Atlanta’s legal bills related to corruption probe top $7.5M, AJC finds

The city of Atlanta has spent at least $5.8 million over the past two years to pay an army of attorneys to respond to a federal corruption probe into former Mayor Kasim Reed’s administration, an Atlanta Journal-Constitution investigation has found.

The spending is four times the amount that the AJC previously reported and began much earlier than Atlanta officials have acknowledged.

The city spent another $1.7 million on attorneys to uphold Reed's controversial firing of former airport general manager Miguel Southwell in a dispute that became an early focus of the federal probe.

The AJC investigation found:

  • The city paid for legal services of more than 100 different lawyers at three law firms, with bills that sometimes exceeded $350,000 per month.
  • Some money that funded at least two law firms came from federally regulated airport funds. Experts told the AJC that spending could violate Federal Aviation Administration policy.
  • The city's billing practices and misleading communications effectively obscured the extent and nature of the attorneys' work from the elected members of City Council who, under city charter, are co-equal clients of both the city's law department and outside counsel it hires.

“The council did not even know that any of this outside counsel activity was going on,” said City Council President Felicia Moore, who served as council member during Reed’s administration. “We didn’t know to ask.”

The administration of former Mayor Kasim Reed deployed an army of attorneys to respond to the federal corruption probe.

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The AJC discovered the additional legal spending after obtaining and reviewing new records the Reed administration withheld during his final six months in office. In November, the AJC reported that the city had spent $1.4 million in legal work related to the federal investigation.

But those figures were based on payments to just one firm, the AJC has since learned. The new records reveal that the city paid two other firms, including white collar criminal defense attorneys who charged rates of more than $900 per hour.

The city declined to answer many of the AJC’s questions, but said the pace and scope of the federal investigation and demands for records required scores of outside attorneys.

“The alternative would have been to hire additional staff and procure needed technology which would have also been expensive and would probably have delayed the ability to be responsive to the federal grand jury subpoenas,” the city said.

In a statement, Reed lauded the city’s fiscal performance under his leadership and dismissed any suggestion that his administration spent inappropriately on legal services. He credited his two former city attorneys for helping secure four indictments in the federal investigation “without exceeding budgets set forth by my Administration.”

To date, the investigation has secured four guilty pleas. One person has been indicted.

“This current criticism amounts to little more than Monday Morning Quarterbacking by individuals who have never run a government for a major American city,” said Reed, who left office in December.

Records request leads to $1.7M in payments

The multi-million dollar spending on outside attorneys began with a four-page public records request from a lawyer representing Miguel Southwell in the spring of 2016.

On May 31, attorney Lee Parks delivered the request to Reed with some explosive allegations. Parks suggested that Southwell’s firing was not because of long airport lines, as Reed had publicly asserted, but because Southwell resisted pressure from the mayor’s office to award airport contracts to companies that were not the lowest bidders.

Former Atlanta Mayor Kasim Reed released documents related to the federal corruption probe in February 2017 in a highly staged news conference featuring boxes of files, many of which were unrelated to the investigation. (HENRY TAYLOR / HENRY.TAYLOR@AJC.COM)

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The allegations came at a politically delicate moment for Reed, who was regarded as a rising Democratic figure with the potential to join the cabinet of Hillary Rodham Clinton if she were elected that November.

Publicly, Reed belittled Southwell after the media obtained Parks' letter, telling Channel 2 Action News that Southwell was "fortunate that I don't destroy his career."

Behind the scenes, however, Parks’ allegations and request for public records set off alarm bells at City Hall. Within days, the city mobilized two international law firms, Greenberg Traurig and Paul Hastings LLP.

Both firms had worked previously for the city and Paul Hastings once employed Reed as an attorney. The two firms combined devoted 40 attorneys to collecting and examining records, according to new invoices obtained by the AJC.

Paul Hastings invoiced the city more than $667,000 for work in the last three weeks of June alone.

By mid-July the attorneys were handling settlement negotiations between the city and Southwell over how to resolve quietly his termination. And the city began using a third firm, Baker Donelson, to help with some of the work, bringing in more attorneys and running up the meter.

Then, in August, Reed faced a demand for records from a different quarter. On Aug. 19, the justice department subpoenaed the city for records associated with pastor Mitzi Bickers. Bickers, a political consultant, was widely credited with helping Reed win the 2009 runoff election by fewer than 700 votes, and Reed rewarded her with a job at City Hall after he took office.

The bills of all three firms show activity the day of the subpoena.

“Significant correspondence and calls…” reads an entry on a Baker Donelson invoice.

“Meeting with client,” notes a Greenberg Traurig lawyer.

