or by the courts or a department head of an agency. Secondly, the complaint accuses the PCAOB of taking away authority reserved for the executive branch of government.
The government's brief argues that the SEC's "pervasive oversight authority leaves no doubt of the existence of a 'superior/inferior' relationship," to meet the intentions of the appointments clause, and flatly dismisses the separation-of-powers concerns.
The final point refuted in the government brief is the point raised by the think tank and firm that Congress must provide an "intelligible principle" to confer discretionary authority to the PCAOB. The brief states that the Supreme Court has found the principle to be lacking on only two occasions, both decided more than 70 years ago.
The entire brief is available at www.sec.gov/news/extra/2006/2006-147_brief.pdf.
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