SEC ‘leased office space it didn’t need’

[Published May 2011 and updated June 2023] US financial watchdog the Securities and Exchange Commission (SEC) leased millions of dollars worth of office space that it did not need, according to a recent investigation.

The SEC’s Inspector General discovered that the SEC signed a 10-year lease worth USD 556.8 million on office space in downtown Washington that went largely unused.

Inspector General David Kotz discovered that last year the SEC quickly leased 900,000 square feet of office space in the Constitution Center in southwest Washington and then discovered that it didn’t need at least two-thirds of it.

The powerful agency was anticipating the hiring of at least 800 new employees to enforce the financial regulations contained in the Dodds-Frank Act, a piece of legislation passed last year in the wake of the financial crisis.

A ‘deeply flawed and unsound process’ was used by the SEC in anticipating extra funding from Congress the report from the Inspector General stated. The anticipated funding never came.

The report stated: “We found that OAS grossly overestimated the amount of space needed at SEC headquarters for the SEC’s projected expansion by more than 300 per cent and used these groundless and unsupportable figures to justify the SEC committing to an expenditure of USD 556,811,589 over 10 years.”

Currently, the SEC is trying to sublet the rest of the unused space in the Constitution Center but has not so far managed to find a tenant.

Now the landlord of the building, David Nassif Associates, is suing the SEC for approximately USD 94 million in damages it caused.

Kotz added that since Congress granted the SEC independent leasing authority in 1990 it has made a series of costly blunders.

Editor’s notes: In July 2011, Nassif Associates said it had agreed to release the SEC from occupying 550,000 square feet (51,000 m²) of space at Constitution Center. However, a period of dispute over build-out costs and back rent ensued. 

In December 2012, it was announced that MetLife and an unnamed investor had each purchased a 50% stake in the building for a combined $734 million – the most expensive price paid for a single building in the District of Columbia.

As of June 2023, the building which is just steps from Capitol Hill boasts the Office of the Comptroller of the Currency, the Federal Housing Finance Agency, the General Services Administration, the Federal Trade Commission, the National Endowment for the Humanities, and the National Endowment for the Arts, as tenants.