Securities and Exchange Commission officials circumvented federal salary rules to pay an employee a $315,000 salary and $120,000 in living expenses in just over a year, according to documents obtained by the Washington Examiner.
A memo from the commission’s inspector general described the refusal of then-SEC Executive Director Diego Ruiz, who was responsible for the hiring decision, to cooperate with federal investigators.
Ruiz used an Intergovernmental Personnel Agreement to hire Henry Hu, a professor at the University of Texas law school. As a federal employee, Hu would have been limited to a salary of $227,000. But under the arrangement, Hu continued to be paid his university salary and the government reimbursed the university.
The agency also manipulated his paperwork to treat full-time work in D.C. as if he were on a permanent business trip.
SEC officials devised a strategy to increase his net pay by listing his duty station as Austin, Texas, even though his actual duty station — the place he reported to work every day — was in Washington, the investigation found.
That meant he got a per diem as if he was staying in a hotel for the entire 14-month period he worked in the nation’s capital.
Government personnel procedures permit per diems to only be paid for short-term travel, typically much less than one year. Long-term work in a different city is handled through a one-time lump sum payment for relocation costs.
But those relocation expenses would have only amounted to $9,000.
Office of Personnel Management’s travel reimbursement rules require that “an agency should consider the cost to the federal government to be a major factor when determining whether to pay a per diem allowance at the assignment location or limited relocation allowances.”
Ruiz was “primarily responsible for developing the terms of Hu’s IPA agreement,” but he “failed to respond” to repeated requests from the inspector general, the division of the SEC responsible for policing waste and fraud. Ruiz was executive director of the SEC from 2006 to 2011.
The SEC also wasted money by allowing employees who ran a division of the D.C. headquarters to live in New York, agreeing to pay for their regular travel to D.C., the inspector general found.
Carlo di Florio and Norman Champ were the director and deputy director of the SEC’s Office of Compliance Inspections and Examinations in Washington, D.C., yet they didn’t live in the D.C. area.
Instead, the SEC allowed them to work out of a regional office and routinely paid for them to travel to D.C. Di Florio was reimbursed $46,000 in an 18-month period.
An SEC spokesman said that in response to the inspector general’s findings, the agency now requires that a person’s “duty station” must be a place where there is an SEC office, and it now limits how long per diems can be paid.
Other federal agencies have had managers knowingly list their employees at “duty stations” other than where they live.
Some have listed Washington, D.C., for employees who live in lower-cost areas, so they get paid more thanks to a cost of living adjustment. Others have done so to practically double their salary by billing the government a hotel rate.
The Federal Mediation and Conciliation Service paid all of Scot Beckenbaugh’s expenses, on top of his hefty salary, for more than five years, listing his “duty station” as Iowa even though he was actually a top official at the D.C.-based agency, where he lived and worked.
Federal workers have to pay taxes on the per-diems if they get them for more than one year, but it is unclear whether Beckenbaugh ever paid taxes on the hundreds of thousands of dollars he received from the mediation service.
Intergovernmental personnel agreements have also been abused by other agencies to bill exorbitant salaries to taxpayers.
The Department of Housing and Urban Development used one to hire a former housing lobbyist who refused to accept a job helping poor people unless the government paid her $200,000. HUD agreed to circumvent federal pay caps by paying her entire salary to the lobbying association for local housing projects where she worked prior to joining the Obama administration.
She was also allowed to keep the prior job while on the public payroll, with a result that she was getting paid by the government to regulate housing authorities even as she was simultaneously an employee at a group that lobbied for the government on the same issue.
