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FAA probes potential misuse of Atlanta airport funds, cites AJC story

The Federal Aviation Administration — citing an article published exclusively in The Atlanta Journal-Constitution — has opened an inquiry into the possible misuse of millions of dollars in airport revenue to pay legal fees associated with a federal corruption investigation at City Hall.

The AJC’s article detailed how the city had paid three law firms more than $7 million for legal services to respond to federal grand jury subpoenas.

Most of the work was performed without contracts, and two of the law firms were paid out of federally regulated airport funds in a manner that some experts said could violate FAA policy.

“While we recognize that legal expenditures are permissible under certain circumstances, this article raises questions that the Federal Aviation Administration’s (FAA) Office of Airport Compliance and Management Analysis (ACO) must address,” wrote Kevin C. Willis, the director of the compliance office, in a letter dated July 26.

The letter, obtained by the AJC on Thursday, is addressed to Balram Bheodari, Hartsfield-Jackson’s interim general manager.

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It requests “all records showing all expenditures since January 1, 2016 of airport revenue or AIP grant funds for legal fees, and documentation sufficient to demonstrate the recipient of each payment and the matter and issue for which each payment was made.”

The airport has 30 days to respond.

“The City Attorney’s office has engaged in a careful review of billings to assure that the appropriate funding sources are utilized,” a city spokesperson said in a statement. “To the best of our knowledge the legal bills related to these expenditures appertained to airport operations, and it was appropriate for aviation funds to be allocated to aviation matters.”

FAA regulations prohibit the use of airport revenue for purposes other than an airport’s capital or operating costs to keep local governments from using airports as cash cows and funneling away their money. The prohibition also ensures that federal airport grants support airport projects and not other uses.

The AIP grants to which Willis referred in his letter are Airport Improvement Program funds that Hartsfield-Jackson — the world’s busiest airport — accepted with the city’s “written assurances all revenue generated by the airport will be expended for the capital or operating costs of the airport, the local airport systems, or other local facilities owned or operated by the airport owner or operator and directly and substantially related to the air transportation of passengers or property,” according to the letter.

Experts interviewed by the AJC said it’s not clear that legal fees related to a federal criminal investigation would fall within the definition of operating and capital costs.

“The FAA has said in the past that certain routine legal expenses are appropriate, but what hasn’t been made clear is how far can one go, how related to the airport should it be,” said Jol Silversmith, a partner at law firm Zuckert Scoutt & Rasenberger in Washington, D.C. who specializes in government regulation of aviation. “The FAA normally takes a very dim eye to revenue diversion if what is presented is a situation where the underlying issues were either using airport revenue in a clearly impermissible manner or other conduct that would be entirely impermissible.”

The city has received nine subpoenas in all, but only one seeking records exclusively related to the airport. Under former Mayor Kasim Reed, the city’s law department kept the subpoena a secret. The document was released earlier this year after Mayor Keisha Lance Bottoms’ office received a public records request for it.

The most significant problem for the airport may be that the city’s legal bills related to the corruption investigation don’t clearly separate airport legal work from other matters.

The AJC’s previous article quoted two experts who said that if airport funds paid for legal services involving other city departments it would likely represent a clear case of revenue diversion.

“If it’s some significant fraud,” future grant funds could be at risk, said J.E. Murdock III, a former FAA chief counsel who now writes on agency matters for JDA Journal.

In fiscal year 2017, the Atlanta airport received a $16.8 million AIP grant for reconstruction of a runway and a taxiway, and $17.2 million for construction of a taxiway.

The year before it received a $15.3 million AIP grant to rehabilitate a taxiway, and a $29.7 million grant for noise mitigation for residences around the airport.

Cutting future grants would be a drastic remedy, Silversmith said, adding that typically such disputes are resolved with a settlement.

But news of the FAA’s investigation also comes at a politically tenuous moment.

Although the state has made periodic attempts to take over the airport in years past, the recent allegations of patronage-based contract awards and rigged bidding processes have provided more political momentum to establish a state authority to oversee airport operations.

With an authority “you have one entity that is held accountable, and it doesn’t matter what elections might take place,” said State Sen. Burt Jones who is chairing a study committee on the matter.

City Councilman Dustin Hillis, who has been pushing legislation giving the council more oversight on spending for outside legal counsel, said he’s aware how the FAA’s investigation might impact the airport.

“In about six more months, the legislature is going to be back in session,” he said. “This is going to add to the state’s discussion and attempt to take over the airport. It just keeps piling up.”

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