The Securities and Exchange Commission on Friday bowed to progressives and fired Public Company Accounting Oversight Board chairman
Note how the left has suddenly warmed to the originalist separation-of-powers views of Supreme Court Justice
Congress established the accounting board in the Sarbanes-Oxley Act of 2002 to police auditors after the Enron and WorldCom frauds. While supervised by the SEC, the nonprofit quasi-government agency has sweeping power to investigate and punish accounting firms.
Sarbox originally provided that PCAOB members could only be removed for cause by the SEC, whose commissioners could also only be removed for cause. This double insulation from presidential control was challenged in Free Enterprise Fund v. PCAOB.
A divided D.C. Circuit Court of Appeals panel upheld the removal provisions. The dissenter was Judge Kavanaugh, who was then on the D.C. Circuit. He argued that “the double for-cause removal provisions in the [Act] . . . combine to eliminate any meaningful Presidential control over the [Board].”
In 2010 a 5-4 Supreme Court majority adopted his reasoning. The Court’s ruling allowed PCAOB members to be fired at will by the SEC. It also laid the ground for the successful challenge to the Consumer Financial Protection Bureau’s director for-cause removal limitation in Seila Law (2020).
Liberals fretted that both High Court decisions would result in the politicization of the supposedly independent agencies. Yet President Biden took advantage of the Seila Law decision to fire Trump appointee
from the consumer bureau. And what do you know?
Progressives also urged Mr. Biden’s new SEC Chairman
to take advantage of the Court’s Free Enterprise Fund ruling to sack Mr. Duhnke. Sens.
wrote a letter last month to Mr. Gensler complaining that Mr. Duhnke has defanged the watchdog and sidelined “investor advocates”—that is, progressive lobbyists.
They want the PCAOB to sic auditors on public companies to enforce the left’s climate and social agenda. Mr. Gensler dutifully saluted. This is a signal of the political direction of the Gensler SEC, and he should be accountable.
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Appeared in the June 7, 2021, print edition.