Why would Paul Hastings pay $90,000 to Atlanta's former city attorney after the law firm earned millions representing the city and its airport under her watch?

That's a key question for federal prosecutors in the ever-widening, almost four-year corruption probe into former Mayor Kasim Reed's administration. The probe expanded earlier this year to the city's dealings with Paul Hastings and Reed's ex-city attorney, Cathy Hampton, the Atlanta Journal-Constitution (AJC) has reported.

Paul Hastings' $90,000 in payments to Hampton, on top of its prior $2.2 million in flat-fee bills to the city, raised concerns for ethics and billing experts as well as several criminal defense attorneys. While highly unusual, they told the Daily Report, the law firm's vague bills to the city, specifying neither timekeepers nor their activities, and its subsequent payments to Hampton could signal anything from sloppy documentation to ethics breaches to, at worst, the firm serving as a conduit to fraud.

Paul Hastings could face exposure from the Atlanta U.S. Attorney's Office's ongoing investigation, they added, depending on its findings.

Federal prosecutors have not accused Paul Hastings of any wrongdoing, but they have asked the firm and Hampton for documents pertaining to the Hampton payments and earlier flat-fee bills to the city, according to an AJC report.

Paul Hastings is cooperating with the U.S. Attorney's Office, a firm representative said in a statement in response to the questions about flat-fee billings, including the $90,000 in payments to Hampton, and conflicts of interest first raised by the AJC. "Paul Hastings places the highest priority on ethics and integrity and we expect all our partners and employees to embrace those standards," the firm said. "We take these allegations very seriously and are reviewing this matter with the support of outside counsel." 

Hampton did not respond to a request for comment.

The AJC reported this month that Paul Hastings paid Hampton's consulting firm $90,000 for "transition services" after she'd stepped down as city attorney. Unbeknownst to the Atlanta City Council, she remained on the city's payroll for another five months.

Hampton's consultancy billed Paul Hastings in two flat-fee, non-itemised invoices. Paul Hastings then billed the city $90,000 for "outside professional services", with no mention of Hampton's name or role on the invoices.

Paul Hastings reimbursed the $90,000 to the city last September after receiving a demand letter from current City Attorney Nina Hickson, the AJC reported.

City of Atlanta spokesman Michael Smith said in a statement: "This administration has and will continue to fully cooperate with the authorities in order to assist bringing the matter to a swift and fair conclusion."

Page Pate/photo by John Disney/Daily Report

The $90,000 transaction between Hampton, Paul Hastings and the city, said criminal defense attorney Page Pate, "if not criminal, was extraordinarily sloppy and potentially unethical", because of the lack of transparency in the invoices.

"The potential for negative consequences to the firm is much more significant and, perhaps, immediate than the [$2.2 million in] flat-fee billings," Pate added.

Asked what professional services Hampton may have provided for Paul Hastings, Pate replied: "I assure you, that is precisely what the U.S. Attorney's Office wants to know right now."

Reed, who started his legal career at Paul Hastings, named Hampton as Atlanta's city attorney when he took office in 2010. She then engaged Paul Hastings as outside counsel for Hartsfield-Jackson Atlanta International airport. Hampton stepped down in May 2017, toward the end of Reed's second term.

Last year, the AJC raised potential underlying conflicts of interest in Paul Hastings' relationships with the city and the airport, based on an extensive analysis performed by ethics expert Clark Cunningham, a law professor at Georgia State University. His September 5 and September 14 letters to the AJC are posted on his website.

Cunningham has called for the Atlanta City Council to initiate its own investigation in addition to those underway by the Justice Department and the Federal Aviation Administration.

Georgia State University College of Law professor Clark Cunningham. Courtesy photo.

With respect to the Paul Hastings transaction with Hampton and the city, the council should probe "whether outside counsel for the airport and the City Attorney conspired to steal $90,000 in airport revenue entrusted to the city", he said in an email. "Atlanta came close this year to losing control of the airport over concerns of pervasive corruption and must now show that its government is committed to real oversight."

Vague Bills 'Troubling'

Ethics conflicts aside, Pate said, what the Justice Department cares about is "the movement of money and whether there was fraud involved – and whether there was potential bribery or gratuities paid to city officials".

The criminal defense lawyers who spoke to Legal Week sister title the Daily Report each emphasised that there is not enough publicly available information to determine whether Paul Hastings' flat-fee invoices to the city for the Hampton payments and for the $2.2 million in earlier legal bills were just vague billing or signs of potential fraud.

"It could be sloppy paperwork, but basically innocent, to something more troubling," said white-collar defense lawyer Jack Sharman of Lightfoot, Franklin & White in Birmingham.

The distinction between conflicts of interest and actual criminal activity "can get a little blurry", Sharman added. "Federal prosecutors are not above turning an undisclosed conflict of interest into a federal offense if the facts fit."

News of Paul Hastings' payments to Hampton followed AJC reports last fall that the city paid the law firm $2.2 million in flat fees from 2014 to 2017 for a series of one-line, non-itemised bills for "litigation consultation" or "legal research", including several monthly $100,000 payments. That was out of a total $11 million in fees that Paul Hastings had billed to the city since Reed became mayor, at hourly rates of up to $950.

During that time, Paul Hastings was overseeing the city's response to federal grand jury subpoenas over airport concessions and related litigation.

After the AJC's initial report on vague billing was published, federal prosecutors requested an interview with William K. Whitner, Paul Hastings' relationship partner with the city, the paper reported.

The flat-fee billing is "not a smoking gun or red flag; but it is part of the milieu", said criminal defense attorney Bret Williams, a former federal prosecutor. "In my opinion, the room's getting a little smoky."

'Knowing Conduit'?

The criminal defense lawyers said the key questions about potential fraud stemming from Paul Hastings' payments to Hampton are what professional services she performed, whether there is documentation, and whether the law firm disclosed to the city that the $90,000 it billed to be reimbursed was for her services.