The SEC leased $556.8 million worth of office space last year - based on a "grossly overestimated" and "deeply flawed and unsound analysis" of its needs.  The 10-year lease was arranged without competitive bids and used backdated approval forms to justify its rushed attempt to rent the office.

According to a report issued May 5/16/11 by the office of SEC Inspector General H. David Kotz, the SEC may have violated federal law by committing the agency to lease office space before Congress had appropriated enough money to pay for the 10-year lease, and before Congress had approved funding for the big staff increase the SEC was anticipating.  The office space is located in downtown Washington. 

    The Lease.   The inspector general’s report focuses on a lease for Constitution Center, an office building in Southwest D.C. that formerly housed the Department of Transportation and had recently undergone an extensive renovation.  The SEC signed a deal for 900,000 square feet in July 2010, expecting that it would be adding 800 employees to handle its expanded responsibilities under the Dodd-Frank Reform Acct.  However, Dodd-Frank authorized but never guaranteed a budget increase for the agency.  Ultimately, the funding did not materialize, and about 600,000 square feet were relinquished to the landlord for other tenants, and the SEC is still responsible for other space being readied for occupancy next year.

    SEC's "WAG" Assumptions.   In an interview with the inspector general’s office, an unnamed SEC employee - one of many whose names were redacted in the report - said one of the assumptions the agency used was merely a “WAG”— a “wild-ass guess,” the report said.  The lease was not awarded competitively, and a document formally justifying it was prepared a month after the SEC had signed the contract, the report said.  The document was backdated to give the impression that it was written just a few days after the lease was signed, the report said.

The report gives fresh ammunition to the SEC’s critics at a time when the agency is already on the defensive.  The SEC has been fighting for a budget increase and meeting resistance from some congressional Republicans who say the agency has been so badly mismanaged that it does not deserve the money. 

For further details, go to:   [Washington Post, 5/24/11, "SEC leased unneeded space"]

To access the report, go to:   [Report of Investigation, - Case OIG-553, "Improper Actions Relating to the Leasing of Office Space"]