[SOLVED] Laccetti v. Securities and Exchange

Laccetti v. Securities and Exchange Commission
United States Court of Appeals, District of Columbia Circuit, 885 F.3d 724 (2018).
Background and Facts; The Public Company Accounting Oversight Board investigated an audit by the Ernst & Young accounting firm. The investigation focused on Mark Laccetti, who was the Ernst & Young partner in charge of the audit. As part of the investigation, the board interviewed Laccetti. During the interview, the board allowed him to be accompanied by an Ernst & Young attorney. But the board denied his request to also be accompanied by an accounting expert who
would assist his legal counsel.
Ultimately, the board found that Laccetti had violated the board’s rules and auditing standards. The board suspended him from the accounting profession for two years and fined him $85,000. The Securities and Exchange Commission upheld the finding and the sanctions. Laccetti appealed, arguing that the board unlawfully barred an accounting expert from assisting his counsel at the investigative interview.
In the Language of the Court kavanaugh, Circuit Judge: 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. The Board’s rationale suffers from three independent flaws. First, the arbitrary and capricious standard requires that an agency’s action be reasonable and reasonably explained. Here, the Board’s explanation for denying Laccetti’s request was not reasonable. [Emphasis added.]
Given the presence of the Ernst & Young attorney at the interview, the Board’s rationale for excluding the Ernst & Young accounting expert makes no sense here. Second, even if the Board wanted to bar an Ernst & Young–affiliated accounting expert, that explanation would not justify the Board’s denying Laccetti any accounting expert. The Board could have told Laccetti that he could bring to the interview an accounting expert who was not affiliated with Ernst & Young. The Board did not do so.
Third, even putting those points aside, the Board’s rules establish that the Board could not bar Laccetti from using an expert to assist his counsel in these circumstances. Given the extraordinary complexity of matters raised in agency investigations, counsel trained only in the law, no matter how skillful, may on occasion be less than fully equipped to serve the client in agency proceedings. Unless the lawyer can receive substantive guidance from an expert technician—in this case, an accountant—when he determines in his professional judgment that such assistance is essential, his client’s absolute right to counsel during the proceedings would become substantially qualified. In this context, an expert is an extension of counsel. [Emphasis added.]
Under the Board’s rules, the Board therefore may not bar a witness from bringing an expert who could assist the witness’s counsel during an investigative interview. The Board itself has long directed its staff to permit a technical consultant to be present during investigative testimony. The problem is that the Board did not follow its rules in this particular case.
Decision and Remedy; The U.S. Court of Appeals for the District of Columbia Circuit vacated the orders and sanctions against Laccetti and remanded the case. “The Board acted unlawfully when it barred Laccetti from bringing an accounting expert to assist his counsel at the investigative interview.”
Critical Thinking
• Legal Environment If the board were to open a new disciplinary proceeding against Laccetti and interview him again, what would it have to do to comply with the court’s decision?
• What If the Facts Were Different? Suppose that the board’s rules guaranteed a witness’s right to counsel but expressly excluded “technical consultants and experts” during an investigative interview. Would the result have been different? Explain.

Question: Laccetti v. Securities and Exchange