Lee hires off-the-books attorney for Braves deal

January 2013: The Braves inform the city of their desire for the city to assume control of Turner Field, instead of the Atlanta-Fulton County Recreation Authority, with which the team had clashed over maintenance issues.

March 20: Braves executive vice president Mike Plant sends note to Deputy Chief Operating Officer Hans Utz expressing that the team is "not feeling real good about how we are being passed around." Utz relays the message in a memo to city leaders.

April 17: Mayor Kasim Reed meets with Plant and Braves CEO Terry McGuirk, who want to discuss stadium issues and ask for the land around the stadium. City officials say the land must be sold through a competitive bidding process. The Braves decline. Parties turn their sights toward crafting a redevelopment proposal.

May: Utz gives the Braves a counteroffer for how to pursue redevelopment, listing three paths for moving forward.

July: Utz and Chief Operating Officer Duriya Farooqui meet with Plant to discuss the project, expecting the Braves to have selected one of the three paths. They clash again over the Braves' desire to control the redevelopment bidding process.

Braves officials hold their first discussions with Cobb Chairman Tim Lee, who then secretly recruits attorney Dan McRae to begin negotiations with the team. Lee bypasses the county attorney’s office and McRae begins work without signing a contract.

August-October: City officials, the Atlanta Fulton County Recreation Authority and the Braves negotiate improvements to sewer drainage problems at Turner Field. By now, Braves and Cobb officials have developed five proposed budgets for a new Braves stadium.

September: The Braves give the city a 16-point proposal outlining desires for lease renewals and redevelopment. The team has indicated its desire to help craft the request for proposal and select a developer.

Oct. 14: Braves attorney Greg Heller sends McRae the first draft of a proposed Memorandum of Understanding, which outlines the parameters of the stadium deal in Cobb County.

Oct. 21-Nov. 10: Four revised drafts of the MOU are passed between Heller and McRae; Cobb County Attorney Deborah Dance and commissioners are notified of the Braves negotiations just days before the public announcement.

Nov. 5: Reed is re-elected to a second term as mayor.

Nov. 6: Plant sends Reed a text message asking for a meeting.

Nov. 7: Braves leaders inform Reed of their plan to relocate the team to Cobb County in 2017.

Nov. 11: The Braves announce their move to the public.

Nov. 14: McRae's firm, Seyfarth Shaw, is added to the draft MOU as bond and project counsel for the county.

Nov. 16: The Cobb County attorney removes Seyfarth Shaw references from the draft.

Nov. 12-25: At least 24 revised drafts of the MOU are circuilated among lawyers, county and Braves officials.

Nov. 26: The Cobb County Commission ratifies the MOU by a 4-1 vote.

Sources: Documents obtained by the AJC from Cobb and Atlanta; AJC reporting

Cobb Commission Chairman Tim Lee answering questions Aug. 8 about his off-the-books hiring of attorney Dan McRae to negotiate the preliminary stadium deal with the Braves. For the audio of the entire interview, go to ajc.com

Why did you hire McRae to lead negotiations? "I didn't choose him to be point man. When the Braves first came to us to talk about this prospect, clearly it was a big project and it had a lot of components to it. I wanted to bounce it off someone who had experience in the bond funding market that could help me understand if it was even feasible to try and do something like this…But he was not the lead negotiator for the county at all."

Who drafted the original MOU? "That's because they have experience. They've done MOUs for other stadiums so we figured why don't you start, put it together, send it to Dan, see if that matches what we've talked about, then eventually it made its way over to (County Attorney) Deborah Dance, who actually was the lead on it … once we got to the point where we needed to make it real."

But the core negotiations didn't involve Dance, did they? "Well, the core of the MOU, I mean, the Braves took an MOU they've had in the past and said let's start here, tweak it to what we've had conversations about. So that's not negotiations, per se. That's coming up with a document and making it reflective of what our conversation was so that when — the MOU, I guess I'm assuming that you're assuming that the MOU was a negotiation. … We didn't negotiate back and forth with the MOU. … I consider it him making sure the MOU reflected what we talked about and was something that could be legally supported."

You don't consider that negotiations? "No I don't because Dan was helping us determine if the financial model could work, and then when we finally figured out that this was the model we were going to try and move forward … let's put it on paper, he worked to put it on paper."

Why didn't he have a contract? He was someone I sought out, saying would you mind helping me figure this out, just to see if we could move forward. Just as a subject-matter expert. And we never had a conversation about compensation."

