United States Court of Appeals, District of Columbia Circuit
Mark E. Laccetti, Petitioner
Securities and Exchange Commission, Respondent
December 12, 2017
Petition for Review of an Order of the Securities &
Douglas R. Cox argued the cause for petitioner. With him on
the briefs was Michael J. Scanlon.
R. Freeman, Attorney, U.S. Department of Justice, and Lisa K.
Helvin, Senior Counsel, U.S. Securities and Exchange
Commission, argued the causes for respondent. With them on
the brief were Mark B. Stern and Jennifer L. Utrecht,
Attorneys, U.S. Department of Justice, Michael A. Conley,
Solicitor, and Dominick V. Freda, Assistant General Counsel,
Securities and Exchange Commission.
Before: Griffith, Kavanaugh, and Wilkins, Circuit Judges.
Kavanaugh, Circuit Judge
Public Company Accounting Oversight Board investigated an
audit that had been conducted by the Ernst & Young
accounting firm. The Board's investigation focused in
part on Mark Laccetti, who was the Ernst & Young partner
in charge of the audit. As part of the investigation, the
Board interviewed Laccetti. During that investigative
interview, the Board allowed Laccetti to be accompanied by an
Ernst & Young attorney. But the Board denied
Laccetti's request to also be accompanied by an
accounting expert who would assist his counsel.
Board ultimately charged Laccetti and found that he had
violated Board rules and auditing standards. The Board
sanctioned Laccetti, suspending him from the accounting
profession for two years and fining him $85, 000. The
Securities and Exchange Commission affirmed the Board's
asks this Court to vacate the orders and sanctions against
him. Laccetti contends that the Board infringed his right to
counsel by unreasonably barring the accounting expert from
assisting his counsel at the interview. We agree. We grant
the petition for review, vacate the order of the Securities
and Exchange Commission, and remand with directions that the
Commission vacate the Board's underlying orders and
* * *
has mandated that Board investigations use "fair
procedures." 15 U.S.C. § 7215(a). Implementing that
statute, the Board's Rule 5109(b) provides: "Any
person compelled to testify" in a PCAOB investigative
interview "may be accompanied, represented and advised
by counsel . . . ." Rule 5102(c)(3) further allows the
Board to limit attendance at the interview to "(i) the
person being examined and his or her counsel . . . and (iv)
such other persons as the Board . . . determine[s] are
appropriate . . . ."
argues that the Board, in applying the rules, unlawfully
barred an accounting expert from assisting Laccetti's
counsel at the investigative interview. The Board stated that
it denied Laccetti's request because Laccetti's
expert was employed at Ernst & Young. The Board did not
want Ernst & Young personnel present for the testimony of
the Ernst & Young witnesses because it apparently did not
want Ernst & Young personnel to monitor the
investigation. That was the sole reason provided by the Board
for denying Laccetti's request.
Board's rationale suffers from three independent flaws.
the arbitrary and capricious standard requires that an
agency's action be reasonable and reasonably explained.
Here, the Board's explanation for ...