On June 4, the SEC announced that it had "removed" William D. Duhnke III from the PCAOB and designated Duane M. DesParte to serve as Acting Chair. Duhnke had been serving as Chair since January 2018.  In the press release,  SEC Chair Gary Gensler said that the "PCAOB has an opportunity to live up to Congress's vision in the Sarbanes-Oxley Act..I look forward to working with my fellow commissioners, Acting Chair DesParte, and the staff of the PCAOB to set it on a path to better protect investors by ensuring that public company audits are informative, accurate, and independent." (See  this PubCo post.) In response to a question about Duhnke's removal at the WSJ's CFO Network Summit earlier this month, Gensler said only that the PCAOB plays an integral role in the audit process and that he didn't think that it was living up to its potential as a standard-setter or in its enforcement role. (See  this PubCo post.)  According to  Bloomberg, Representative Patrick McHenry, the top Republican on the House Financial Services Committee, has said he's opening an investigation into the firing of Duhnke. The WSJ  is now  reporting exclusively that the SEC is conducting an investigation into whether Duhnke "violated any rules in his handling of internal complaints" at the PCAOB.

Following the 2017 PCAOB leaking scandal (see  this PubCo post) and the appointment of Duhnke, as reported by the  WSJ in October 2019, the PCAOB "slowed its work amid board infighting, multiple senior staff departures, and allegations that the chairman has created a 'sense of fear,' according to a [May 2019] whistleblower letter and people familiar with the situation..The regulator has issued 27% fewer audit-inspection reports this year, board data show, as senior staff positions remain unfilled for months."  What's more, that same whistleblower complaint- submitted by a group of employees to the board in May and to the SEC in August-precipitated the appointment of Harvey Pitt, former SEC Chair, to review "PCAOB corporate governance." A PCAOB spokesperson told the WSJ  that, following the eruption of the leaking scandal in 2017, the board "undertook a sweeping assessment in 2018 of its operations and has been working toward 'a series of transformation initiatives to address systemic issues that exist across the organization.'" But, the WSJ reported, shortly after arriving, the new Chair "began pushing out longtime senior executives, according to the whistleblower letter and people familiar with the matter. The whistleblower letter said the regulator 'is permeated by a sense of fear,' due to 'the numerous terminations . [some] driven by retaliation.'"

In addition, as reported by  Thomson-Reuters, a lawsuit was filed last month by a senior officer of the PCAOB against the regulator and Duhnke, charging unlawful termination on the basis of race. The litigation accused Duhnke of perpetrating "a xenophobic and racist campaign" against her, including allegations that he made racist comments in her presence, remarked about "her Chinese ancestry and birth overseas," regularly referred "to the COVID-19 pandemic as 'kung flu' and the 'Chinese flu' in her presence," and mocked her for wearing a mask in the office. The PCAOB has denied the allegations, according to  Law.com, contending that the PCAOB officer was fired over "internal complaints about her conduct and for questions about the necessity of certain travel."

According to the current WSJ article, the SEC "is also looking into how the PCAOB has been run, including its handling of whistleblowers and other employees.. Mr. Duhnke allegedly retaliated against employees he disagreed with by forcing them out of their jobs and, in certain cases, making it hard for them to get other jobs in government, whistleblowers alleged." In addition,  whistleblowers alleged that Duhnke "took a political approach to his job, firing senior staff and curtailing areas of the regulator's work with the aim of shutting it down."

In a written statement,  Duhnke said that "'every single allegation of wrongdoing that has been made against me is false. It's obvious that certain individuals have abused their positions of authority by orchestrating a well-coordinated smear campaign.'" The PCAOB declined to comment.

The article reports that the PCAOB has hired two major law firms, one to investigate the retaliation allegations and represent the PCAOB in the SEC's enforcement investigation, and another to investigate the allegations of racial discrimination. 

The WSJ notes that, even if misconduct were found, since Duhnke has already been removed from the PCAOB, it isn't very clear how exactly the SEC could punish him. SOX, which created the PCAOB, "gives the SEC authority to censure board members or remove them from office if they shirk their duties or abuse their authority."

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