Justice Dept. May Prosecute SEC Over Office Lease

The Justice Department is considering prosecuting Security and Exchange Commission employees for their role in the lease of unnecessary office space in downtown Washington at a cost of $557 million. The SEC’s inspector general said the space was not needed, The Washington Post reports.

SEC headquarters, Washington, D.C. (AP photo)

H. David Kotz, the SEC inspector general, said he recently referred the matter to the Justice Department for investigation and they have already requested documents. The referral focused on the backdating of a document that was used to justify the lease, he said at a House hearing.

In an email to the Post sent after the hearing, Kotz said he refers matters to the Justice Department “when there is reasonable grounds to believe there has been a violation of Federal criminal law.”

An IG report in May found that the SEC entered the lease without competitive bidding on the belief Congress would approve funding for new hires after passing legislation expanding the SEC responsibilities. However, the budget increase did not occur.

During the hearing Rep. Jeff Denham, R-Calif., wondered how the SEC could have committed the government to a 10-year lease before getting the money. SEC Chairman Mary Schapiro said, “The agency made a terrible mistake here. I view myself as being ultimately responsible,” the Post reported.

Schapiro admitted she approved the deal without having seen the office space based on the recommendation of a staff member who told her it was a good deal. Already facing the threat from Congress of losing the ability to lease space, Schapiro said she is arranging to transfer the job to the General Services Administration, the Post reported.

This is not the first time Schapiro has found herself in hot water.

She previously has been taken to task by Congress for poor administration for allowing an agency official to participate in policymaking related to the fallout from Bernard Madoff’s Ponzi scheme. The official was allowed to work on the issue even though he and his brothers inherited an investment account with Madoff, the Post reported.