JACKSONVILLE, Fla. – Federal prosecutors rested their case just after noon on Monday after calling their final two witnesses in their case against former JEA executives Aaron Zahn and Ryan Wannemacher who are accused of conspiracy and wire fraud.
Both witnesses were other members of JEA’s senior leadership team under Zahn, who had been the utility’s CEO, with Wannemacher as his chief financial officer.
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Former VP and human resources officer Jon Kendrick was first on the stand. He was asked about the presentation of the long-term incentive plan at the June 2019 JEA board compensation committee and at the July 23 meeting of the full board. He explained that he presented the first portion of slides, giving background on the compensation philosophy, but did not present on the design of the long-term incentive plan.
During the July board meeting, that was the point where Wannemacher took over, explaining how the performance unit plan would work. Kendrick testified that at the time of his presentation, he had no idea what payouts under the plan could be in the event JEA were sold, and the city received proceeds of $4-6 billion. He said it wasn’t until November, when the council auditor’s report came out, that he learned the PUP could have paid out hundreds of millions of dollars in the event of such a sale.
The final witness prosecutors called before resting their case was former JEA executive Herschel Vinyard.
Vinyard, a longtime attorney who also once served as secretary of the Florida Department of Environmental Protection, joined JEA in April 2019 as chief administrative officer, testifying he was not acting as a lawyer in that role. He testified that he had concerns about the PUP, because as he understood the plan, employees would be given an opportunity to buy something like a stock in a government agency, and that wasn’t anything he had heard of, or was comfortable with.
Similar to Kendrick, Vinyard testified that at the time of the PUP presentation on July 23, he had no idea of the potential for hundreds of millions in payouts if JEA had been sold and the city received $4-6 billion. He also first learned of that potential in November, as reports emerged in news media, and as the council auditor’s report was discussed.
Vinyard explained that he didn’t have any conversations with Zahn about the potential of multi-million dollar payouts. He did recount one thing that was discussed with Zahn, in that he told him, “if he (Zahn) makes one dollar off this plan, that the public will light themselves on fire,” a conversation that has been recalled by other witnesses previously during the trial.
Prosecutors asked about an email from one of the attorneys at the Jacksonville office of the Foley & Lardner law firm, which stated the PUP formula was “spitting out larger numbers” than anticipated. Vinyard explained that he was aware of the concern, and had a conversation with New York-based attorney Stephen Amdur of the Pillsbury law firm, which was working with JEA on the PUP and the ITN. Vinyard said Amdur told him that they had found an error in the definition of the PUP formula, and that they were fixing it and that once Amdur said the problem was resolved, Vinyard moved on.
After a discussion of the letter Vinyard sent to Florida Attorney General Ashley Moody, seeking an opinion on the PUP, prosecutors concluded their questioning of Vinyard with a reference to Friday’s hearing, where he gave testimony before the judge, with the juries not present. The question at that hearing was if city employees were going to be paid tens of millions of dollars in bonus, if such a plan is something he would have even needed legal research on. Vinyard read from the transcript of his testimony that day, where he had said, “I would have left JEA.”
Attorneys for Zahn also called their first witness on Monday, Ernest Dixon. Dixon is an accountant who has worked for large consulting firms, with experience working with utilities. He was was retained by the Zahn legal team to analyze financial documents related to the case, following Generally Accepted Accounting Principles, or GAAP.
One of the topics Zahn’s attorneys wanted considered was how a sale or recapitalization of JEA would affect calculations under the PUP.
Dixon testified that based on the PUP documents, calculations related to the PUP are done with the net position of JEA, a way of valuing the utility. He testified that the sale price of JEA would not have an impact on the PUP calculation, saying that since JEA is a part of the city of Jacksonville, the sale price of the utility would go to the city’s financials, not JEA’s. Dixon said there’s no mention in the PUP calculations related to how much the city is receiving from a sale of JEA, only that the calculations are based on JEA’s financial position.