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Whistleblowers Sound Concern Over Politicization of PCAOB

Chris Gaetano
Published Date:
Oct 16, 2019

A group of whistleblowers sent a formal complaint to the Securities and Exchange Commission (SEC) over infighting, staff departures and a "sense of fear" connected with what they say is an increasingly politicized Public Company Accounting Oversight Board (PCAOB), according to the Wall Street Journal.

The letter, filed first with the PCAOB in May and then sent to the SEC in August, described a level of internal strife that has affected other operational areas of the board: for instance, the number of PCAOB's audit-inspection reports has dropped by 27 percent this year, and certain senior staff positions, such as  general counsel and enforcement director, have gone unfilled for months (the board has gone 16 months without either in a permanent position). 

The whisteblowers said that much of this strife can be attributed to the chair, William Duhnke, who had long been favored by Republicans as a member. Upon his appointment in 2017, he is said to have begun actively pushing out senior leaders, and convincing them to sign nondisparagement agreements in exchange for six months of continued compensation. The whistleblowers also level the charge that the organization has retaliated against those who objected to the manner in which the terminations were done, such as an associate counsel who expressed concern that the board’s insurance policies required its leaders to consult with legal counsel before dismissing employees, which was not done. She left the agency shortly afterward. 

The SEC responded to the complaint by appointing Harvey Pitt, a former agency chairman, to review the PCAOB’s corporate governance, though it is unknown the degree to which this review was completed. Arthur Levitt, a former SEC chairman, told the Journal that it appears that the PCAOB is in the process of being politicized, in which case there is a danger of it becoming a "totally worthless political jumping ground." 

A PCAOB spokeswoman said that the board is currently in the process of implementing a series of transformation initiatives to address systemic issues that exist across the organization, though she conceded that change is not always easy. 

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