JACKSONVILLE, Fla. – What began in 2019 as a proposal to sell city-owned utility JEA, ballooned into what many consider the largest attempted fraud scheme in Jacksonville’s history.
The alleged scheme resulted in the federal indictments of former JEA CEO Aaron Zahn and former JEA CFO Ryan Wannemacher. They are accused of conspiracy and wire fraud in connection with the proposed sale, which could have netted the pair and other JEA executives millions of dollars through a controversial bonus plan tied to the sale.
TIMELINE: The federal case against two former JEA executives | JEA Scandal: A closer look at Jacksonville’s largest fraud case
The pair are being tried together but separate juries were picked for each defendant last week.
The trial started with opening statements from federal prosecutor Tysen Duva and Zahn attorney Eddie Suarez. Duva gave some background on JEA, calling it the “most important and coveted asset of the city of Jacksonville,” one that contributes about $120 million to the city budget each year. He outlined what led up to the discussion of a sale of JEA, stating that selling JEA is not a crime.
“The crux of the crime, and why you’re here, is a bonus plan that was attached to it,” Duva told the two juries, as he told them about the bonus plan that could have paid out tens of millions of dollars had JEA been sold.
He outlined the scenario planning process JEA underwent in 2019, and how they invited investor-owned utilities to make bids for JEA. He said Wannemacher created spreadsheets that outlined a scenario where the units for the performance unit plan – which employees could purchase for $10 each – could skyrocket in value to $11,500. Duva then explained how the council auditor’s office discovered the potential payouts of the plan, in the hundreds of millions of dollars which was originally described as having modest payouts of $3-4 million.
Suarez said his job “is to show you what the evidence doesn’t show.” He outlined several things that the prosecution “must prove” for the jury to convict, and that they would have to rule out every possibility that what they did was lawful behavior. Suarez also described several steps that would have had to happen for the bonus plan to pay out, following a sale, including the sale’s approval by voters, the approval of the city council, the approval of the board, as well as the approval of the bonus plan by the state attorney general and the Florida Ethics Commission.
Suarez told the jury that the JEA board hired Zahn to bring in vision from the private sector and the know-how to navigate future trends, and to look out for the City of Jacksonville.
“They cannot rule out all of the reasonable possibilities that Mr. Zahn’s conduct was lawful,” Suarez told the jury.
Suarez said he never pushed for the sale but offered all types of methods to make JEA more profitable. As for the bonus plan, he argued it was not hidden and was not there to make millions for employees. Suarez said the plan was abandoned once it was learned there could be problems.
He added that Zahn never portrayed JEA to be in a “death spiral” and only used those words to say the utility wasn’t in one.
Wannemacher defense attorney James Felman began his opening statements saying, “Ryan Wannemacher never conspired with Aaron Zahn or anyone else to commit a crime.”
Felman said Wannemacher was asked to come up with a certain formula, and he did, and he was asked to help present the PUP to the board, and he did and that he would explain the PUP to auditors, attorneys, and anyone who asked about it.
The trial is expected to last four weeks. Zahn and Wannemacher could get up to 25 years in prison if convicted on all charges.
Following opening statements, prosecutors begin calling witnesses, starting with former JEA CEO Paul McElroy.
McElroy had spent 16 years as a JEA executive until his 2018 retirement, with the last six years as CEO. He later came back to serve as interim CEO for six months in 2020.
McElroy was questioned about the start of the privatization talk in November 2017, with the comments made by outgoing JEA board chair Tom Petway at his final meeting, which the prosecutor said has been referred to as the “Petway mic drop.”
“My reaction was, at the time, this is gonna be extraordinarily challenging, to make a statement that broad during his last board meeting,” McElroy said of Petway’s mention that privatization should be explored.
McElroy then described the political climate that followed pertaining to privatization as “tense and aggressive,” with regard to the scheduling of a joint meeting between the JEA board and the city council. The purpose of the meeting was to review a report commissioned by the city, looking at the value of JEA in a potential privatization.
Testimony then turned to February and March of 2018, when Zahn joined the JEA board. McElroy described Zahn as having a “voracious appetite for information regarding JEA in a very detailed manner” during his onboarding process as a new board member.
Prosecutors then showed a clip of a March 20, 2018, JEA board workshop where privatization was discussed. The meeting also included Zahn making his first public comments as a member of the JEA board. McElroy testified that after the meeting, he had a meeting with JEA board chair Alan Howard, where Howard relayed a message from the office of Mayor Lenny Curry that they felt McElroy should resign. McElroy testified that he initially said no at the time, but that Howard indicated he needed to resign immediately, otherwise things could become very difficult for him.
Tomorrow morning, prosecutors will continue with McElroy’s testimony.
DOCUMENT: Witness list submitted by prosecution in U.S. vs. Aaron Zahn & Ryan Wannemacher
Among some of the notable names on the prosecution’s witness list are:
- JEA-related witnesses: McElroy; Melissa Dykes, COO under Zahn and interim CEO briefly after Zahn was let go; Jay Stowe, current CEO of JEA
- Former board members: Kelly Flanagan, Andy Allen, Alan Howard, Fred Newbill, April Green, Camille Lee Johnson
- City-related witnesses: Kyle Billy, former City Council auditor; Jeff Rodda, assistant council auditor; Kim Taylor, council auditor; Jason Gabriel, former general counsel for the city
- Others of note: Sam Mousa, former chief administrative officer for the city, who testified before the city council investigative committee at one point; two executives with NextEra, the parent company of FPL -- one of the main bidders to purchase JEA; Matt Schellenberg, former city council member; Kevin Hyde, former city council president who is currently with the Foley Lardner law firm, which did some work for JEA
Zahn, who was appointed to the JEA board at the request of then-Mayor Lenny Curry and later became CEO, was removed as CEO in December 2019, after the scheme began to come to light. Zahn had proposed the sale of JEA after leadership began asserting falsely that JEA “was in trouble.”
Later, the public learned of the controversial bonus plan that would have benefited Zahn and others, had the sale gone through.
“Just think of what that would have meant to the taxpayers. A scheme to potentially defraud nearly a billion dollars,” News4JAX political analyst Rick Mullaney said.
Wannemacher and other executives were also let go.
The city council investigated, as well as the state attorney’s office. But the case was turned over to the feds, who later indicted Zahn and Wannemacher in March 2022. Both pleaded not guilty.
Zahn has made reference to the fact that he was a scapegoat, telling a lawyer working for JEA and the city that Curry was supportive of the $40 million payout Zahn would receive in the event of a sale. Curry has denied that claim. He has never been charged in connection with the JEA sale and has not been accused of any wrongdoing.