DC Court Upholds Constitutionality of SOX
August 25, 2008 | Leave a Comment
As first reported in the SoxFirst blog today. The US Court of Appeals for the District of Columbia Circuit has upheld the constitutionality of Sarbanes-Oxley, and in particular the Public Company Accounting Oversight Board.
The opinion is in response to the appeal filed in 2006 by the Free Enterprise Fund which claimed that the manner of appointing the PCAOB members by the SEC violated the Constitution, because it gives the president the power to make appointments with the consent of the Senate.
The Competitive Enterprise Institute’s Open Market blog called the ruling “illogical”.
The Fourth Circuit Rejects ReInstatement for First Sox Whistleblower
August 12, 2008 | Leave a Comment
The first claimant to win a Sox Whistleblower case suffered another setback in a federal appeals court last week. The 4th U.S. Circuit Court of Appeals refused to reinstate David Welch to his job, ruling that he failed to explain how his employer’s alleged shoddy accounting practices could be considered a violation of federal law. Welch was dismissed as chief financial officer of Cardinal Bankshares Corp. in 2002 after reporting what he said were misclassifications in financial reports that essentially overstated the bank’s earnings by $195,000. Cardinal is the holding company for a bank in southwestern Virginia.
In the case, styled Welch v. Chao, Judge Diana Gribbon Motz wrote that a SOX whistleblower doesn’t have to cite code sections to make out a claim, but he has to identify the specific conduct he “reasonably believes” is illegal. Judge Motz wrote that communications about misclassifications in financial statements could form the basis of a SOX whistleblower claim, but that Welch’s SOX claim failed because his citation of accounting treatises and later-passed laws and regulations could not show how the bank’s accounting practices reasonably could have been perceived as a violation of federal securities laws.