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Leasing Authority Investigation

Washington, DC – Representative Jeff Denham, Chair of the Economic Development, Public Buildings and Emergency Management Subcommittee, today questioned the Securities and Exchange Commission (SEC) Chairman and Inspector General regarding the Agency’s recent lease of hundreds of thousands of square feet of unneeded space. As a result of the Chairman Denham’s investigation, the SEC agreed to give up its leasing authority and many of the SEC employees may also face prosecution from the Justice Department for backdating documents that “justified” the lease.

“It is inconceivable that the SEC bound the taxpayer to more than a half a billion dollars based on “back of the envelope” calculations that were inflated and just simply wrong. And, it is even more disturbing that such a lease was signed without any formal internal written approval, no OMB approval and no congressional approval. On top of that, the SEC proceeded with a sole source contract, “negotiated” over the course of just days, based on a justification document that was backdated and altered,” Denham continued.

At a June 16, 2011 Subcommittee hearing on SEC IG report, the SEC’s COO and General Counsel could not answer key questions related to the SEC lease and the circumstances surrounding the sole source procurement and back-dated documents included in the lease. As a result, Chairman Denham held today’s follow-up hearing to examine whether the SEC should keep its independent leasing authority and to make sure there is accountability for the SEC’s actions. Today, SEC Chairman Shapiro took full responsibility for the SEC’s actions, but what remains unclear is who will be held accountable for this blatant waste of taxpayer dollars.

“In the private sector, if an employee bound their company to a contract costing over $500 million it did not need, that company would want to know the facts to determine who all should be held accountable and how to prevent it from happening again,” Chairman Denham said. “Federal agencies should be held to an even higher standard as, ultimately, it’s the American people who pay for their costly mistakes.

Because of prior abuses of independent and unchecked leasing authority, legislation introduced in the House by Chairman Denham in May – the Civilian Property Realignment Act (H.R. 1734) – eliminates the independent leasing authority for the SEC.

Background: In July of 2010, the SEC entered into a ten-year lease, anticipating that their responsibilities would expand under the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The lease was signed in only a few days for space it did not need. The SEC Inspector General (IG) released a report on the lease at the request of Subcommittee Chairman Denham, which found that the Office of Administrative Services at SEC vastly overestimated the amount of space needed under this lease, committing the taxpayers to more than $500 million.