On October 5, "the First Monday in October," the Supreme Court of the
United States will begin its October 2009 Term. One of the important
cases the Court will consider-Free Enterprise Fund v. Public Company
Accounting Oversight Board (PCAOB)-asks whether the PCAOB, established
by Congress in the 2002 Sarbanes-Oxley Act in response to the Enron
"crisis," complies with the Constitution. One judge from the U.S.
Court of Appeals for the District of Columbia called it "the most
important separation-of-powers case regarding the president's
appointment and removal powers to reach the courts in the last 20 years."

The PCAOB is a private-sector, nonprofit corporation that oversees
the auditors of public companies in order to "protect the interests
of investors and further the public interest in the preparation of
informative, fair, and independent audit reports." It has five
full-time members, including its chairman, all appointed by the
Securities and Exchange Commission (SEC). The chairman is paid
$556,000 a year and each other board member $452,000. It has an
annual budget of $100 million and a staff of 300, headquartered in
Washington, D.C. Its activities are approved and overseen by the SEC,
which can revise or reverse its rules.

In February 2006, the Free Enterprise Fund, a nonprofit, IRC 501(c)(4)
group that champions limited government, along with a small Nevada
accounting firm, filed a lawsuit challenging the constitutionality
of the PCAOB. The Fund argues that the Act quadrupled the auditing
expenses of public corporations and costs the U.S. economy nearly $35
billion each year. The worst is yet to come, argues the Fund, when
the Act is applied to small companies and even nonprofit entities.
Constitutionally, argues the Fund, PCAOB is "a quasi-legislative,
quasi-executive, quasi-non-profit regulatory commission" that violates
the Constitution's "Separation of Powers Doctrine" as well as
the "Appointments Clause."

Nonetheless, in March 2007, the federal district court for the
District of Columbia upheld the Act's constitutionality. In August 2008,
the U.S. Court of Appeals for the District of Columbia, by a 2-1 margin,
agreed and, in November 2008, rejected petitions for rehearing and
rehearing en banc by 2-1 and 5-4, respectively. On May 18, 2009,
however, the Supreme Court agreed to hear the matter. All briefing
in the case has been completed.

The Constitution is explicit as to the structure of the federal
government. The Founders believed that all governmental power is
composed of one of three types: legislative, executive, and judicial;
to ensure the "checks and balances" essential to preserve liberty,
they vested those powers in three separate, distinct, and co-equal
divisions of government. Thus, "All legislative Powers," they wrote,
"shall be vested in a Congress.." Likewise, the "executive Power shall
be vested in a President," and the "judicial Power of the United States
shall be vested in one Supreme Court [and inferior courts]."

Despite this specificity, over the decades Congress blurred these lines
by creating executive entities that report, not to the President, but
to the multi-headed monster that is Congress, hence to no one. Worse
yet, the Supreme Court failed to enforce the limits of the Constitution,
enabling Congress, in Madison's words, to "draw all power into its
impetuous vortex." In a series of cases beginning in 1886, extending
through 1935, and culminating in 1988 (in a ruling Justice Scalia called
"an open invitation for Congress to experiment"), the Court authorized
the administrative state. A 1926 ruling, in which the Court got it right,
via careful analyses of the Constitution's text and the Founders' theory,
was brushed aside.

In Free Enterprise Fund, the Court should rule that independent
agencies-bodies of persons wielding executive power, over whom the
President exercises little, if any control or supervision-is anathema to
the Constitution, for the Founders intended that no executive activity be
"independent" of or free from political accountability. With so much
mischief afoot in Washington, D.C., there has never been a more important
time to do so.

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Good Neighbor Committee
P.O. Box 155 - La Salle, CO  80645
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