Atlanta taxpayers covered a $24,500 annual health insurance premium for former Mayor Kasim Reed and his family for the year following his departure from office, an Atlanta Journal-Constitution investigation has found.
The premium payment occurred without the authorization of City Council and after a council member questioned if the transaction was proper.
Despite those questions and acknowledging council approval was required, Reed’s human resources chief Yvonne Yancy pushed the payment through the city’s Finance Department just before Reed’s term ended, records show. She claimed the cost would be covered by a pay raise the mayor had publicly declined to accept and had promised to earmark for charity.
“The mayor has elected to (use) his remaining salary that he did not accept to pay for COBRA for him and his family,” Yancy wrote in a Dec. 28, 2017 email to former Chief Financial Officer Jim Beard. “The total amount remaining is $24,464, and this full amount is the exact cost of the 12 months of COBRA. Please transfer these funds.”
Three current high-ranking officials in Mayor Keisha Lance Bottoms’ administration, including the director of benefits, were either copied on or forwarded the email.
Victor E. Hartman, a former FBI agent and author of “The Honest Truth About Fraud,” questioned whether the transaction was legal since it was not approved by the City Council. Reed essentially gifted the money to the city, he said.
“No matter how badly he wants it back, he can’t get it back,” said Hartman, a lawyer and former FBI agent. “His subordinate can’t just give him $24,465.”
A spokeswoman for Reed said in a statement that the city’s payment of his 2018 insurance premium was appropriate and based on guidance given to him at the time.
“The City of Atlanta issued Mayor Reed a W-2 form reporting this transfer of funds as income to him,” says the statement from Anne Torres, who supervised the city’s communications department under Reed. “To Mayor Reed’s knowledge and based upon the guidance he received at the time, he believes that this transaction was appropriate.”
Torres declined to provide the AJC with a copy of Reed’s W-2 form.
Joyce Kitchens, an Atlanta attorney who specializes in employment law, said the health insurance payment was a personal benefit to Reed and should have been reported on his federal income tax return — even though he never directly received the money.
“I’d love to see how they reported this payment to the IRS,” Kitchens said.
Under federal law, employers must offer health insurance, known as COBRA, to former employees at their own expense for a limited time period.
“Clearly they thought they could do whatever they wanted to with city money,” City Council President Felicia Moore said when asked about the insurance payments.
Reed also received the insurance benefit for the first six months of 2019, the AJC found. Within hours of the AJC sending him questions about the insurance premiums, Reed personally delivered a reimbursement check for $12,631 to City Hall.
Reed repaid the money more than three months after the insurance coverage ended. The city’s COBRA policy says premiums are due monthly and in advance. It says coverage will cease if payments are not made on time.
A spokesman for Mayor Bottoms said the city is researching how Reed received city-funded health care coverage this year.
City Auditor Amanda Noble told the AJC that her office would also look into city payments for Reed’s insurance premiums.
Yancy declined to comment.
Reed pledges pay raise to charities
The issues surrounding Reed's salary increase date to a 2012 City Council decision to raise the pay of council members by 50% and the mayor by 25%, at the suggestion of an advisory committee.
At the time, council members argued that they were poorly compensated for all the hours they worked. But the decision angered some rank-and-file employees who protested at City Hall.
Reed’s office issued a press release announcing that he would not accept the higher salary, which would have increased his pay to $184,300 from $147,500 beginning in 2014.
Reed refused to sign the legislation, but also did not veto it. And so the raises went into effect.
In 2016, Reed successfully pushed legislation that allowed him to donate his foregone raises to charity, and created an account in which to keep the funds.
‘Donation’ was a ‘typo’ in ordinance
On Nov. 29, 2017, Yancy appeared before the City Council’s Finance Executive Committee to answer questions about the ordinance that donated the mayor’s foregone salary to “four entities.”
Two of those entities — the health insurance fund and Invest Atlanta, the city’s economic development agency — were not registered charities.
Under the proposed ordinance, $40,000 of the money would have gone to to Invest Atlanta and $24,465 to the insurance fund.
“We don’t want to leave the money behind,” Yancy told the committee. “We want to give it away before he leaves.”
“Is the group insurance fund a not-for profit?” asked then Councilwoman Yolanda Adrean.
“No,” Yancy responded, acknowledging that calling it a “donation” in the ordinance was a “typo.”
“He is using his salary to pay his COBRA benefits,” Yancy said.
“But that’s not a (charity),” Adrean responded.
Credit: KENT D. JOHNSON / AJC
Credit: KENT D. JOHNSON / AJC
Yancy then told the committee that she needed to correct the ordinance. She returned to the podium a few minutes later with revisions: The provision that would have funded Reed’s COBRA payment through the city’s insurance fund was gone, and the total amount to be donated to charity was $77,028.
And the recipient of the $40,000 donation was modified from Invest Atlanta to Partners for Prosperity, a dormant charity that Invest Atlanta established for fund-raising purposes. That donation was actually part of a scheme in which the charity returned the money to the city. The financial maneuver allowed Reed to claim private money paid for luxury airfare to South Africa for himself and his cabinet members.
Federal prosecutors issued a subpoena for records related to Partners For Prosperity after the AJC reported on the transaction last year.
A spokesman for U.S. Attorney’s Office declined to comment on the insurance matter.
After Yancy and Reed left City Hall employment, Yancy followed up to make sure the COBRA payment occurred.
“Checking to confirm this has happened,” she wrote on Jan. 3, 2018 to Beard, who then forwarded the question to the city’s controller. “Please advise.”
“Accounting has completed this entry,” the controller responded.
Our reporting:
The Atlanta Journal-Constitution discovered emails about Reed’s health insurance payout among hundreds of thousands of documents the city turned over to the federal prosecutors in response to a June subpoena. AJC reporting has led federal investigators to question other extravagant expenses authorized by Reed and his inner circle, including $800,000 in bonuses; a $10,000 hotel bill in Paris, France for CFO Beard; and $8,000 for Reed’s going away dinner at an Atlanta steakhouse.
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