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Support for Accountants Serving on State Boards

Aug 3rd 2018
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Proposed federal legislation that would help ensure that accountants who serve on state regulatory boards aren’t deterred from serving because of possible legal damages has won the support of the AICPA.

The Occupational Licensing Board Antitrust Damages Relief and Reform Act (H.R. 6515) was introduced in July by U.S. Rep. Mike Conaway, R-Texas, to protect state regulatory boards from damage awards.

“The accounting profession believes that a federal solution is necessary to ensure that current and prospective state board members are not dissuaded from serving because of uncertainty over any potential liability arising from their public service,” said AICPA President and chief executive officer Barry C. Melancon, CPA, CGMA, in a prepared statement. “We commend [Rep]. Conaway for recognizing and addressing this very real threat to voluntary service on state boards of accountancy and other licensing boards.”

In 2015, the U.S. Supreme Court ruled that the North Carolina Dental Board was not entitled to state action immunity from antitrust laws because its actions weren’t actively state-supervised. The AICPA’s goal is to remove the potential for personal financial liability of appointed state board members under antitrust laws.

According to the ruling, the Supreme Court case turned on whether teeth whitening is the practice of dentistry.

The ruling states:

Nonetheless, after dentists complained to the Board that nondentists were charging lower prices for such services than dentists did, the Board issued at least 47 official cease-and-desist letters to nondentist teeth whitening service providers and product manufacturers, often warning that the unlicensed practice of dentistry is a crime. This and other related Board actions led nondentists to cease offering teeth whitening services in North Carolina.

The Federal Trade Commission (FTC) filed an administrative complaint, alleging that the Board’s concerted action to exclude nondentists from the market for teeth whitening services in North Carolina constituted an anticompetitive and unfair method of competition under the Federal Trade Commission Act. An Administrative Law Judge (ALJ) denied the Board’s motion to dismiss on the ground of state-action immunity.

The FTC sustained that ruling, reasoning that even if the Board had acted pursuant to a clearly articulated state policy to displace competition, the Board must be actively supervised by the State to claim immunity, which it was not. After a hearing on the merits, the [administrative law judge (ALJ)] determined that the Board had unreasonably restrained trade in violation of antitrust law. The FTC again sustained the ALJ, and the Fourth Circuit affirmed the FTC in all respects. Held: Because a controlling number of the Board’s decisionmakers are active market participants in the occupation the Board regulates, the Board can invoke state-action antitrust immunity only if it was subject to active supervision by the State, and here that requirement is not met. Pp. 5–18.

Two years later, Melancon expressed concern about the ruling’s effect in a letter to the House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law for its hearing on regulation and competition in occupational  licensing.

Melancon cautioned that state professional boards could lose qualified and experienced members because of the risk of personal liability in lawsuits related to actions taken in the members’ official capacities.

“There is widespread agreement regarding the importance of well-functioning licensing boards, in such learned professions as medical, legal, accounting, engineering, architecture and more, to promote and protect public health, safety and welfare,” Melancon stated. “Therefore, the AICPA believes that a federal solution is important to ensure that current and prospective state board members are not deterred from serving because they are uncertain as to any potential financial liability that could arise from their public service. Such legislation should provide a balanced approach to protecting the public while also allowing for competition in the marketplace for consumers.”

Conaway stated in the AICPA news release about the legislative proposal that people who serve on the regulatory boards should have the same legal protections for working on behalf of the state as other state officials do. “Having served on the Texas State Board of Accountancy myself, I understand that serving on a licensing board is performing an important public service,” Conaway said in the prepared statement. “This legislation ensures that members of state licensing boards will continue to serve the state without fear of personal liability.”

The bill has been referred to the Committee on the Judiciary and the Committee on Education and the Workforce. In his letter to lawmakers, Melancon cited two examples of Florida state boards that lost members because of a lack of state indemnification: The Florida Board of Employee Leasing Companies and the Florida Board of Podiatric Medicine.

According to Wikipedia, Conaway became a CPA in 1974, was chief financial officer at an unnamed bank, and from 1981 to 1986 was the chief financial officer of Arbusto Energy Inc., an oil and gas exploration company operated by President George W. Bush.

After Bush was elected governor of Texas, he appointed Conaway to the Texas State Board of Public Accountancy, where he served as a volunteer for seven years and as chairman for the last five years, Wikipedia states.

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