JACKSONVILLE, Fla. – Former JEA board members continued to testify on Wednesday in the case against two former JEA executives involving what some are calling one of the biggest schemes ever to try to defraud the City of Jacksonville.
If a sale of the city-owned utility had gone through, prosecutors say the execs could have received a multi-million dollar payout, and former JEA CEO Aaron Zahn and his chief financial officer Ryan Wannemacher are accused of trying to pull that off.
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Both have been charged with conspiracy and fraud.
MORE: As city council auditors pushed for answers on controversial bonus plan, they say they got no response from JEA execs | FBI agent continues to detail investigation into ex-JEA execs accused in conspiracy case on Day 3 of trial | FBI agent details investigation into ex-JEA execs accused in conspiracy case on Day 2 of trial | Ex-JEA execs accused of orchestrating Jacksonville’s largest fraud scheme layout defense on Day 1 of federal trial
Multiple board members have testified that had they known of the potential for bonus plan payouts of $345 million in the event JEA had been sold, they would not have voted to approve the plan at the July 2019 board meeting.
On Day 6 of the federal trial, former JEA board member Alan Howard took the stand.
Howard, a longtime Jacksonville attorney with experience in mergers & acquisitions and finance, joined the JEA board in 2015. Howard was board chair in the spring of 2018, as then-CEO Paul McElroy’s contract expiration was approaching in September. Howard testified that he got a call from the office of Mayor Lenny Curry, stating “they would be interested in seeing a change in leadership at JEA.” He testified he then delivered that message to McElroy, leading to his resignation.
Soon after, Howard said Zahn reached out to him, saying he wanted to resign from the board to become a candidate for CEO. Howard testified he was surprised, and had told Zahn that he would like him to continue serving as a board member. Howard told the court that Melissa Dykes, another JEA executive, would have been his preference for interim CEO.
Howard testified about the presentations during the May and June 2019 board meetings, and the June 2019 compensation committee meeting, all during which the cost of the long-term incentive plan was presented as $3.4 million. He also testified about the employment agreements for Zahn and Wannemacher that were approved in July 2019, which detailed that the executives had a “fiduciary obligation,” meaning, they had an obligation to act in the best interest of the organization, not themselves.
As had been the case during the testimony of other former board members, Howard was asked if he saw spreadsheets calculating the growth of the performance units, or the potential payouts prior to approving the plan, and he said he had not. He was then shown the council auditor’s memo from November 2019, which calculated total payouts of hundreds of millions of dollars, in the event JEA was sold and net proceeds to the city ranged from $3 to 5 billion. Howard testified that had he known of that possibility, he would not have voted for the plan.
“I think that would have been excessive compensation to the employees as a percentage of the total sale,” particularly as a city-owned utility, Howard said.
Former JEA board member and board chair April Green took the stand Wednesday afternoon. Green, who was appointed to the JEA board in December 2017, took over as board chair after Alan Howard’s time as chair ended, in the middle of 2019.
Like some of the other board members who testified, Green was asked about the events around former CEO Paul McElroy’s resignation in April 2018, and said she was surprised to hear he was leaving the utility.
As questioning shifted to the presentation of the PUP, Green testified that she understood the $3.4 million figure from presentations to mean that was the total cost of payouts to all employees, including members of the senior leadership team. She said there were no conversations about how a sale or privatization might affect the payouts under the plan, only saying that at a compensation committee meeting, there was a discussion of how the plan was about employee retention, in the event of a sale.
When presented with spreadsheets that prosecutors say show the potential payouts of up to $345 million, Green said she had not seen the document until prosecutors showed it to her. When asked if she would have approved the PUP had she known the payouts could be that high, Green responded, “absolutely not.”
Green also testified that she didn’t learn that JEA was soliciting bids to sell the utility until she saw it in news media, adding she had thought all options for privatization were still on the table.
She said her only discussions at that point with Zahn about the bid process were to ask why representatives of the utility were meeting with bidders outside of Jacksonville. When she learned that JEA’s senior leadership team was traveling to Atlanta in late 2019 to meet with bidders, Green testified she talked to Zahn and asked that the meeting be canceled. She said that at that point, the council auditor’s report on the proposed bonus plan was out, and she “felt we had lost the trust of the public at that time.” Green said she felt everything needed to stop until speculation was addressed, but that Zahn told her the meeting could not be canceled.
Thursday, attorneys will continue to cross-examine Green. Following her testimony, prosecutors plan to call Jeff Panger, an analyst with S&P Global who issued ratings on JEA, and Melissa Dykes, the former JEA chief operating officer who also served twice as interim CEO.
The trial is expected to last four weeks in all. If convicted on all counts, Zahn and Wannemacher face up to 25 years in prison.