The county attorney didn't know about the negotiations. Who was providing you with legal advice, if not Dan McRae? Until my staff … got involved, everything up until that point … was as if you would do a feasibility gut check — is this something we should even move forward with? And he played a role in that, to include can we get to the point of an MOU that we can all agree on, that we can bring forward."

So when talking about negotiations with the Braves, was that primarily you? "Primarily, yeah. In putting together what I thought would be best for the county to present to the commission for approval."

And McRae's role in that? "Just helping me understand what I could and couldn't do financially."

Isn't that the role of an attorney? "I don't know. I'm not a lawyer, so I don't know what their job is."

Why didn't you ask the county attorney for help? "I chose not to do that."

Why? "We were having — this was a very — evidently this is a bigger deal than I thought it was at the time. And I was working with a small group of people trying to get an assessment whether or not this makes sense to go forward, by involving as few people as possible."

Not the county attorney? "Let's say I never knew Dan, and I never knew his capability, his reputation … then sure I would have called Deborah and asked who do you recommend. But I knew Dan and I didn't want to hire him, I just wanted to get his advice: does this make sense to move to the next level. It's not any different than you calling your uncle who happens to be a master plumber (to) say look I'm thinking about adding an outside spigot."

Did you promise McRae he'd be bond counsel? No.

Are you aware Seyfarth Shaw was written into the MOU as bond counsel? It's my understanding now. At the time it was done I was unaware of it."

Do you know who did that? What I've been told is Dan inserted that language.

Why? I don't know why. You'd have to chat with him."

Is that a concern to you? No. Because I have an approved MOU, which doesn't have him in it."

About Dan McRae

Occupation: A partner in the Atlanta office of Seyfarth Shaw, McRae leads the team that handles financing and investing in projects.

Education: 1973 graduate of Emory University School of Law

Professional experience: Known for his expertise in finance and incentives, McRae is frequently retained by companies or communities to help them obtain successful project locations. He has helped members of Georgia's general assembly draft economic development legislation that has become law in the state of Georgia.He is a faculty member for the University of Georgia's Fanning Institute, which trains development authority board members.

Source: Seyfarth Shaw web page

Digging deep

How local governments spend taxpayer money is a hallmark of The Atlanta Journal-Constitution’s investigative journalism. Previous coverage has examined previously undisclosed financing and legal costs of the deal. Read related coverage at our premium subscriber website, MyAJC.com.

HOW WE GOT THE STORY

Cobb taxpayers have hundreds of millions of dollars riding on the Braves new stadium deal. Atlanta Journal-Constitution reporters have been tracking the deal for months to keep tabs on the stadium costs and obligations public officials are making in their name. For this story, Cobb County Watchdog Reporter Dan Klepal obtained previously undisclosed documents that show the intitial negotiations between Cobb County and the Braves. The documents provide the first glimpse into how the deal evolved, and led to questions that revealed that Cobb Chairman Tim Lee hired an attorney without the county attorney or commissioners knowledge or permission to negotiate the deal. The AJC interviewed lawyers, stadium finance experts, economists and Cobb officials to help understand the agreements.

Coming Monday: The AJC has obtained documents that give the public its first glimpse into how the deal between Cobb and the Braves evolved. The AJC explains what the documents say and how they were kept secret for nearly a year.

Cobb Commission Chairman Tim Lee unilaterally began working on the Braves move to Cobb County a year ago, by hiring an attorney off the books to lead negotiations of the largest economic development deal in the county’s history.

In directing attorney Dan McRae to begin secret talks with the Braves, Lee bypassed the county’s rules for hiring outside legal counsel. And McRae, according to Lee, listed his own firm in a preliminary draft of the stadium agreement for legal work that would’ve paid his firm $4 million.

Not only did Lee perform an end run around the County Attorney’s Office, but he also chose not to tell the other commissioners about his decision to entrust McRae in negotiating with $400 million of public money. Unlike a strong mayor or a county chief executive, Lee doesn’t have the authority to make decisions alone.

» THE STORY, PART TWO: Draft docs: Braves initially asked Cobb for $442 million

» DOCUMENTS -- See the Braves-Cobb agreement revisions and comment on them: Part One | Part Two

» VIDEO: Interview with Cobb Commission Chairman Tim Lee

» TIMELINE: How the Braves-Cobb deal was done | LEARN MORE: Our Braves Move To Cobb page

It wasn’t until early November that County Attorney Deborah Dance and the commissioners were told about the Braves deal — after nearly four months of negotiations, and just days before the public announcement.

