Schapiro says GSA will take over SEC leasing after $557M mistake

The U.S. Securities and Exchange Commission's system for leasing space had “significant flaws,” and the federal General Services Administration will likely take over that role, Chairman Mary Schapiro told House lawmakers. “GSA indicated it was open to playing a significant role in those efforts,” Schapiro said in testimony prepared for a hearing today of a House subcommittee that oversees public buildings. The subcommittee is examining the SEC's $556.8 million deal last year for 900,000 square feet of office space the agency eventually decided it didn't need. On May 24, SEC Inspector General H. David Kotz released the results of an investigation into the deal, accusing the agency of a “deeply flawed and unsound analysis.” Kotz's report said the owner of the office property, David Nassif Associates, was seeking to recover $94 million in costs. The inspector general's office is watching to make sure SEC officials identified as responsible “are held appropriately accountable for their actions,” Kotz said in testimony prepared for today's hearing in Washington. Schapiro said her agency notified Kotz last week about its plans to fix the flawed system. Disciplinary recommendations for three employees involved in the lease process “will be made as soon as possible,” Schapiro said. The SEC committed to a 10-year deal to lease the space at the Constitution Center in Washington after the 2010 Dodd-Frank Act suggested the agency's new duties would require hundreds of new workers. The SEC never received all of the $1.3 billion authorized by Dodd-Frank for 2011, and the agency informed the property owner that it couldn't use the space. “I was told that our other leasing options in Washington, D.C. no longer existed, that the space at Constitution Center was our only option given our space needs, that the pricing was advantageous, and that we had to move quickly as there was competition for the space,” Schapiro said. She said that “within weeks,” she realized the SEC's budget would not allow that level of expansion. --Bloomberg News