The federal probe of Atlanta City Hall under the Reed administration continues to churn.

Questions raised about Atlanta probe of South Africa trip payment

Former Atlanta Mayor Kasim Reed was not interviewed before an outside law firm provided a city board with the results of its investigation into a $40,000 payment Reed directed to cover luxury airfare to South Africa.

The Atlanta Journal-Constitution and Channel 2 Action News have learned law firm McFadden Davis interviewed Reed after delivering an oral report during a closed-door executive session about Partners for Prosperity, the nonprofit fundraising arm of Invest Atlanta that accepted $40,000 from the city only to return the money a few months later.

The transaction was an attempt by Reed to fulfill his promise to have a non-governmental agency pay for a portion of the expensive airfare. The law firm’s July report found no criminal wrongdoing.

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Experts in internal investigations and a member of City Council are questioning the thoroughness of the probe. Federal prosecutors, meanwhile, delivered a subpoena to the city last week demanding a copy of the review into Partners for Prosperity.

It was the second known federal subpoena naming the charity.

Atlanta City Council President Felicia Moore questioned how the Invest Atlanta board could take action based upon a probe that had not yet interviewed Reed.

“How do you make that determination without talking to the central figure in all of this and that’s the [former] mayor,” Moore said. “It does not make any sense.”

Then-Atlanta Mayor Kasim Reed casts his vote for the Atlanta mayoral run-off election at Fickett Elementary School on Tuesday, Dec. 5, 2017. ALYSSA POINTER/ALYSSA.POINTER@AJC.COM
Photo: The Atlanta Journal-Constitution

The Aug. 22 federal grand jury subpoena seeks “all internal and external audit/investigative reports” related to the charity and the $40,000 payment. The subpoena also seeks all calendar, travel and credit card spending records for all employees of the mayor’s office, as well as those of Reed’s security detail during his eight years in office.

It’s unclear what, if any, legal misconduct the feds are examining in relation to the charity.

The subpoena is the clearest example to date that Reed and members of his office are under scrutiny in the long-running federal investigation into City Hall corruption.

The Invest Atlanta board stripped its CEO, Eloisa Klementich, of her contract and a six-figure buyout clause, based on the law firm’s findings. The report faulted her conduct as it related to charity bylaws and the mixing of her role at the city’s economic development agency.

Invest Atlanta retained Klementich as chief executive on an “at-will” basis.

Jessica Gabel Cino, a Georgia State University law professor who has conducted similar investigations, said the city’s probe wouldn’t have taken place without Reed’s actions, and it would be critical for the firm to interview the former mayor before issuing findings to the board.

Cino said prosecutors’ request for additional documents related to Partners for Prosperity indicates the feds are trying to unravel what she described as “a shell game.”

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Federal investigators might want to compare findings they already have from an April subpoena naming the charity to findings of the city’s investigation, she said. Among the matters they will compare are any witness statements in the city’s probe to any interviews conducted by the FBI — either those that have taken place or will in the future.

“The feds never just do something to dot Is and cross Ts,” Cino said. “They never review an audit for the fun of it. They generally look for something more.”

In a statement Tuesday, Jamala McFadden, the lawyer who led the probe for the city, said Reed was not the focus of the investigation.

Reed had been scheduled to meet McFadden’s team prior to a July 19 Invest Atlanta board meeting, but he rescheduled his interview and one was not conducted until a later date.

Bottoms’ office defended the decision on Tuesday to accept the oral report before Reed’s interview.

“It was in the best interests of both the City and the IA Board that delivery of the report not be delayed by one individual,” a statement from spokesman Michael Smith said, adding “it was apparent that his testimony would not substantially change the results of the report.”

Partners for Prosperity, a nonprofit formed by Invest Atlanta to help promote affordable housing, job creation and economic development, cut this $40,000 check to the city of Atlanta in March to defray the cost of business-class travel for former Mayor Kasim Reed and some of his entourage for a spring 2017 trip to South Africa. In December, the city had given the nonprofit $40,000 in taxpayer money from Reed’s unclaimed salary.
Photo: The Atlanta Journal-Constitution

A deferred raise

The Partners for Prosperity controversy has its origins in spring 2017 when Reed took nine employees to South Africa to learn about film-making, urban agriculture and to recruit jobs. Most flew business class.

After the $90,000 price tag for the trip became public, Reed promised to find non-governmental funds to pay the $40,000 difference between coach and business-class airfare.

City Council approved a $40,000 donation to the charity in December on the recommendation of Reed’s office. The funds came from an account that held money from a raise Reed had deferred.

But councilmembers were not informed that the money would be used to pay for luxury airfare.

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On Dec. 29, days before he left office, Reed approved a new contract for Klementich. The same day, the city sent $40,000 to the charity.

Then, this past March, then-city chief financial officer Jim Beard sent a city invoice from his personal email address to Klementich’s seeking $40,000 from the nonprofit. Days later, Klementich signed a check for $40,000, but Partners for Prosperity’s board didn’t formally approve the payment until early April, board minutes showed.

An outside investigation into a $40,000 payment for luxury airfare for former Mayor Kasim Reed faulted Invest Atlanta CEO Eloisa Klementich and recommended changes to Invest Atlanta’s relationship to a related charity. (INVEST ATLANTA)
Photo: The Atlanta Journal-Constitution

Roles are unclear

On July 19, Bottoms announced the law firm’s findings after a nearly three-hour closed door executive session of the Invest Atlanta board. She said the firm found no laws were broken, but faulted Klementich for violating governance policies of Partners for Prosperity, for which Klementich served as an officer and board member.

The next day, Reed issued a statement saying the probe exonerated him, calling the transaction “wholly appropriate and legal.”

When the AJC and Channel 2 requested copies of McFadden Davis’ investigation, Bottoms’ office said the report was made orally, and not in writing.

Open government advocates said that decision denied the public the right to determine whether the investigation was thorough and fair.

After business hours on Aug. 22, the day the city received the subpoena, Bottoms’ office posted a three-page written summary of the investigation on the city’s media page, but it did not distribute the summary to the press.

The executive summary, dated Aug. 13, closely tracked reporting from the AJC and Channel 2, which broke the story of the $40,000 payment in April.

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The summary says that Reed directed a donation of his unclaimed salary to the nonprofit; that the money was given back to the city before Partners for Prosperity’s board met to approve the transaction; and that Reed signed Klementich’s employment contract on the same day the money was transferred back to the city.

The summary says that Reed told investigators that he received “legal and accounting advice regarding the contemplated transactions,” but it made no mention of which firms provided that advice, whether investigators confirmed that the advice was provided, or what the advice was.

The investigation also concluded that “the timing of former Mayor Reed’s signing of Klementich’s contract and the distribution of the $40,000 donation were not connected.” But it gives no reasoning for how that conclusion was reached.

It did not address Reed’s role in directing the transactions.

Bottoms’ office said last week a final report has not been produced.

Asked why the city didn’t request a full report, Smith said the “investigation centered around a single $40,000 transaction, and this decision was made in an effort to keep costs to taxpayers minimal.”

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