And the county never signed a contract with McRae’s firm, which did not charge for any of the attorney’s time during months of negotiations with the Braves. However, McRae’s firm, Seyfarth Shaw, was listed as the county’s bond and project attorney in a Nov. 12 draft of the preliminary agreement.

Combined, those jobs pay more than $4 million.

In recent interviews, Lee first denied that McRae negotiated with the Braves on the county’s behalf, but later acknowledged that McRae performed that service. Lee also said McRae wrote his firm into the contract without his knowledge or consent, and that he did not promise McRae additional work on the stadium deal in exchange for his help with the preliminary agreement.

Lee said he sought McRae’s help only as a “subject-matter expert,” to determine if the deal was “feasible.” McRae is a partner with Seyfarth Shaw.

Timothy Terrell, an Emory University law professor and expert on legal ethics, said there is “no question” McRae was acting as the county’s attorney during MOU negotiations. McRae performed work for the county after the MOU was finalized, and charged just under $500 an hour.

Publication of this story was delayed a week to give McRae an opportunity to explain his role in the negotiations. Steven L. Kennedy, the firm’s managing partner, responded with a statement last week that praised McRae’s work but did not address the newspaper’s questions about why the firm was named bond and project counsel in the draft agreement, and why the firm participated in the deal without payment or a contract.

The negotiations are revealed in about 30 versions of the so-called Memorandum of Understanding, a critical preliminary agreement that spells out the commitments of everyone involved in building the $622 million stadium. The Atlanta Journal-Constitution obtained the documents through Georgia’s Open Records Act.

Dance removed Seyfarth Shaw from the contract during her Nov. 16 edit. When asked why, she replied that it was not “appropriate” to name McRae’s firm because “the county had an existing bond counsel contract that had resulted from a bid process.”

When asked if individual commissioners have the authority to hire outside lawyers, Dance replied: “I’m not aware that they can.”

Dance’s office is responsible for choosing all outside legal counsel hired by the county. She selected a different firm — Thompson Hine — to be the county’s project attorney, which was paid $250,000 to negotiate later agreements with the Braves. Dance said she chose them after reviewing qualifications of several firms experienced in stadium deals. One of those firms was Seyfarth Shaw.

The county’s bond attorney, hired long before negotiations began with the Braves, will be paid 1-percent of the debt issued. Commissioners have approved up to $397 million in bonds for the project.

Lee may have committed an ethical breach in bypassing the county’s policies and procedures for hiring outside legal counsel, said Edward Queen, coordinator of undergraduate studies at Emory University’s Center for Ethics.

It’s the kind of thing that erodes public confidence in government, he said.

“It’s either an issue of incompetence or unethical behavior,” Queen said. “Neither one reflects particularly well on the individual.”

Project Intrepid

The Braves negotiations — and McRae’s involvement in them — were so secret that Lee and chamber of commerce officials thought it needed a code name.

They came up with “Project Intrepid.”

The first meeting between Lee and McRae happened in July 2013, with Cobb Chamber executive vice president Brooks Mathis playing intermediary.

An email from McRae’s legal assistant to Mathis setting up the meeting had in the subject line: “Project Intrepid — Confidential.” Documents reviewed by the newspaper indicate that McRae’s negotiations with the Braves started within weeks of that meeting.

But in an Aug. 8 interview, Lee steadfastly maintained that McRae did not negotiate on the county’s behalf.

“… The Braves took an MOU they’ve had in the past and said let’s start here, and tweak it to what we’ve had conversations about,” Lee said. “So that’s not negotiations, per se, that’s coming up with a document and making it reflective of what our conversation was. We didn’t negotiate back and forth with the MOU.”

A back-and-forth negotiation is exactly what happened.

McRae was the primary contact for Braves attorney Greg Heller on all the MOU work, and the two also met in person to talk about the contract, according to documents reviewed by the newspaper. McRae worked on the project from at least August until the final MOU was approved by the county commission Nov. 26.

About 30 versions of the agreement were shuffled between Heller and McRae, who then sent the documents to Mathis so they could be reviewed by county officials. No county personnel retained the documents, which effectively prevented public inspection.

