JACKSONVILLE, Fla. – The trial of two JEA executives accused of trying to take millions in personal profits from a proposed sale of the city-owned utility through a controversial bonus plan entered its second week on Monday.
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 and could face 25 years if convicted.
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Two of the key witnesses for the prosecution on Monday were members of the council auditor’s office who detailed their efforts to get answers on the bonus plan which JEA referred to as its “performance unit plan,” or the “PUP.”
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Testimony from council auditor Kim Taylor shed some light on what led up to the memorandum in November 2019 exposing the potential for multi-million dollar payouts under the PUP.
In August 2019, another member of the council auditor’s office, Jeff Rodda, sent an email to Wannemacher and others, with 22 questions regarding the PUP. Some of those initial questions asked the purpose of the PUP, what sort of modeling had been done, and what the maximum cost to JEA could be. Two months later, council auditor Kyle Billy held a meeting with Wannemacher, JEA chief administrative officer Herschel Vinyard, Taylor, and others from the council auditor’s office. At that point, the Aug. 9 questions had not been responded to in writing.
Taylor, who was assistant council auditor in 2019, testified that before the meeting, she had reviewed the plan documents, and started to have concerns, regarding the complexity of the plan, implementation timelines and the apparent lack of caps on payouts under the plan. Her concern was that under a recapitalization or sale of the utility, it could essentially function as a stock option.
“As a city entity, you just don’t see things like that,” Taylor testified, adding the amount of payouts could be “limitless.” She said that during the meeting with Wannemacher and others from JEA, no cap was ever stated. Taylor said Wannemacher was asked about modeling of payouts, in connection with a recapitalization, but that the conversation was steered back to the amounts from the board meeting.
They followed up on the meeting with an additional 15 questions in writing, sent the same day, and sent a reminder a week later after receiving no responses. Around that time, on Nov. 7, Taylor sent Wannemacher an email, asking to confirm calculations which she had carried out based on plan documents. She said they followed up that week after getting no response and were told JEA was working on the calculations.
On Nov. 13, Wannemacher emailed members of the council auditor’s office, informing them they were not moving forward with the PUP, and attaching a letter Zahn had sent to the city’s general counsel, Jason Gabriel, the day before, informing him the PUP was “postponed indefinitely.”
Taylor testified that based on that language, the council auditor’s office felt there was still a possibility the bonus plan could move forward at some point, so they felt a “duty” to make the city council aware. Taylor emailed Wannemacher again, still asking for the calculation. He did respond with a spreadsheet, but still had no reference to a recapitalization or sale.
Another auditor in the office, Heather Reber, responded to the JEA CFO, asking a question about the possibility of $3 billion, $4 billion, or $5 billion in proceeds to the city, in the event of a recapitalization. The following day, Wannemacher responded by informing the auditor’s office that it was a draft plan that was not being finalized and that Zahn noted it would be moot in the event of recapitalization.
“I felt it was very defensive to not give answers to questions we had initiated in August, to repeatedly not receive responses,” Taylor testified about her reaction to that email.
Following Taylor’s testimony, the court heard from her former boss, the former council auditor Kyle Billy, who retired in June 2020. He testified about the start of his office’s involvement in looking into the proposed bonus plan, when an auditor tasked as being the detail person for JEA, Jeff Rodda, raised concerns following the July 23, 2019 board meeting. Billy said that Rodda had a list of questions, which he approved sending over.
Billy said the October 31 meeting came about because their questions had still not been answered, and the office was starting come out of its busy budget season, which begins when the mayor presents a budget in July and wraps up when the budget is approved at the end of September. His testimony then walked through some of the additional email exchanges where his office sought answers from JEA. Billy testified that after the Oct. 31 meeting, he had been on vacation out of the country for about a week but kept in touch with his office during that time – which was the time that auditors were seeking answers from JEA.
Billy testified that in issuing his November 18th memo, even though Zahn had said the bonus plan was indefinitely postponed, until the JEA board rescinded the plan, Billy viewed it was still a possibility, and felt a duty to inform the city council.
One of the first witnesses to take the stand on Monday was Pat Maillis, JEA’s director of employee services. She oversees benefits, compensation, and labor relations, and has been with the utility for more than 10 years, as part of a 35-year career working in employee compensation.
Prosecutors asked Maillis whether prior to Zahn’s arrival, long-term incentive plans had been discussed at JEA. She said they would do an annual compensation analysis, looking at base compensation, short-term incentive plans and other matters, but had never been able to put together a long-term incentive plan, because being in a government environment, it wasn’t acceptable.
She testified that in October 2018, she met with Wannemacher, and started discussing a possible long-term incentive plan, and what it could be built around. Soon after, they started working with their compensation consultant, Willis Towers Watson, and asked it to look into a long-term incentive plan. A meeting held in March 2019 between JEA and the consultants included a presentation that in part stated in public power utilities, like JEA, “long-term incentive plans are uncommon.”
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Prosecutors then went through different versions of a presentation from consultant Willis Towers Watson, with Maillis. After the first version that contained the phrase, “LTI plans are uncommon,” a version the following month read, “LTI plans are uncommon, but used selectively.” In another document version, in May, the same section read “LTI plans are used selectively.”
Maillis testified that she was never asked to work on any documents for the performance unit plan, something she would have expected she would be asked to work on, given her position. When the JEA board then approved a resolution for a performance unit plan at its July 23 meeting, Maillis testified she had been watching the meeting online, and was surprised it was approved, saying she didn’t know it was going to the board in that form, and that she hadn’t seen any of the documents for the plan before.
She said she also saw possible conflicts of interest, as there was information that people were aware of before the units were granted, which she said appeared to be “insider information.”
Zahn’s attorney, Raquel Jefferson, questioned Maillis on whether she knew of any utilities that used long-term incentive plans, and answered she was aware that the Tennessee Valley Authority had previously used such a plan. The TVA is where current JEA CEO Jay Stowe previously worked.
Jefferson also asked Maillis if she knew who made the various changes to the Willis Towers Watson presentation, about the use of long-term incentive plans among public power utilities, and she said she did not know but would assume that someone with the consulting firm approved of the changes.
Retired council auditor Kyle Billy will return to the stand Tuesday morning as prosecutors continue their questioning, followed by cross-examination by the defense.
The trial is expected to last a total of four weeks.
