What prosecutors say is evidence that former JEA executives deceived to push their plan to sell the utility and gain hundreds of millions was shown to the jury.
JACKSONVILLE, Fla. — The first week in the case against former JEA executives Aaron Zahn and Ryan Wannemacher, charged with conspiracy and wire fraud, continued Friday with evidence to bolster accusations of their deception.
Zahn and Wannemacher are accused of masterminding and concealing a plan to make hundreds of millions of dollars off a potential privatization and sale of JEA. After a moment referred to by witnesses as ‘Petway’s mic drop,’ outgoing board member Tom Petway told the board that he thought JEA needed to sell, throwing an idea that had come and gone back into the ring.
Zahn was a newly-minted CEO at the time of the sale discussion. His attorneys painted him as a young upstart who was asked to come in with innovative ideas, and did just that. Wannemacher’s attorney echoed that he was “just doing his job.” But, prosecutors say when the sale conversation began, Zahn and Wannemacher smelled blood in the water and zeroed in on an opportunity.
The ‘death spiral’ argument
Prosecutors say Zahn and Wannemacher lied to the board, their employees and the public, saying that JEA was failing, sweetening the idea of selling the utility to make up revenue. Evidence of what has been called Zahn’s “death spiral” narrative was the focal point of the trial’s first week. But, the CEO who took over when Zahn was ousted, testified JEA was in fine shape, nearly identical to when Zahn was appointed to his position.
Zahn’s attorney Eddie Suarez agreed that JEA was in fine shape. He said Zahn did not lie: He never believed, or spread, a pessimistic outlook on JEA. In fact, Suarez countered Zahn never said the words “death spiral,” except for when he was reassuring someone JEA was doing the opposite.
The primary evidence otherwise: Videos of Zahn and Wannemacher speaking to the JEA board at publicly-broadcast meetings. These videos were displayed during the testimony of FBI agent Angela Hill, who worked with the United States government in this case.
A frog in a pot
Before the sale effort began, Zahn, Wannemacher and then-COO Melissa Dykes presented the board with a forecast so dire that the utility needed to consider layoffs. Prosecutors showed video of a board meeting in June 2019, where Zahn told the board what was known as his favorite parable (notably a myth): If a frog is in a pot of boiling water, and you heat the water, it will not jump out. For Zahn, JEA was the frog, doom encroaching slowly.
At the June meeting, Zahn gave a lengthy presentation where he showed examples of old school industries that he believed have been played out: Taxis outsold by Uber, film cameras outplayed by digital cameras, hotels overrun by Airbnb. It was a point later reiterated by Wannemacher, who said at a fateful July meeting that JEA was faced with a “binary choice” to “shrink, or grow.”
Layoffs weighed against sale
By a July 23, 2019 meeting, Zahn was prepared to leverage employees against the decision to sell. The jury watched the board vote to pursue a sale, or choose another money-saving plan, which, among other things, would lay off 29% of employees — 574 people.
Faced with this choice, the board voted to start pursuing leads on a sale.
During her testimony, Hill confirmed all of these videos were viewed by the FBI and considered proof of the crimes. An element of a conspiracy charge can be “agreement to lie.”
Wannemacher and Zahn crafted a plan that prosecutors say was a scheme to make a fortune. An investigator with the State Attorney’s Office testified earlier in the week that when he looked at the plan, he understood “some people were going to get very rich off the sale of JEA.”
Their plan involved offering “performance units,” essentially shares of JEA, to employees. Executives like them would have the most access to these shares. While their defense claims the numbers were just theoretical, prosecutors say that behind closed doors, they calculated the shares could skyrocket from a value of $0 to a value of $11,500 each over time, yielding them hundreds of millions.
By Friday’s lunch break, testimony had moved on from the alleged lies over JEA’s outlook, and records pertaining to the specifics of the conspiracy and the performance unit plan is expected to be the next topic.
Testimony will continue throughout the day Friday.
