The shakeup at the Public Company Accounting Oversight Board continued with the announcement Tuesday that Claudius Modesti, director of the PCAOB’s Division of Enforcement and Investigations, will be leaving at the end of the month.
Modesti served for 14 years at the PCAOB. He is the latest of a series of officials whose departures have been announced this month after an all-new board and chairman took over this year. Other high-level PCAOB officials who have been announced as leaving at the end of May are Martin Baumann, chief auditor and director of professional standards; Helen Munter, director of registration and inspections; Nirav Kapadia, director of the Office of Information Technology and chief information officer; and J. Gordon Seymour, general counsel.
In recent months, the PCAOB installed a new chairman, William Duhnke, along with four new board members, giving the audit firm overseer a completely new board. The PCAOB is also planning an overhaul of its strategic plan and approach to inspecting audit firms.
Modesti joined the PCAOB in May 2004 as its original enforcement director and led the team that built the enforcement group from the beginning. They brought settled and litigated matters involving a wide range of audit firms and conduct, including audit failures, noncooperation with the PCAOB’s oversight processes, and independence violations. Many of those matters involved cross-border audits. Under Modesti's leadership, the team has developed strong working relationships with the Securities and Exchange Commission, the Financial Industry Regulatory Authority, federal banking regulators, and foreign audit regulators. He also recently chaired the Enforcement Working Group of the International Forum of Independent Audit Regulators.
“Claudius has made remarkable contributions to the PCAOB and he is well-regarded and respected at the PCAOB and around the world for establishing and developing our enforcement program,” Duhnke said in a statement. “We wish him all the best.”
Prior to joining the PCAOB, Modesti was an assistant U.S. attorney in the Eastern District of Virginia, where he investigated and prosecuted white collar crimes, such as securities fraud, and was corporate fraud coordinator for the office. He also worked as a trial attorney for the Justice Department’s Criminal Division, spent four years in the SEC’s Division of Enforcement, and served as a law clerk for Judge J. Frederick Motz of the U.S. District Court in Maryland.
“It has been the greatest honor and privilege of my professional career to be a part of the PCAOB for the last 14 years and to have worked with the immensely dedicated and talented colleagues in the Division of Enforcement and Investigations and throughout the PCAOB,” Modesti said in a statement. “I am particularly proud to see the PCAOB’s enforcement function become a vital factor in improving audit quality and protecting investors in the U.S. capital markets. My sincerest gratitude goes out to Chairman Duhnke and former Chairmen Doty, Olson and the late William McDonough, as well as all the board members, for their leadership and support and for the opportunities they provided to me.”
Further departures at the PCAOB are likely, according to one of Modesti’s former colleagues. “In its recent personnel changes, the board has indicated that business as usual at the PCAOB has ended,” said Robert Cox, a former assistant director of the PCAOB’s Division of Enforcement and Investigations and currently an attorney at the law firm Briglia Hundley in Tysons Corner, Virginia. “Claudius was the first, and to date, the only director of the Division of Enforcement and Investigations. The board clearly believes that significant changes in leadership are needed for a new direction. I expect further personnel changes will be announced in the coming days.”
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