On The Money: Lousy Lease

Lousy Deal for Taxpayers?
By Mike Luery

Taxpayers may be on the hook for millions of dollars after a federal agency allegedly falsified documents on a leasing contract – for an empty building you are renting in Washington D.C.

"We want to know who's been fired," Congressman Jeff Denham told CBS 13 in a one-on-one interview in his Modesto office.

Denham wants heads to roll over the lease for the Constitution Center.
http://www.constitutioncenterdc.com/

The Securities and Exchange Commission, a federal agency, http://www.sec.gov/ signed a 10 year lease worth $556 million – for a newly remodeled building with panoramic views of the Washington Monument, white marble interiors, Jerusalem limestone, paneling of Red Oak and lace wood - and a physical fitness center.

But as it turns out – the SEC overestimated the space it needed by 300% - because the figures they used were based on guesses – according to an Inspector General's report that was highly critical of the agency.

http://republicans.transportation.house.gov/Media/file/112th/EDPBEM/2011-06-15%20OIG%20Report.pdf
 "Over half a billion of taxpayer dollars are committed to a project that had no oversight," Congressman Denham told CBS 13. 

And taxpayers we talked to in Denham's Modesto district were surprised to learn of a federal agency signing such a lavish lease for 900,000 square feet of space – only to actually need just one-third of that.

 "It's a nice building but yeah it's a complete waste of money," stated Lelynd Allen of Turlock.

Those sentiments were echoed by Karleen Ashby. The Modesto resident told CBS 13, "Well I think we should only use what we need. And certainly if it's costing that much and we're in this kind of economy. It should be spent in better places."

Ruben Casillas of Modesto agreed. "They shouldn't be getting this big old place. They should be getting something smaller and maybe save the money for something else that is probably more important."

But the feds were determined to move forward – even using deceptive documents to justify the lease, according to the Inspector General's report.

 "And where they really broke the law, they went back in and backdated contracts and even falsified some of these contracts," Congressman Denham told CBS 13.

Denham will be grilling the Feds in Washington on Wednesday over the lousy lease for what is now an empty building.

In response, the SEC says it has not paid any rent yet for the Constitution Center but admits to making mistakes – calling the operating practices "deeply flawed".

The agency says it is working with the landlord to identify substitute tenants.
http://www.sec.gov/news/testimony/2011/ts061611jh.htm

The building owners however, are claiming nearly $94 million in damages.

Wednesday's congressional hearing is expected to turn up the heat on those bureaucrats accused of falsifying documents – bureaucrats who are still getting paid. Congressman Denham is demanding repercussions. He says the SEC should lose its authority to lease buildings in the future.

"This is one of the biggest wastes that I've seen in my entire time in office", said Denham, an elected official who served for many years in the California legislature before becoming a congressman.

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If you see examples of government waste, send us an e-mail to onthemoney@kovr.com
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