The leadership at the U.S. Securities Exchange Commission interpreted the Dodd-Frank financial-overhaul law last July to mean that the SEC would secure funding to spend money however the SEC saw fit. This included signing a 900,000 square foot lease with no Program of Requirements in three days for an elegant, downtown Washington DC office building.
Thankfully, the money to fund the 900,000 square foot lease was shot down in the Fiscal Year 2011 Budget that passed earlier this year. However, the SEC still jumped the gun back in July 2010 by signing the 900,000 square foot lease at the taxpayers expense to the tune of $550 million dollars in lease obligations.
Yesterday, a Congressional hearing conducted by the House Subcommittee on Economic Development, Public Buildings and Emergency Management severely scrutinized the $550 million lease. During the hearing, Subcommittee Chairman Rep. Jeff Denham (R-CA) stated that the “half-a-billion-dollar lease for space…goes far beyond mismanagement.”
The SEC’s mismanagement comes with significant legal and political consequences in light of the SEC Inspector General’s investigation into the SEC’s leasing practices.
The SEC IG found the following:
- The 900,000 square foot lease in downtown Washington, DC was never needed due to existing vacant space at other SEC offices
- $75 million of lease liabilities for vacant office space in New York
- Inflated numbers of future SEC employees to justify its need for a 900,000 square foot building
- Failure to follow government requirements of open competition for leasing office space
- Possible violation of Anti-Deficiency Act which prohibits employees from entering into a contract before an appropriation is made.
One must ask- how can a federal agency regulate Wall Street when it clearly cannot keep its own house in order and who pulled the trigger on this unneeded office space?
Rep. Tim Walz (D-MN), essentially stated during the hearing that members of Congress expect the SEC to fail in implementing Dodd-Frank by calling the $550 million lease “stupid and illegal decision making” creating a “beach ball” for Republicans to hit at Dodd-Frank because the SEC “can’t do anything right”.
When the later question was posed by the subcommittee, no one was left holding the politically toxic beach ball. Sharon Sheehan – an SEC employee making six figures according to the U.S. Office of Personnel Management – who was dubbed by the SEC IG as one of the major players responsible for entering the lease, did not make an appearance and is still on the job.
However, Rep. Holmes Norton (D-DC), the top Democrat on the House subcommittee, made clear to SEC Chief Operating Office, Mr. Jeff Heslop, that the SEC employees responsible for the lease decisions should be disciplined. "The notion that no process has even begun even though the IG has issued a report is very troubling...you are going to have your head handed to you by the appropriators”.
To expand on the “troubling” behavior at the SEC, it is hard to believe that SEC leasing officials would enter into a $550 million lease without the blessing of SEC Chairlady Mary Shapiro.
Save the Queen at Sheehan’s expense?
Well, if Chairlady Shapiro did not sign off on the lease, major restructuring within the SEC needs to take place as the SEC’s track record continues to grow as an inept agency which has come to represent an attitude of beauracratic entitlement. The full details surrounding this “deceitful” action (as stated by Rep. Nortron), will hopefully come to light in the near future. The next hearing on this matter should be quite interesting, since Rep. Denham will most likely issue subpoenas to Sheehan and Chairlady Schapiro.
The bottom line is that taxpayers cannot afford to be stiffed with another unwarranted, multi-million dollar lease obligation. Americans have had to tighten their belts over the course of the past few years and its time the SEC lives within its means and use the vacant space that existed before it entered into a $550 million lease obligation.
To view hearing - Click Here
To read SEC IG report - Click Here