“…Telephone conference regarding communications,” a Paul Hastings associate records.

On Aug. 30, less than two weeks after the subpoena, Reed and Southwell reached a deal on Southwell's termination. On Sept. 6, Reed and Southwell issued a public joint statement saying that the two men "now agree that neither of them engaged in any civil or criminal wrongdoing, and any statements they made that could have been interpreted to the contrary are disavowed."

Miguel Southwell, the former general manager at Hartsfield-Jackson International Airport, was fired by Reed in August 2016. Information in a letter Southwell’s attorney wrote to the city was laster sought in a federal subpoena. The Reed administration wittheld the subpoena from the public and the media. HYOSUB SHIN / HSHIN@AJC.COM (The Atlanta Journal-Constitution)

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The agreement ended a crisis that threatened Reed’s final year in office. But it came at a price. By the time of their joint statement, the legal tab had reached $1.7 million for just three months of work.

Parks told the AJC the city never produced the information he requested, but instead used its outside attorneys to “obfuscate and frustrate” his public records requests.

Three days after the joint statement on Southwell's termination, the justice department subpoenaed the city for records relating to Southwell, then-Watershed Commissioner JoAnn Macrina and then-procurement chief Adam Smith. Prosecutors also sought detailed records about specific contracts at the airport.

Guidelines on outside attorneys ignored

The city continued to use the same three firms to respond to the Southwell subpoena and the six subpoenas known to have followed it. Through February 2018, the firms have billed the city $5.8 million beyond the $1.7 million billed over the summer of 2016.

Yet most of this spending has just come to light because of the Reed administration’s decision to conceal the spending and the scope of the attorneys’ work.

The city attorney, who represents both the mayor and City Council, is responsible for hiring outside lawyers and is guided by city policies calling for agreements to be memorialized in “letters of engagement,” a practice also encouraged by the State Bar of Georgia.

Letters of engagement, used by private companies as well, spell out the scope of legal services being offered, list the attorneys who will work on the case and their hourly rates. The letters also certify to the client that they attorneys involved do not have any conflicts of interest with other clients they may represent.

The letter of engagement serves as a kind of contract. Outside law firms bill against it, and the city or client creates a new “matter” associated with the case to keep track of spending.

Former Atlanta City Attorney Jeremy Berry told the AJC that the city intentionally concealed legal work related to the bribery investigation in an unrelated case to prevent employees from finding out if they were targets. WSB-TV

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The first acknowledgement that the law department ignored the guidelines on the hiring of outside counsel came earlier this year when then-City Attorney Jeremy Berry disclosed that the city intentionally concealed legal work related to the bribery investigation in an unrelated case. In a decision made before he became city attorney in May 2017, Berry said the city did not want employees scouring legal invoices to determine if they were a target of the federal investigation.

In a March 2018 AJC story, Berry acknowledged that documents on Baker Donelson letterhead given to the AJC in November and described as invoices were in fact "summaries" extracted from the unrelated case to satisfy an AJC records request. Berry did not disclose that the documents were not authentic Baker Donelson invoices, an omission that experts said could violate the state's Open Records Act and laws governing the altering of public records.

The new records reviewed by the AJC show that the practice of concealing bribery billing in other cases seems to have begun with an invoice titled “Whistleblower Complaint” dated Aug. 10, 2016 — nine days before the city received what officials identified as the first subpoena in the federal grand jury investigation.

Berry has also since acknowledged to the AJC that the city does not have an engagement letter with Baker Donelson for the corruption probe, but instead has relied on an agreement from 2012 for an unrelated investigation at the airport — four years before Southwell’s termination and subsequent federal subpoenas.

While the city produced engagement letters with Paul Hastings for the Atlanta streetcar and other matters, it could not produce one for work related Southwell’s termination and the corruption investigation in response to an open records request. In response to a question, the city said Paul Hastings is Atlanta’s “outside counsel on airport matters.”

The city issued a “new notice of new matter” to Greenberg Traurig for Southwell’s termination in May 2016, but produced no agreement that included work related to the federal corruption investigation.

The three firms declined comment on their arrangements with the city.

Lawyers included noted criminal defense attorney

In February 2017, Reed stood in front of a wall of white boxes containing 1.4 million pages of records that he said had been turned over to the feds for their investigation, calling his administration the most transparent in city history.

In fact, as the AJC and Channel 2 reported in May, the records did not include any of the documents turned over to the feds for the Southwell subpoena, which Reed considered a closed “personnel” matter and “unrelated to the ongoing federal bribery investigation,” according to a statement from him May 11.

