June 7, 2006

Judge to soon hear motion to dismiss PCAOB suit

By Karey Wutkowski

WASHINGTON (Reuters) - A federal judge will hear arguments
on June 29 on whether to dismiss a lawsuit filed by a
conservative think tank that seeks to declare unconstitutional
a U.S. audit watchdog agency, a lawyer in the case said on

The Public Company Accounting Oversight Board (PCAOB) was
created in 2002 to police the formerly self-regulated audit
business dominated by the Big Four accounting firms. The
post-Enron Sarbanes-Oxley laws that created the PCAOB also
require U.S.-traded companies to disclose more about their
internal controls and how they keep their books in order.

Michael Carvin, an attorney for the think tank, the Free
Enterprise Fund, said he does not believe the Bush
administration's recent statement of support for dismissal of
the lawsuit will have bearing on the case.

The U.S. Department of Justice filed a "statement of
interest" last week, saying the lawsuit was filed "at the wrong
time, in the wrong court" and should be dismissed. It said a
challenge to the constitutionality of PCAOB must first be
reviewed by the U.S. Securities and Exchange Commission.

"They're weighing in on arcane jurisdiction questions where
they have no expertise," Carvin said. "We're using the
procedure that everyone arguing about constitutional violations

U.S. Judge James Robertson will hear arguments on the
motion to dismiss on June 29, Carvin said.

The Free Enterprise Fund, a group headed by conservative
activist Mallory Factor, filed the lawsuit in U.S. District
Court in Washington in February. It accused the PCAOB of
violating the federal separation of powers because it lacks
proper checks and balances.

Kenneth Starr, the former U.S. independent counsel who
investigated President Clinton's extramarital affair with
Monica Lewinsky, is part of the think tank's legal team.

The Free Enterprise Fund also contends that PCAOB board
members should be appointed by the White House with
congressional review. The officials are currently appointed by
the SEC, with consultation from the Federal Reserve Board and
the Treasury Department.

The Justice Department told the court that the think tank
was seeking a "premature judicial ruling" and trying to bypass
the mechanisms Congress had set up to challenge the PCAOB and
its actions.

The PCAOB is also seeking to dismiss the lawsuit. The
agency filed documents last month saying the federal court
lacks jurisdiction to hear the case.