CRS-11 considerations for determining Bills of Attainder summarized in Kennedy v. Mindoza-Martínez, 372 U.S. 144, (1963) and conclude that $504 does not have a punitive purpose and is not, therefore, a Bill of Attainder. The considerations are: "Whether the sanction involves an affirmative disability or restraint, whether it has historically been regarded as a punishment, whether it comes into play only on a finding of scienter, whether its operation will promote the traditional aims of punishment-retribution and deterrence, whether the behavior to which it applies is already a crime, whether an alternative purpose to which it may rationally be connected is assignable for it, and whether it appears excessive in relation to the alternative purpose assigned are all relevant to the inquiry, and may often point in differing directions." 372 US, at 168-169, 9 L ed 2d at 661. An application of these criteria to § 504 compels the conculsion that it is regulatory rather than punitive. -Natest Milijanich Robert M. Ujevich At the suggestion of the Honorable Abraham S. Ribicoff, I am submitting this statement relative to one extremely important area which was touched on briefly in the above Study issued in January of this year. By way of introduction, I am a partner in a small, local accounting firm in Hartford (7 partners, 14 staff); a member for more than 25 years of the American Institute of CPA's and of the Connecticut Society of CPA's (of which, incidentally, my firm has served as independent auditors for the past three years); and Chairman Pro-Tem of the Coalition of Concerned Connecticut CPA's (of which, more later). The particular point to which this letter is addressed is mentioned near the end of the section of the Summary of the Staff Study dealing with the American Institute of Certified Public Accountants. I quote: "The AICPA has already adopted a voluntary program intended to assure the public regarding the quality of accounting firms practicing before the SEC. The primary participants in the program would be the "Big Eight" firms which would review each other to evaluate their quality control procedures. The program has several major deficiencies which make it wholly inadequate as a basis for public confidence in the quality of practice by large accounting firms." The so-called voluntary program, I fear, has a purpose other than public assurance regarding quality, more subtle, but no less contrary to the public interest. Elsewhere in the Staff Study, attention is called to the fact that the Committee structure of the AICPA provides the Big Eight "with an opportunity to promote anti-competitive practices by meeting together privately and establishing important auditing and accounting policies". The so-called Voluntary Quality Control Review Program is clearly designed to and, in fact, Jack Chesson, Esq. will serve to consolidate and expand the monopoly position of the Big Eight and the handful of firms slightly smaller in size. In a letter dated September 29, 1976 (copy enclosed) from John A. Carley (a Price Waterhouse partner), President of the Connecticut Society of CPA's, to its membership, he admits: "It is conceivable that any member who is excluded from the plan would be at a competitive disadvantage and vulnerable from a legal liability point of view if not a participant in his profession's quality control program." Incidentally, while the program covered only firms practicing before the SEC (or planning to do so), at the time of your investigation, it was later expanded to have authority over all CPA firms. I believe that a history of my personal involvement in opposition to the program would be beneficial to your Committee's understanding of the methods used by the Big Eight in their "abuse of the monopoly privilege". Early in 1976, the AICPA issued a draft of a PLAN FOR VOLUNTARY REGISTRATION OF CPA FIRMS MEETING AUDIT PRACTICE QUALITY CONTROL STANDARDS. I received a copy, together with an invitation (copy enclosed) to attend a Member Forum Discussion on the plan to be chaired by a member of the AICPA Council. The meeting was structured to follow a Participant's Discussion Guide which consisted of questions like: "What are the compelling reasons for adoption of the Plan?" and: "What are the advantages to the profession in adopting the Plan?" Since only selected accountants were invited and since the meeting was called during the extremely busy tax filing period, it was only sparsely attended (such meetings usually are called at inconvenient times, possibly to achieve this result). While no votes were permitted, it appeared that only Big Eight people and current and former officers of the State Society of CPA's favored the plan. We were asked to send any further thoughts we might have to the AICPA in writing. I quote from my letter of February 3, 1976 (copy enclosed). "Assume that the plan were adopted, if not in its present form then in some modified form. Unless his firm were so registered, it is doubtful that any client, small or large would retain a CPA for the preparation of financial statements, audited or unaudited. The first thing the bank or the factor would tell the client was that his accountant was not professionally qualified. Anyone not registered would automatically become a second class citizen." Assuming that letters from individual practitioners were likely to have little beneficial effect, I registered to attend the annual meeting of the Connecticut Society of CPA's to be held May 15, 1976 in San Francisco, three thousand miles away (again, possibly, to limit small practitioner attendance). Jack Chesson, Esq. April 14, 1977 Meanwhile, the Committee on Self-Regulation of the AICPA apparently received many letters like mine from small practitioners opposed to the plan. Intentionally misinterpreting the objections, on February 19, 1976, it issued a new discussion draft entitled Proposed Plan for Voluntary Quality Control Review Program for CPA Firms with