Court Challenge to Sarbanes-Oxley Fails
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An effort to overturn the Sarbanes-Oxley Act has failed, with a federal appeals court upholding a nonprofit board that polices accounting firms.
The creation of the board, known as the Public Company Accounting Oversight Board, is central to the 2002 law, which was passed after the accounting scandals involving Enron and WorldCom. Critics say the intensive auditing requirements imposed on public companies are expensive to comply with and are undermining American competitiveness against foreign companies.
At issue in the appeal was whether the creation of the Public Company Accounting Oversight Board violated the Constitution’s separation of powers doctrine by leaving the president with too little oversight. A panel of the U.S. Court of Appeals for the D.C. Circuit decided Friday in 2-1 vote that the board, whose members can’t be directly removed by the president, was constitutional.
Judge Judith Rogers wrote for the decision. She was joined by Judge Janice Brown.
In a dissent, Judge Brett Kavanaugh, who was a lawyer in the White House when President Bush signed the law, wrote: “The Act renders this Executive Branch agency unaccountable and divorced from Presidential control to a degree not previously countenanced in our constitutional structure.”
Christian Vergonis, a lawyer who represents the plaintiffs, a small accounting firm in Nevada, told the Wall Street Journal that there would be an appeal to either the full D.C. Circuit or the U.S. Supreme Court.