Dance, whose first edit was Nov. 14 after about a dozen versions of the document had been traded between McRae and Heller, said she saw McRae negotiating in meetings. Dance performed edits on the document after being made aware of the deal.

“Dan McRae was negotiating with the consent — however it was given — of the county. I personally observed it,” Dance said. “As an attorney having reviewed this deal and the course of conduct … Dan McRae was the lead point person negotiating this agreement.”

Dance also said she thought McRae did a good job representing the county.

After making that statement, Dance told a reporter that she was going to talk to Lee about his comments in the AJC’s interview. The next day, Lee issued a statement through a spokesman acknowledging that McRae was the county’s lead negotiator.

“It is now my understanding that McRae was acting on the county’s behalf,” the statement says. “Dan’s expertise in this area of law, and his efforts, played a key role in securing our partnership with the Braves.”

Lee’s statement did not acknowledge that secretly hiring McRae without a formal agreement was improper.

Lost Confidence

The Braves were still trying to secure a deal to stay in the city of Atlanta when McRae started negotiating with the Braves.

In fact, as proposed budgets were being developed for a new stadium in Cobb, the Braves sent Atlanta officials the team’s 16-point demand letter for staying in Turner Field. A majority of those points dealt with their desire to have a mixed-use development built outside the stadium that would guarantee at least $10 million a year in new revenue.

And Braves executives insisted that Lee maintain complete secrecy regarding the Cobb negotiations.

But in the interview, Lee said the secrecy demand did not play a role in his decision to keep the County Attorney’s Office out of the loop.

“I knew Dan and I didn’t want to hire him, I just wanted to get his advice: does this make sense to move to the next level,” Lee said. “It’s not any different than you calling your uncle who happens to be a master plumber (to) say: `Look I’m thinking about adding an outside spigot.’”

By Oct. 2, Cobb and the Braves had put together four separate budget proposals. The most expensive, dated Sept. 26, had a project budget of $732 million, with $472 million (64 percent) to be financed by taxpayers. The budget eventually approved by commissioners is $622 million, with the county paying $392 million (63 percent). A portion of the county’s debt will be covered by $6.1 million in annual rent payments from the team.

Mike Plant, the Braves executive vice president of business operations, told the AJC’s editorial board earlier this year that the final straw in negotiations with Atlanta came about because of conflict over redevelopment outside the ballpark. The Braves issued a statement Friday that said McRae negotiated “the framework for the MOU.”

“It was just a feeling that I lost confidence that we’d be able to address the development,” Plant said to the editorial board. “We said: if you’re going to build outside the front door, and we’re going to be there for the next 20 or 30 years, we kind of have to control how that operates and the potential adverse financial impact.”

The Braves plan to build a private, mixed-use development outside the new stadium.

Heller, the Braves attorney, submitted the first written MOU to McRae on Oct. 14, with an email.

“Attached for your review please find an initial working draft of the Intrepid MOU,” Heller wrote. “You will note there are a number of items bracketed for discussion. As such … I look forward to walking you though the draft tomorrow and discussing in greater detail.”

From there, the document was passed back and forth between the attorneys who performed separate edits — underlining text to be added to the document; striking through text to be deleted. McRae and, eventually, Dance often wrote comments or notes in the margins before returning the document Heller and the team.

That is a routine method of contract negotiation, so that changes to the document can be easily tracked. Subsequent agreements with the Braves were negotiated in exactly the same manner by the Thompson Hine firm, and so was the Falcons agreements negotiated by attorneys for the Georgia World Congress Center.

Frank Poe, executive director of the GWCC, said his organization worked through the Attorney General’s Office to find the two firms hired for the Falcons deal. Both signed contracts to document their scope of work and fees.

“You’ve got to make sure you define the roles and expectations of the legal team, and then what they should be fairly compensated,” Poe said.

Commissioners Lisa Cupid and Bob Ott both expressed concern over Lee hiring an outside counsel without the commissioners knowledge or approval.

“Certainly it’s a concern because that’s not how we’re supposed to do things,” Ott said of McRae’s secret hiring. “Those actions are supposed to be determined by the board.

Lee agreed to a second interview last week, after issuing his statement acknowledging that McRae negotiated on behalf of the county. He said that he probably should have re-evaluated using McRae as the deal progressed, but then shrugged off the issue as being “semantic as to what negotiation means.”

“I thought it was good judgment and good management, actually,” Lee said.