John M. Sayre, Sr.
355 Ivanhoe Street
Denver, Colorado 80220

November 26, 2002

Jonathan G. Katz
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609

    Re: File No. S7-40-02
    Disclosure Required by Sections 404, 406
    and 407 of the Sarbanes-Oxley Act of 2002

Dear Mr. Katz:

As an ordinary citizen and an occasional investor in public issuers, I find it perplexing that there is any question as to the need of public corporations to find, and retain as a member of the audit committee, a "financial expert". Financial experts, as defined in Section 407 of the Sarbanes-Oxley Act of 2002, are necessary to re-establish investor confidence in the free market system that depends on the integrity and knowledge of boards of directors.

The accounting firms, that we all relied on in the past, have proven flawed and unable to provide investors with accurate pictures of the financial health of many corporations. Even the current chairman of the AICPA, William F. Ezzell recently bemoaned the state of the accounting industry to his fellow practitioners stating, "We all know we can do everything right, and still not do the right thing...How often do we celebrate those who say `no' in the face of overwhelming pressure." Investors must rely on their representatives, the board of directors, to ensure a corporation is accurately reflecting its business activities in its financial statements. Strict adherence to an ever expanding set of accounting standards has lead to the financial reporting world Mr. Ezzell bemoans. Where is the judgment required to understand the Statements of Financial Accounting Concepts? The accounting industry and chief financial officers have hidden for too long behind very narrow, very specific, accounting interpretations rather than exercising their business judgment, a commodity that appears in short supply these days. Rule abiding accountants, CFO's, and controllers don't seem to strive for the financial transparency that was an important goal of the conceptual framework project and relied on judgment, not rules, as the determinant factor in financial reporting. Board of directors that include a "financial expert", as defined in the law, will greatly enhance the probability of financial reporting focusing on corporate transparency for investors.

Several comment letters have been received by the Commission that speculate as to a shortage of financial experts as defined in Sarbanes-Oxley and go on to request amendments to the definition. In sharp protest to these letters, I must point out that the American system has always relied on price adjustments to remedy supply and demand imbalances. It is interesting to note that the November 23rd Financial Times lead story was entitled "Headhunter fees surge in the wake of new board rules." The article cites a 33% increase in search fees as "the role of independent directors becomes more important and the search more difficult." Yet the fees are only $100,000 after the increase, substantially lower than the fee charged by one on the headhunting firms quoted in the article for searches related to corporate governance officers. As search fees generally reflect compensation levels of the underlying position, it appears corporations currently place little value on strong, competent board members, including the "financial expert". I, however, believe the cost of strong, independent Boards of Directors is minuscule when compared to the recent losses incurred by ordinary investors and retirees. We must value the role that directors play in guaranteeing proper and ethical corporate behavior.

As a practical person, however, I must acknowledge the supply and demand imbalance for "financial experts" may continue for some time. In the interim, I strongly urge the Commission to encourage audit committees to retain their own expert advisers and legal counsel, apart from those provided by corporate management. The law clearly provides for corporate resources to be used for this purpose. Audit committee members must be fully capable of executing their duties independent of management input, and must rely on a staff of professionals to support them. Section 301 of Sarbanes-Oxley specifically provides for the retention, use and payment of such experts. The Commission should encourage, if not mandate, the interim retention of advisers, independent financial experts, by audit committees where no financial expert has been appointed to the audit committee. Recent corporate disclosures as to accounting errors, and the inability of so many issuers to file timely quarterly reports, directly speak to the need for strong action.

As Assistant Secretary of the Interior for Water and Science in the first Bush administration, I advocated practical solutions and market forces to solve problems rather than promote regulatory bureaucracies. An editorial in The Wall Street Journal (November 3, 1992) characterized my work as Assistant Secretary as "...[emphasizing] market approaches at a department traditionally tied to the resource-industry interests...." Today, I believe the best hope for a prosperous corporate America is for corporate governance to come from within public issuers themselves, not from the government. Strict enforcement and compliance with Section 407 of Sarbanes-Oxley provides one of the best hopes that audit committees can meet their corporate governance duties without further government action. A "financial expert" must be just that - an EXPERT - well versed in "preparation or auditing of comparable issuers". The law is clear as to what an expert is, now I ask the Commission to enforce the provisions of Sarbanes-Oxley, and hopefully, less regulation in the future will be needed.

In closing, I urge you to enforce immediately Section 407 of the Sarbanes-Oxley Act of 2002 as legislated. The marketplace will price fairly the services of a "financial expert", as well as all independent directors. The American free enterprise system always does. Corporations will have to bear the cost of being public issuers, a privilege much abused recently. The Commission also needs to address when "financial experts" are not appointed to boards of directors of public issuers. Some type of temporary assurances to investors are needed. The Commission should encourage these non-complainant boards to retain outside financial advisers, who are not registered public accountants, but who can provide expert advice to their audit committees.


John M. Sayre, Sr.