JACKSONVILLE, Fla. – Former JEA CEO Paul McElroy said Thursday that he was “surprised” and “somewhat disappointed” when Aaron Zahn became interim CEO of the city-owned utility following McElroy’s 2018 retirement.
Zahn, who later became CEO of JEA, and former JEA CFO Ryan Wannemacher are facing federal charges of conspiracy and wire fraud in connection with the utility’s proposed sale, which could have netted the pair and other JEA executives millions of dollars through a controversial bonus plan tied to the sale.
McElroy, the first witness to take the stand following opening statements, testified Wednesday that he was told in early 2018 by the chair of JEA’s board that Mayor Lenny Curry’s office wanted him to resign. He initially declined but then decided to retire, not knowing who would be named interim CEO, he said.
Shortly after McElroy’s retirement, Zahn, who had been appointed to the JEA Board by Curry, resigned from the board and became interim CEO.
“I was surprised at the appointment and somewhat disappointed,” McElroy said of the decision, adding that he felt there were executives at JEA who could work out as interim CEO and work with the board through its process to pick a new permanent CEO, including Melissa Dykes, who is also slated to testify in the federal trial.
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McElroy 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 after the scuttled JEA sale and the firing of Zahn.
Prosecutor Tysen Duva asked McElroy about JEA’s financial status in April 2020, when he came back as interim CEO. McElroy testified that he watched that month’s board meeting, including a presentation that was going to be given to rating agencies.
“I was surprised to find how much it sounded like the presentation we had put together in the spring of 2018,” said McElroy, explaining that what he saw on the horizon for JEA were many of the same challenges he saw in April 2018, with electric generation, changing sales, and constraints on the water business, all of which had been addressed with JEA’s operations. McElroy testified he didn’t see any different challenges that the utility now faced.
Zahn, who was removed as CEO in December 2019 after the alleged scheme began to come to light, had proposed the sale of JEA after leadership began asserting falsely that JEA “was in trouble.”
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Later, the public learned of the controversial bonus plan that would have benefited Zahn and others, had the sale gone through.
The city council investigated, as well as the state attorney’s office, and Wannemacher and other executives were also let go. But the case was turned over to the feds, who later indicted Zahn and Wannemacher in March 2022. Both have pleaded not guilty.
Zahn and Wannemacher’s trial started Wednesday with opening statements from Duva, Zahn attorney Eddie Suarez and Wannemacher attorney James Felman. 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 million-$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 Zahn 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.
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.
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