FAA issues second subpoena to city of Atlanta in probe

The Federal Aviation Administration has issued a second subpoena in an investigation into Hartsfield-Jackson International Airport and allegations that revenue was unlawfully diverted to the city of Atlanta.

The Federal Aviation Administration has issued a second subpoena in an investigation into Hartsfield-Jackson International Airport and allegations that revenue was unlawfully diverted to the city of Atlanta.

The Federal Aviation Administration has issued a second subpoena in an investigation into Hartsfield-Jackson International Airport and allegations that revenue was unlawfully diverted to the city of Atlanta.

The second subpoena zeroes in on billings to the city from one particular law firm: Paul Hastings LLP, a global firm that has defended the city against legal challenges under former Mayor Kasim Reed and current Mayor Keisha Lance Bottoms. It's also a firm where Reed worked as an attorney early in his career.

VIDEO: Previous coverage of this issue

Channel 2 investigative reporter Aaron Diamant digs into the new federal subpoena against the City of Atlanta.

The city of Atlanta says it provided more than 3,000 pages of unredacted legal invoices to the FAA this month, which a city spokesperson said are under a federal court protective order to protect attorney-client and attorney work product privileges.

The FAA had called for the city of Atlanta to produce all invoices paid to Paul Hastings using Atlanta airport funds, as well as invoices for work billed as "legal research" and "litigation consultation," and engagement letters from Paul Hastings.

Engagement letters typically outline the services to be performed and the pay rate.

The Atlanta Journal-Constitution has reported that the city paid $2.2 million to Paul Hastings for the work billed as "legal research" and "litigation consultation" — at rates as high as $25,000, $50,000 and $100,000 a month. Experts told the AJC that what made the arrangement unusual is that the city could not produce an engagement letter detailing what legal matters the firm was working on, required under city guidelines.

The FAA also asked the city for documentation on what the flat-fee payments were for, the name of each attorney assigned and a “detailed accounting of the dates and times spent by each attorney on each matter.”

In addition to the monthly flat fee invoices from Paul Hastings litigation partner William K. Whitner — an associate of Reed’s — Paul Hastings proposed attorneys’ fees of $950 per hour for Whitner, $700 per hour for litigation associate Eric Stolze and $255 per hour for paralegals for itemized legal work.

William K. Whitner is a partner with law firm Paul Hastings LLP, and acted as the firm’s point person on outside legal work for the city of Atlanta. J. SCOTT TRUBEY / STRUBEY@AJC.COM.

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The FAA investigation continues as the possibility of an airport takeover looms during the Georgia legislative session. Another possibility is that state legislators could seek to create an oversight committee to monitor the airport. In pushing for state control of the airport, state legislators have cited the federal corruption probe into the city, indictments and investigations.

FAA regulations prohibit the use of airport revenue for expenses other than the airport's capital or operating costs. That's aimed at preventing local governments from turning airports into cash cows by funneling money away, and ensures that federal airport grants pay for airport projects and not other uses. Sanctions for improper use of airport revenue can threaten federal grant funding or result in civil penalties.

‘Proprietary to the firm’ 

This FAA investigation started last year, and followed the launch of a financial audit by the agency of Hartsfield-Jackson International Airport. The airport argued that records the FAA sought for the audit were protected by attorney-client privilege.

The agency sent the city of Atlanta a notice of investigation last July saying it was looking into allegations that the city may have unlawfully diverted airport revenue and improperly withheld airport documents. The first subpoena in the investigation sought all invoices paid using revenue or funds from the Atlanta airport to any attorney or law firm from 2016 through 2018.

The FAA would not comment on the subpoenas or the investigation on Wednesday.

The second subpoena seeks Paul Hastings billings dating back to late 2013. It follows the city’s Nov. 22, 2019 response to an FAA information request with a batch of documents and explanations for why some documents were missing to explain what flat fees were paying for when paid by the city to Paul Hastings.

The city told the FAA that “Paul Hastings has more detailed internal records which would be responsive to this request, but Paul Hastings has to date declined to provide those records to either the city or the FAA because they are proprietary to the firm.” Paul Hastings indicated to the city that it could provide non-proprietary documents following “an internal review process.”

Atlanta paid former Mayor Kasim Reed’s law firm $2.2 million from airport revenues for legal services vaguely described as “litigation consultation” and “legal research.” The Federal Aviation Administration is investigating if money paid to outside attorneys was used for non-airport matters, a violation of FAA regulations.September 26, 2018 Atlanta: Multiple restaurants line Concourse B at Hartsfield-Jackson International Airport on Wednesday, Sept 26, 2018, in Atlanta. Curtis Compton/ccompton@ajc.com

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The city also gives an explanation for one set of invoices involving an Atlanta public relations and crisis management expert — Jeff Dickerson, president of Dickerson Communications.

Dickerson was paid a monthly retainer through $10,000 invoices— as “pass-through costs” for outside professional services under the Paul Hastings contract.

Dickerson said his client was Paul Hastings, which he helped on public affairs amid controversy over contracts awarded for airport restaurants and legal challenges by losing concessionaires. He said he was working with a team of lawyers, and “we would strategize about how to handle some of the public controversy around concessions contracts…. It was all aviation related.”

After Reed left office, Dickerson acted as a spokesman for the former mayor for a period of time.

This is the latest FAA probe following a 2018 FAA inquiry launched after The Atlanta Journal-Constitution reported that the city had paid three law firms more than $7 million to respond to federal grand jury subpoenas, with two of the firms paid out of federally regulated airport funds in a manner some experts said could violate FAA policy.

The city of Atlanta last year acknowledged that it wrongly used airport funds to pay $90,000 to a consulting firm founded by former city attorney Cathy Hampton.

After the FAA launched an initial inquiry into potential revenue diversion, the money was paid back to the city and the airport revenue fund was credited.

FAA steps up scrutiny of Atlanta airport expenditures

July 2018: The Federal Aviation Administration sends Hartsfield-Jackson a letter of inquiry into airport legal expenditures

March 2019: FAA notifies Hartsfield-Jackson it will review seven years' worth of airport financial records

April 2019: The city of Atlanta, which owns and operates Hartsfield-Jackson, declines to provide legal bills in unredacted form, asserting attorney-client privilege. The FAA subpoenas legal invoices from Hartsfield-Jackson as it prepares for the audit.

July 2019: FAA sends the city of Atlanta a notice of investigation into allegations that it may have unlawfully diverted airport revenue and improperly withheld records and documents.

December 2019: The FAA sends a second subpoena seeking invoices paid to law firm Paul Hastings using airport funds