Supreme Court strikes down key Sarbanes-Oxley provision

The Supreme Court today issued a ruling in Free Enterprise Fund v. Public Company Accounting Oversight Board. In a 5 to 4 decision, the Court found unconstitutional a key provision of the Sarbanes-Oxley Act, the anti-fraud law Congress enacted in the aftermath of the Enron and WorldCom accounting scandals. Overturning decisions by the DC District Court and the DC Circuit Court, the Supreme Court held that the Public Company Accounting Oversight Board violated the Appointments Clause of the Constitution because its members are not under the direct control of the President. Senator Leahy (D-VT) was a co-sponsor of the Sarbanes-Oxley Act of 2002 and a principle author of the whistleblower protections established by the Act.
‘I am very disappointed by today’s decision in which a bare majority of the Supreme Court found a key provision of the Sarbanes-Oxley Act unconstitutional. This important anti-fraud legislation has been a critical tool for protecting American taxpayers from fraud and corruption. In overturning the lower courts’ decision, the Supreme Court has once again turned its back on its own precedents and disregarded the longstanding judgments of Congress and our efforts to protect Americans from abuses by powerful corporate interests.
‘A key reform enacted by the Sarbanes-Oxley Act was the establishment of the independent Public Company Accounting Oversight Board to regulate accounting firms whose use of convoluted, often fraudulent, accounting schemes misled investors and rocked the financial world. Their deception and greed cost Americans hundreds of billions of dollars. Corporate conservatives attacked this Board as unconstitutional because its members are not under the direct control of the President. A slim majority of the Supreme Court agreed with these corporate interests that the law violates the Constitution’s Appointments Clause, and their decision today guts many of the critical accountability provisions of the Sarbanes-Oxley Act intended to protect the public.
‘Unfortunately, this case is bigger than just the Sarbanes-Oxley Act. As Justice Breyer noted in a vigorous dissent today, this decision may call into question the constitutionality of various mechanisms fashioned by Congress to combat inefficiency and fraud in both the public and business sectors and ‘threatens to disrupt severely the fair and efficient administration of the laws.’ Congress has established dozens of agencies which serve as indispensible corporate watchdogs and whose oversight provides a check on the power of Wall Street. I am very concerned that the Court’s decision today will call into question the ability of these agencies to adequately protect the public.
‘By continuing to issue decisions that benefit corporate risk-takers at the expense of hardworking Americans, the Court has once again undermined the government’s effort to reign in corruption on Wall Street. Congress must take swift action to respond to this disappointing decision, and I look forward to working with Senators from both sides of the aisle to pass legislation that will reinstate the Public Company Accounting Oversight Board and the important protections it provides our citizens.’
Source: Leahy's office. 6.28.2010
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