Sec Practices. The Committee indicated that since all of the adverse comments it had received were from small firms without SEC Practices, apparently they preferred to be excluded. (Incidentally, there are over 117,000 members of the AICPA, but fewer than 1,000 firms have SEC clients.) At the annual meeting of the Connecticut Society in May, I presented a resolution (copy enclosed), voicing the Society's strong opposition to the plan, which stated, in part, that: "The Society, however, is of the opinion that the establishment of two distinct classes of CPA firms, as contemplated by the proposed plan, though ostensibly applicable only to those firms practicing before the Securities and Exchange Commission, will inevitably result in "second class citizenship" for all firms not so registered, with respect to matters not pertaining to the SEC as well." The resolution, much to my surprise, passed by an overwhelming vote. I followed it up with a motion that: "The President appoint a committee to take such action as may be appropriate to prevent imposition of the plan, and that this action be given high priority". This motion passed unanimously! (Copy of the report on the meeting from the CSCPA Newsletter is enclosed.) I was naive to think that I had accomplished something. At the next meeting of the Board of Governors of the CSCPA, the President (a Price Waterhouse partner) took the following forceful action (quoted from the official minutes of the Board meeting, copy enclosed): "President Carley announced that his response to this resolution was to appoint a committee to consider what action should be taken with respect to that resolution, if any." As expected, the committee took no positive action. In response to my telephoned objection, Mr. Carley stated that he would never give the committee the authority "to take action". On July 23, 1976, the AICPA Board of Directors approved, for submission to Council, a revised program extended to cover firms with general audit practices as well as SEC practices (just what the Big Eight had sponsored in the first place). The Board's position apparently was that it would be unfair to leave anyone out just because they didn't have SEC regulated clients. Realizing I was getting nowhere, I petitioned for a Special Meeting of the State Society to consider a resolution (copy enclosed) to clothe the committee with full authority and to force action. The meeting was the best attended the CSCPA ever held, fully reported on in the CSCPA Newsletter of October 1976 (copy enclosed). The debate did not focus on the question of the Quality Control Review Program itself. No one supported the program! Jack Chesson, Esq. April 14, 1977 The question discussed was: How far should we go in our opposition? The key objections to the resolution were that it gave the committee too broad a mandate to spend money to accomplish its goals and that it went too far by specifically empowering the committee to engage counsel to seek an injunction against the Institute. On these issues, the resolution was defeated by a vote of 52% to 48%. Needless to say, the Big Eight, amply forewarned, had packed the house with bodies who said nothing but voted as instructed. The Connecticut "Establishment" did, to their credit, recognize that they had to do something. At the AICPA Council meeting in Philadelphia on October 23, 1976, Connecticut's three members offered a resolution to delay the vote on the plan, supported by only 18 out of 252 Council members. Council overwhelmingly adopted a Voluntary Quality Control Review Program for CPA Firms (copy enclosed). I believe that it is important to emphasize that at no time have the 117,000 members of the AICPA ever been permitted to vote for or against the adoption of this program. While only 15% of the AICPA members are associated with the Big Eight, 42% of the members of the AICPA Council who adopted the program come from the 15 largest firms. There is no question that the AICPA membership would vote: No! Sane people do not sign their own death warrants. On January 29, 1977, I wrote to the 306 members of the Connecticut Society of CPA's practicing public accounting in the Hartford area, other than with the Big Eight. My letter sought an expression of interest in forming a Coalition to protect the interests of the public and of the local CPA's. In ten days, I received positive responses from 47 firms representing 113 CPA's. This Coalition of Concerned Connecticut CPA's first turned its attention to matters presently before the Connecticut State Legislature, sponsored by the Big Eight through their control of the Connecticut Society of CPA's. (The Big Eight constitute roughly 25% of the membership.) (See my letter to Ms. Margery Smith, Acting Head, Federal Trade Commission, Bureau of Consumer Protection, copy enclosed.) This matter had time priority, and is, as yet, unresolved. But, the Coalition agrees that the matter of the Voluntary Quality Control Review Program is ultimately far more important. * * * Having briefed you on the history of its adoption, permit me to outline the plan itself. (All quotes are directly from the Program document.) A CPA "firm advises the AICPA committee of its decision to participate", and that it "has documented policies and procedures for the quality control of its audit practice". A field review is made of the documentation and then "client files relating to selected audit engagements" are also reviewed to see that "there were well-planned and appropriately executed auditing procedures that were documented in accordance with the firm's policies." The review team "reports on the results of the review to the reviewed firm" which in turn submits it (presumably, if it is favorable) to the AICPA. The AICPA committee publishes a list of those firms which submit a favorable report and distributes the list far and wide. "The committee is also responsible for acquainting the business community and general public with the |