Earlier today (May 26), in a press briefing at the White House, President Barack Obama nominated federal appeals court Judge Sonia Sotomayor of New York for the vacancy on the Supreme Court arising from Justice Souter’s announced retirement. Background on Judge Sotomayor can be found in this FoxNews article.
Among issues Sotomayor will address, if confirmed, along with the other Supreme Court justices: last week, the U.S. Supreme Court agreed to hear an appeal relating to a challenge to the Constitutionality of the Sarbanes-Oxley Act, specifically whether the appointment of PCAOB board members by the SEC commissioners (as opposed to by the President) violates the Appointment Clause of the Constitution. According to this one-page Supreme Court document confirming the court’s decision to ‘grant certiorari’ or take on the case, the questions presented are:
1. Whether the Sarbanes-Oxley Act of 2002 violates the Constitution's separation of powers by vesting members of the Public Company Accounting Oversight Board ("PCAOB") with far-reaching executive power while completely stripping the President of all authority to appoint or remove those members or otherwise supervise or control their exercise of that power, or whether, as the court of appeals held, the Act is constitutional because Congress can restrict the President's removal authority in any way it "deems best for the public interest."
2. Whether the court of appeals erred in holding that, under the Appointments Clause, PCAOB members are "inferior officers" directed and supervised by the Securities and Exchange Commission ("SEC"), where the SEC lacks any authority to supervise those members personally, to remove the members for any policy related reason or to influence the members' key investigative functions, merely because the SEC may review some of the members' work product.
3. If PCAOB members are inferior officers, whether the Act's provision for their appointment by the SEC violates the Appointments Clause either because the SEC is not a "Department" under Freytag v. Commissioner, 501 U.S. 868 (1991), or because the five commissioners, acting collectively, are not the "Head" of the SEC.
FCPA Investigations Increase
Meanwhile, Dionne Searcey of the Wall Street Journal reports today on developments relating to a precursor to Sarbanes-Oxley: The Foreign Corrupt Practices Act or FCPA. In her article, U.S. Cracks Down on Corporate Bribes, Searcey explains that FCPA, which became law in 1977 as a response to corporate bribery scandals at home and abroad, has seen an uptick in related investigations, rising from 100 last year, to 120 this year. She notes: "The effort began in the wake of a series of business scandals earlier this decade, including the collapse of Enron, that stirred up a new corporate-reform movement... After the passage of the 2002 Sarbanes-Oxley Act, which is intended to hold executives more accountable for their companies' actions, the Justice Department dusted off the FCPA law as part of the overall crackdown on corporate shenanigans." Read more on this topic here.
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Gail Perry, CPA