A former Atlanta contracting official was sentenced Tuesday to two years in prison for failing to disclose work he did on the sly for a company that helped other firms win contracts with the city and other local governments.
Larry Scott, 55, who formerly served as director of contract compliance for the city, pleaded guilty in September to wire fraud and filing false tax returns. He admitted to earning more than $220,000 from Cornerstone U.S. Management from 2012 to 2017 as its business manager, and failing to disclose that income to the city and in six federal tax returns.
Scott helped form Cornerstone and kept the books for his friend and former fraternity brother Tracy Reed, a brother of former Mayor Kasim Reed. Scott’s defense attorney, Stephen Murrin, said his client wasn’t involved in Cornerstone’s daily operations.
Murrin said Scott was not involved in any alleged pay-to-play contracting, which is at the center of a federal investigation dating to at least mid-2015. Prosecutors have subpoenaed millions of pages of records related to scores of city contracts, as well as credit card spending and city travel.
Scott is the third senior city official to plead guilty in the probe. Two construction company CEOs previously pleaded guilty to conspiring to pay bribes to win contracts.
“Larry implicates no one in his crimes,” Murrin told reporters after the sentencing. “He has no knowledge or information regarding the administration of Kasim Reed or Kasim Reed individually or anyone in his office. He simply was a high-level executive within the city and has human frailties and made tax mistakes. He stood up for his crimes, he took his medicine and the case ended.”
U.S. Attorney Byung J. “BJay” Pak declined to answer when asked if Cornerstone, its clients or Tracy Reed were under scrutiny. Prosecutors have not identified Cornerstone clients or said whether such assistance was improper.
Attempts to reach Reed were not successful.
Scott ran the city’s office of contract compliance, which helps minority and disadvantaged businesses find work with the city. The city’s contracting system features a complicated web of minority vendor and contracting requirements, and Scott’s office was responsible for ensuring those requirements were met by winning bidders.
Assistant U.S. Attorney Jeff Davis said in court that Scott’s actions “shattered the very delicate trust between the city of Atlanta and its citizens.”
For years, Scott disclosed a small computer sales and consulting business he had on required ethics disclosures, showing he knew he needed to report outside work to the government. But that company’s work did not overlap with his job at the city like Cornerstone, Davis said.
“He knew he couldn’t work as director of contract compliance while he worked as a business manager for a company helping businesses get contracts,” Davis said.
Scott told U.S. District Judge Steve Jones that Tracy Reed helped him get a job with the city in 2002 when he was out of work. In 2011, after Reed lost his job with the city following a controversy involving his use of city vehicles while his license was suspended, Reed turned to Scott for help forming a company.
“I didn’t think twice,” Scott said.
Scott said he filed paperwork to incorporate Cornerstone, established a post office box and did other work for the company. Scott apologized to his colleagues at the city and to his family and friends.
But he said, “any narrative that tries to conflate my actions with the broader investigation is patently false.”
Scott said he turned over control of the business in 2017 to Reed and said he hasn’t had any interaction with him since.
Last year, when FBI agents approached Scott, Murrin said his client cooperated without an attorney, meeting several times with federal authorities.
Judge Jones said he was perplexed by why Scott didn’t disclose Cornerstone to the city or pay his taxes.
“You’re not a bad person, Mr. Scott,” Jones said. “But what you did was serious, it was intentional, and it was deceptive.”
Jones sentenced Scott to 24 months on the two counts he faced, to run concurrently. Scott also must pay $124,000 in restitution and serve three years on supervised release.
Scott is free on bond and will report to a federal corrections facility at a later date.
After the hearing, Pak said the City Hall probe is ongoing.
“Every day we evaluate evidence and as the facts develop, we make decisions as quickly as possible to try to bring the end to this probe,” Pak said.
But he would not say if his office is close to wrapping up the investigation.
“Unfortunately, I don’t think we’re done,” he said.
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