Playing Peekaboo
Wednesday, June 10th, 2009
For many years, a network of right-wing “think tanks” and organizations have worked toward two major goals: (1) The deregulation of all manner of businesses, from financial institutions to factories to farms; and (2) “tort reform,” a means to protect businesses from personal injury liability. And yes, you should assume there is big corporate money funding these goals.
Workplace safety regulation and the right to sue for damages in court are both critical issues to people suffering from mesothelioma and other asbestos-related diseases. Most exposure to asbestos occurs in workplaces, and many people suffering diseases caused by asbestos exposure rely on the tort system to get the money they need to take care of themselves and their families.
With that in mind — among the cases that will be heard by the U.S. Supreme Court next term will be a challenge to the Sarbanes-Oxley corporate accountability law. According to Jonathan Rauch, writing for National Journal, this challenge began at a 2005 meeting at the American Enterprise Institute (AEI) in Washington. Organizations represented at this meeting included the Competitive Enterprise Institute (CEI; “dedicated to free enterprise and limited government”); and the Free Enterprise Fund, a 501(c)4 activist group with multiple ties to the right-wing Club for Growth. All of these organizations work tirelessly for deregulation and “tort reform.”
The Sarbanes-Oxley Act was created in 2002 in the wake of a number of corporate scandals, notably the failure of Enron. Among other provisions, Sarbanes-Oxley established the Public Company Accounting Oversight Board to set and enforce standards for accountants who audit corporations’ books. Called “Peekaboo” for short, the board is a private, nonprofit corporation whose members are appointed by the Securities and Exchange Commission. In other words, it is an independent regulatory body accountable only to another independent regulatory body.
Jonathan Rauch writes that the attendees of the 2005 AEI meeting thought the Peekaboo board is a “constitutional monster.” I think it’s more likely the attendees were looking for a way to dismantle Sarbanes-Oxley altogether, and Peekaboo seemed the Act’s most vulnerable spot.
In their minds, Sarbanes-Oxley is a hindrance to the creation of wealth. For example, in this 2002 AEI opinion piece, Sarbanes-Oxley was blamed for sluggish economic growth. The “Sarbanes-Oxley Act and the stock exchange regulations it has spawned,” it says, “have altered the composition and dynamics of corporate boards in ways that discourage risk-taking.” Given last year’s financial sector meltdown, one suspects Sarbanes-Oxley didn’t discourage risk-taking enough.
But in 2002, the “free market” enthusiasts were baffled why aggressive tax cuts and low interest rates were not significantly stimulating the economy. How could that be? Wait, we know the reason! It must be the fault of Sarbanes-Oxley!
In February 2006, a federal district court was asked to strike down Peekaboo as unconstitutional. The federal district court “slapped down the case on summary judgment,” says Rauch. A D.C. Circuit Court of Appeals agreed with the federal district court, 2-1. But on May 18 the U.S. Supreme Court agreed to hear the case.
Rauch writes that a constitutional argument can be made against Peekaboo. An independent agency whose members are answerable only to another independent agency is unprecedented. The four “conservative” judges of the Court — Roberts, Alito, Scalia and Thomas — are likely to decide Peekaboo is unconstitutional. Might a fifth judge feel the same way?
However, even if the justices decide Peekaboo is afoul of the Constitution, this will not likely end Sarbanes-Oxley. It probably won’t even end Peekaboo, Rauch says. “What it might do is force Congress to rewrite the law — for instance, by making the board subject to White House appointment and Senate confirmation. If so, only a few accountants and law professors would notice the difference,” Rauch writes.
Making Peekaboo more accountable to the White House and Senate probably is not the result the “limited government” AEI group had in mind. They might find themselves winning a battle but losing a war.
Barbara O’Brien
June 6, 2009
