House Republican Launches Investigation Into PCAOB Chair Dismissal, Calls Move Partisan

By:
Chris Gaetano
Published Date:
Jun 10, 2021
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Rep. Patrick McHenry (R-NC), the senior Republican on the House Financial Services Committee, announced plans to investigate the recent dismissal of Public Company Accounting Oversight Board Chair William Duhnke III, which he said was a partisan move to politicize the ostensibly independent regulator.

The Securities and Exchange Commission (SEC) removed Duhnke from the PCOAB late last week. While it did not give an explicit reason for doing so, the move came shortly after a group of progressive organizations sent a letter to SEC Chair Gary Gensler calling for him to clean house and remove the entire board, followed by a letter from Sen. Elizabeth Warren (D-Mass.) and Sen. Bernie Sanders (I-Vt.) calling for the same. Both letters argued that the board overall has strayed from its purpose, saying that there has been a collapse in enforcement action, a weakening of auditing standards and a dearth of outside engagement due to the shuttering of important advisory bodies. The senators' letter also mentioned the departure of senior staff, and an overall "sense of fear" that has taken hold in the organization, largely due to the chairman. The complaints are similar to those raised by former board member J. Robert Brown who, shortly before resigning in January, made a number of public critiques of the organization's actions, or lack thereof, including transparency issues, a lack of innovation, a straying from the PCAOB's core mission, and the loosening of independence rules. Citing a 2019 whistleblower letter purporting to be from a group of current and former employees, Bloomberg Businessweek  added that Duhnke was also the target of numerous complaints from rank-and- file workers, including that he singled out Democrats at the organization, and used racial slurs when referring to COVID-19.

But McHenry maintains that it was not Duhnke who was partisan, but rather the Democrats who removed him from the PCAOB. While those inside the organization cited concern that Duhnke was eroding the board's independence, McHenry argued that the act of removing him is what will erode the board's independence. The lawmaker alleges that the SEC has no legitimate basis for removing him, as well as the remaining board members, and charges that the main purpose behind the move was to remake the PCAOB so it is more compliant to Democratic policies.

McHenry asked the SEC and PCAOB to preserve documents related to the dismissal, as well as to formally release the report on the PCAOB’s governance practices prepared by former SEC Chair Harvey Pitt as he prepares his probe.

“The brazen attempt by the SEC’s Democratic majority to radically alter the PCAOB raises serious questions about whether and why the Biden Administration is eroding the Board’s independence and deliberately exposing it to the ‘vicissitudes of politics,’" McHenry said. "A recent report by former SEC Chair Harvey Pitt on PCAOB governance issues may provide some answers. The SEC hired Pitt in July 2019 to assess the PCAOB’s corporate governance policies and practices and recommend changes as appropriate. Pitt’s ensuing report, which cost taxpayers $125,000, may shed light on whether reforms to the PCAOB are necessary and clarify whether the SEC has any legitimate basis for overhauling the Board’s membership, aside from the Democratic majority’s apparent partisan motives. I expect the SEC to assist the Committee’s investigation and formally authorize the report for release.”

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