If the Securities and Exchange Commission's "informal inquiry" into D.C. Chief Financial Officer Natwar Gandhi's office is nothing to worry about, why is the city lawyering up? The Washington Examiner's Alan Blinder reported Monday that documents obtained under the Freedom of Information Act show that the District has already spent more than $25,000 on outside legal counsel and is planning to spend another $35,000 -- in addition to the five OCFO attorneys working on the SEC probe full time.
SEC's Municipal Securities and Public Pensions Unit is looking into allegations that Gandhi "quarantined" unfavorable internal audits by leaving them in draft form. The allegations were made by William DiVello, Gandhi's former director of integrity and oversight and the third in four years to be either fired or resign in protest over issues of accountability.
Gandhi denied that he buried unfavorable audits. But even the D.C. Council members who rubber-stamped his reappointment there months earlier didn't believe him. Last October, they passed emergency legislation requiring that all internal audits be disclosed online within 15 days, while the SEC requested copies of all "audits, inspections, reviews and investigations" by the internal oversight office since 2010.
Citing ongoing litigation, Gandhi refused to answer questions, including one by Councilman Jack Evans, who wanted to know why there were two materially different investigative reports by DiVello predecessor Robert Andary with the exact same date. Evans, himself a former SEC attorney, knows there's no good answer to that one.
The Examiner has learned that SEC investigators have threatened to subpoena documents regarding the OCFO's internal control system that allowed Gandhi's employees to change billions of dollars worth of commercial property assessments without leaving an electronic trace. They are also looking into a list of about two dozen companies that reportedly received "off book" contracts in apparent violation of the city's procurement laws.
If the SEC finds that the "quarantined" audits and investigative reports contained material information that the city was required to disclose to bond investors, D.C. could be required to restate its financial outlook or worse, lose its A-plus debt rating.
But Gandhi won't be around for that. In February, just months into his latest five-year term, the city's top bean counter conveniently announced he was resigning June 1 "for personal reasons." But it hardly seems a coincidence that Gandhi is getting out of Dodge just as the SEC probe heats up.