Supreme Court Rules for President in Separation of Powers Case

Article excerpt

The Supreme Court ruled Monday that a board overseen by the Securities and Exchange Commission operated under rules that violated the Constitution's separation of powers clause.

Congress overstepped its authority when it sought to create an independent watchdog agency deliberately insulated from direct presidential control and political accountability.

In a 5-to-4 decision announced on Monday, the US Supreme Court struck down a portion of the 2002 Sarbanes-Oxley Act, which authorized the creation of the Public Company Accounting Oversight Board (PCAOB).

In a narrow ruling, the majority justices said the accounting oversight board could continue to function as before, but that its members must face removal at any time by the Securities and Exchange Commission (SEC), which supervises the accounting board.

Under the law as written by Congress, the accounting board members could only be removed for cause - in other words, if they engaged in some form of wrongdoing. Under Monday's ruling, the members must be able to be removed "at will," or for any reason including a policy difference.

The action was deemed by the majority justices as necessary to restore enough control over the board by the president to satisfy separation of powers requirements.

"We hold that such multilevel protection from removal is contrary to Article II's vesting of the executive power in the president," Chief Justice John Roberts wrote for majority. "The president cannot 'take care that the laws be faithfully executed' if he cannot oversee the faithfulness of the officers who execute them."

At issue in the case

The oversight board was established in the wake of the accounting scandals at Enron and other large corporations. It was designed to encourage aggressive audits of publicly traded companies to help keep corporate officials honest and investors better informed of a firm's financial health.

To create a watchdog group independent of the accounting industry, Congress required the five members of the oversight board to be appointed by the SEC. In addition, the SEC was to supervise the board's activities and wield the power to remove any PCAOB board member, but only "for cause."

At issue in the case, Free Enterprise Fund v. Public Company Accounting Oversight Board, was whether appointment of oversight board members by the SEC rather than the president violated the separation of powers and the Constitution's appointments clause by insulating the board from presidential control and political accountability.

The high court ruled that it did.

"The Constitution that makes the president accountable to the people for executing the laws also gives him the power to do so. That power includes, as a general matter, the authority to remove those who assist him in carrying out his duties," the chief justice wrote. "Without such power, the president could not be held fully accountable for discharging his own responsibilities; the buck would stop somewhere else."

Joining the chief justice in the majority were Justices Antonin Scalia, Anthony Kennedy, Clarence Thomas, and Samuel Alito.

In a dissent, Justice Stephen Breyer said the statute did not significantly interfere with the president's executive authority. …