By Sarah N. Lynch
WASHINGTON (Reuters) - The U.S. Securities and Exchange Commission's internal watchdog is probing the agency's leasing activities for possible waste of taxpayer dollars or other violations.
SEC Inspector General David Kotz said on Monday that the investigation stemmed from leasing activities by the SEC at two properties in Washington and at its operations center in Virginia.
He declined to discuss additional details of the probe which was reported by some other media outlets last week.
The SEC's leasing woes are the result of an agency effort to expand and consolidate its ranks to carry out dozens of new reforms. Partisan wrangling in Congress has delayed the budget boost promised to the SEC, putting the agency in a tight spot, having leased property it cannot afford.
The SEC had signed a deal to lease 900,000 square feet of office space at the Constitution Center in Washington, D.C., for nearly $45 a square foot shortly after the enactment of the Dodd-Frank Wall Street reform law in July last year.
The SEC felt it needed the space to accommodate the roughly 800 new staff it planned to hire, and it also thought it would be able to pay for it thanks to language in the law authorizing a doubling of the SEC's budget by 2015.
But the budget hit an impasse in Congress and remains stuck at 2010 funding levels. With House Republicans creating budget uncertainty by calling for cuts in regulator funding, the SEC had to relinquish roughly 600,000 square feet back to the landlord in the fall.
So far, the SEC has not had to pay any penalties or fees for scaling back its expansion plans, and other regulators including the Office of the Comptroller of the Currency and the Federal Housing Finance Agency have signed on to occupy the space the SEC abandoned, SEC spokesman John Nester said.
The SEC has been looking for months to better house its thousands of employees to prepare for Dodd-Frank. In the spring last year, the SEC signed a deal for additional office space in its current location known as "Station Place" near Union Station.
It also plans to move 740 staffers from its operations and data centers located in Virginia to office space both at Station Place and Constitution Center. The leases for its two Virginia locations will expire later this year.
Kotz said he is looking at leasing activities at the SEC's current location at Station Place, as well as leasing and procurement activities at Constitution Center and the Virginia operations center.
If his investigation finds evidence of "waste of government funds or violations of federal regulations," it could be the ammunition Republicans need to justify withholding money from the agency.
Kotz has previously criticized the SEC's leasing activities in a report issued in September. That report found that the SEC lacked adequate policies and procedures for leasing.
The report uncovered problems such as the SEC incurring increased costs in connection with a lease for its San Francisco office and paying $15 million for a property in New York it did not occupy.
Nester said in a statement that employers like the SEC need to "continually assess their space needs and adjust to changing circumstances and funding constraints."
He added that the goal is to promote efficient operations.
(Reporting by Sarah N. Lynch; Editing by Tim Dobbyn)
