The Atlanta Journal-Constitution
City official guilty of wire, tax fraud
Head of Atlanta contract compliance office quit last week, faces prison.
Atlanta’s top contract compliance officer was paid $220,000
over five years for helping companies obtain government contracts — including with the city of Atlanta — as part of an undisclosed side business he operated with former Mayor Kasim Reed’s brother, Tracy.
Larry Scott pleaded guilty in federal court Wednesday to charges of wire fraud and tax evasion for failing to report the income to officials with the city and the IRS.
U.S. Attorney Byung J. “BJay” Pak said in a news conference after the hearing that Scott is now cooperating with his office’s long-running investigation of corruption at Atlanta City Hall.
Scott, 54, abruptly resigned from his $98,000-a-year job as head of the city’s contract compliance office last week, just days after being questioned by the FBI. He faces up to 30 months in prison at his Nov. 25 sentencing.
“To Mr. Scott’s credit, there is never a wrong time to do the right thing,” Pak said. “He did come clean and admitted his activities, and that’s why we’re here today.”
Pak urged others to come forward and said more developments in the case are pending.
A spokesman for Mayor Keisha Lance Bottoms said the administration remains “steadfast” in its commitment to fully cooperate with the investigation but said federal agents have not shared the names of other city employees who may be targets.
“We are disheartened by these allegations against a longtime employee,” said Bottoms’ spokesman Michael Smith.
Cornerstone formed in 2011
Scott formed Cornerstone U.S. Management Group in 2011 with Tracy Reed’s wife, Crystal, according to state corporation records.
Cornerstone’s address is listed at Tracy and Crystal Reed’s home address.
Neither Tracy nor Crystal Reed returned messages Wednesday, and neither is implicated in the charges filed against Scott.
Tracy Reed resigned from his job with the city in November 2011, after a controversy involving driving a city vehicle on a suspended license. Two years later, Tracy Reed became the company’s registered agent, records show. In 2017, he was listed as the company’s organizer, and later as a member of the business, according to the documents.
Scott worked in several positions at the city, including as a senior contract compliance officer, director of procurement for the Watershed Department and nearly five years as director of contract compliance. The last 20 months of Scott’s tenure were under Mayor Bottoms.
A key part of the government’s case is Scott’s failure to disclose his income from Cornerstone to the city. City employees must disclose income in excess of $5,000 in any given year from any business.
With his guilty plea, Scott admitted he knew the city would have fired him if he had disclosed his Cornerstone income.
Scott admitted filing a total of six false financial disclosure statements with the city from 2012-17, “each executed under penalty of perjury.” He also admitted filing six “false and fraudulent federal income tax returns by failing to report the majority of the income that he earned from Cornerstone.”
The federal investigation has tightened around Reed and the former mayor’s inner circle. Reed has been named in federal subpoenas probing contracts, travel records and credit card purchasing statements. Members of his cabinet have also been targeted by subpoenas.
“I think the constant drip, drip, drip of additional people getting indicted or pleading guilty or additional subpoenas coming in, it’s been a slow, tortuous process,” said Caren Morrison, a Georgia State University law professor and former federal prosecutor.
Pak on Wednesday said the pace of the investigation is picking up, but he wouldn’t comment on any companies that did business with Cornerstone.
“But like I said, Mr. Scott is cooperating,” Pak said.
Scott in ‘position to influence’
The contract compliance officer wields tremendous power over contracting. The office’s purpose is to serve as a liaison between the city and disadvantaged businesses.
The city’s contracting system includes a complex web of minority contracting requirements. The office is also responsible for ensuring those requirements are met after contracts are awarded.
Scott “was in a position to influence a lot of things, particularly in the area of procurement,” Pak said. “He has been involved in this area for a long time.”
Shelia Edwards, a former minority contractor at the airport, attended Scott’s plea hearing.
Edwards has alleged in a lawsuit that Mayor Reed’s administration allowed her to be improperly removed from an airport contract and that people close to Reed benefited. The Federal Aviation Administration has recently said the city violated its federal obligations for airport grants in that dispute.
Edwards said she attended the hearing because she considers herself one of Scott’s victims.
“I wanted him to look in my face,” Edwards said.
Scott became the third high-ranking city of Atlanta official to plead guilty in the investigation, following guilty pleas by the city’s former purchasing chief Adam Smith and former Reed deputy chief of staff Katrina Taylor-Parks.
Three others, including two construction company CEOs, also have pleaded guilty. In addition, the city’s former director of human services and a third contractor have been indicted and await trial.
Scott offered a clipped response when asked by the judge to recount what he did.
“I’m charged with wire fraud and failing to disclose on income tax,” Scott said.