JACKSONVILLE, Fla. – A multi-day hearing ahead of the federal trial for two former JEA executives revealed new details about events surrounding the attempted sale of the utility in 2019.
Former JEA CEO Aaron Zahn and his former Chief Financial Officer Ryan Wannemacher are charged with conspiracy and wire fraud in connection with a proposed bonus scheme, known as the Performance Unit Plan (PUP), which could have netted millions of dollars for top executives if the utility was sold.
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Friday morning, Pam Rauch, the vice president of external affairs for FPL, testified during a Kastigar hearing. The purpose of the hearing is to determine whether or not any of the evidence prosecutors have used to build their case was derived from statements Zahn and Wannemacher gave to city attorneys in January 2020. Those statements, made during an investigation into whether Zahn could be fired with “cause,” are covered by what is known as Garrity protections, which prevent the statements from being used in a criminal case against the defendants.
Rauch testified that she attended a meeting with Zahn in July 2019, which prosecutors said was on July 17. The meeting, which Rauch said JEA officials had requested, was held at an airport in West Palm Beach. Also attending the meeting were then-FPL CEO Eric Silagy, FPL vice president of state legislative affairs Danny Martell, and Tim Baker.
Baker, a well-known Jacksonville political consultant, was attending the meeting with Zahn, and according to Rauch, was representing the city of Jacksonville or JEA. Rauch also testified Baker had done consulting work for FPL in the past, but believed that at the time of the meeting, FPL and Baker had severed their arrangement.
As prosecutor Tysen Duva asked what transpired at the meeting, Rauch explained that Zahn led the discussion, letting FPL’s CEO know that the city-owned utility was exploring its options, with one of those options being privatization and a bidding process. Rauch testified there was an understanding the investor-owned utility would be interested in bidding on JEA.
The meeting in West Palm Beach transpired about a week before the July 23 JEA board meeting, where board members voted to move forward with investigating privatization.
Earlier Friday, prosecutors finished their questioning of former JEA CEO Paul McElroy, who first took the stand Thursday. McElroy had been asked to resign as CEO in April 2018 and came back as interim CEO in April 2020. During the time the utility explored privatization and the proposed bonus plan, McElroy testified that since he was retired, he didn’t watch board meetings, but did read some news articles during the time.
He told the court that after the council auditor released his memo in November 2019, detailing that the proposed bonus plan could pay out hundreds of millions of dollars if the utility was sold, he took a closer look, reviewing board documents and doing his own calculations.
“This can’t go forward, it’s got to stop, it’s inconceivable,” McElroy said his reaction was at the time.
McElroy also testified that when he came back to run the utility in April 2020, he saw no need to terminate 29% of the workforce, as had been proposed in one of the scenarios presented to the board under Zahn’s tenure in the summer of 2019 – a scenario that board members at one point, voted to prepare to implement.
Prosecutors also called Jeff Rodda, a member of the council auditor’s office who routinely did work involving JEA. Rodda testified that before JEA board meetings, he would typically review the packet of materials prepared for board members that was released several days in advance, and summarize any information for the council auditor, Kyle Billy. But days before the July 23, 2019 meeting, he realized the meeting packet posted on the JEA website was incomplete. In trying to get the full packet, he wound up getting a call from Wannemacher the night before the meeting, asking him to meet the next morning at a downtown café.
Rodda then detailed a conversation from that day that referenced the movie “The Matrix.” He testified that Wannemacher started their meeting by saying it was a “red pill, blue pill conversation,” referring to a well-known scene in the movie. Rodda said Wannemacher presented the options as the “red pill,” where he would get the full board package, as long as he agreed to not give it to anyone until 8:45 that morning, or the “blue pill,” where they would just have a cup of coffee and talk about their families. Rodda stated he took the “red one,” receiving the 352-page board packet. He said that during their conversation, Wannemacher mentioned that privatization would be discussed that day, but made no mention of the PUP.
Later testimony from Rodda detailed how the council auditor’s office corresponded with JEA over the bonus plan, asking questions about the formula. The two sides also met on October 31, after which the auditor’s office asked additional questions and relayed concerns, including the fact that it appeared there was no limit to how much could be paid out under the bonus plan. On November 7, Wannemacher emailed the auditor’s office, including a letter from Zahn to city of Jacksonville general counsel Jason Gabriel, stating that the decision had been made to “postpone indefinitely” the implementation of the bonus plan.
Despite that decision to put the bonus plan on hold, the council auditor moved forward with releasing a memo analyzing the bonus plan, a week later.
Rodda also described how he obtained two spreadsheets central to the case, “Performance Unit Scratch Sheet.xlsx” and “notes.xlsx.” Both documents involve calculations and notes regarding the performance unit plan. Rodda testified that after reviewing JEA’s invoices from outside law firms, he discovered an entry involving the review of a spreadsheet related to the long-term incentive plan, or LTI. Rodda testified he requested the spreadsheet from JEA, and received the scratch sheet document, and a subsequent request related to the document, resulted in the “notes.xlsx” file.
Testimony is scheduled to resume Tuesday morning, with the hearing lasting late into the week. Zahn and Wannemacher are scheduled to stand trial in October.