At his February 2017 news conference, Reed also said the city would not conduct an internal investigation into procurement at City Hall to protect the work of federal prosecutors.

“We haven’t launched our own concurrent investigation because that could alert people that the justice department is pursuing,” Reed said.

In fact, invoices show that the city was already paying a high-dollar white collar criminal defense lawyer out of Paul Hastings’ headquarters in Los Angeles named Thomas O’Brien, a former U.S. attorney whose specialties include internal investigations — and experience representing public officials accused of corruption.

In August, at another press conference, Reed reversed his position, saying that the city had hired a former U.S. Attorney to lead a team conducting an internal review to root out corruption. Reed declined to answer questions from the AJC about why his stance changed.

Reed’s former communications director, Anne Torres, told the AJC in an email dated Feb. 22, 2018, that none of the law firms have produced an internal investigative report and, even if they had, she claimed it would be exempt from public disclosure.

What was city paying for?

Given Reed’s prior employment at Paul Hastings and the firm’s prior work for the city, one legal expert interviewed by the AJC questioned the independence of Paul Hastings to conduct an internal investigation at City Hall.

“Typically you want an independent firm to come in, a new set of eyes to look at what has happened,” said Peter Henning, a Wayne State University Law School professor.

In an interview, a former city employee who requested anonymity out of fear of political retribution said Paul Hastings lawyers appeared to be assessing the criminal exposure of high ranking city officials at the public’s expense.

The employee described being summoned to a meeting with two Paul Hastings attorneys during the last few months of 2017 to discuss procurement reform.

But the main focus of the interview related to concerns the employee had raised about a vendor who was the subject of a subpoena and any interactions the employee may have had with Reed, the employee told the AJC.

A legal expert who reviewed the city’s billing records at the request of the AJC said the large amount of money, combined with pervasive patterns of irregular billing, was “very troubling.”

“The most plausible explanation was that at least one reason this army of lawyers was employed was to protect Kasim Reed personally from the risk of criminal prosecution,” said Clark Cunningham, professor of legal ethics at Georgia State University’s law school.

In his statement to the AJC, Reed dismissed any suggestion that the city’s spending on legal services benefited him personally.

Council members said they had no idea about Hastings’ work. In monthly reports required under city ordinance, the law department failed to disclose to the council the nature of the firms’ work as being “criminal,” a notation that almost certainly would have prompted questions.

In response to an AJC question about why the notations were omitted, the city said Baker Donelson was not providing the city with criminal defense services. It did not answer the question with respect to Paul Hastings and Greenberg Traurig.

Revenue diversion?

The AJC’s examination of legal spending also raises questions about how the city paid the bills.

The AJC obtained a handful of expenditure records that show Baker Donelson was paid from the general and watershed funds and that Paul Hastings and Greenberg Traurig were paid out of airport funds.

Federal aviation regulations prohibit the use of airport revenue for expenses unrelated to an airports’ operations and capital expenses. Doing so can put millions of dollars in federal grants to the airport at risk.

Aviation law experts told the AJC that perhaps the city could argue that legal expenses involving grand jury demands for airport related information could be included in operations, but if the firms billed the airport for unrelated legal work it could be a case of revenue diversion.

The AJC asked the city what rationale the law department used to pay Paul Hastings and Greenberg Traurig out of airport funds. The city did not answer with respect to Greenberg Traurig but noted Paul Hastings’ role as outside counsel on the airport.

“To the extent that the investigation addressed airport operations, it was appropriate for aviation funds to be allocated for aviation matters,” the city said.

The records reviewed by the AJC do not provide a clear picture of how the law firms divided and segregated their work. Descriptions of work on legal invoices were vague and the city often heavily redacted them, claiming the information was privileged, before providing them to the AJC.

But language in the invoices and billing entries indicate that the firms weren’t focused on different aspects of the investigation, but were working together.

When the city received a subpoena on Nov. 30, 2016, for information about two contractors whose work was not airport related, for example, O'Brien recorded one hour of work on an invoice titled "subpoena advice" to "analyze (redacted word)."

Barbara Lichman, an aviation lawyer in southern California, said if the firms were paid from airport funds for legal services unrelated to the airport she believed the payments would meet the definition of revenue diversion.

“You’re not allowed to take money from the airport off the airport,” she said. “By paying for other city departments you’re taking money off the airport.”

The invoices of all three firms’ work often reflect an intense focus on reviewing documents to determine what information was privileged and therefore exempt from disclosure to the government.

Paying a firm to collect and review documents of other departments out of airport funds “could very clearly be revenue diversion because those are documents that are better held by other agencies that are not the airport,” said Alison L. Squiccimaro, an aviation lawyer in Connecticut.