JACKSONVILLE, Fla. – A former JEA CEO and his former chief financial officer are preparing to stand trial on federal charges of conspiracy and wire fraud, accused of trying to take millions in personal profits from a proposed sale of the city-owned utility through a controversial bonus plan.
Aaron Zahn and Ryan Wannemacher were indicted in March 2022, and after numerous delays, their trial is ready to begin, nearly two years after their charges were announced.
Here’s how we got to this point.
Proposed sale
In the summer of 2019, following presentations by some of the utility’s top executives, the JEA board voted to investigate privatizing the city-owned utility. The decision came after scenarios were presented that forecast falling revenues due to lower electric consumption, and other presented options involved massive job cuts and and significant rate hikes.
The privatization process involved JEA opening an Invitation to Negotiate (ITN), getting responses from interested entities, and then beginning negotiations with some of them. The JEA board ended the ITN process on Dec. 24, 2019, following what was called a “loss of trust” by the utility’s stakeholders.
Proposed bonus plan
At the same July 23, 2019 meeting where JEA’s board formally voted to explore privatization, the board also approved a resolution approving a long-term performance unit plan, sometimes called the PUP. As explained to the board at the meeting, the plan would enable employees to purchase performance units at $10 each, and the units would increase or decrease in value based on the financial performance of JEA over a three-year period. The board was told the estimated cost of the plan was $3.4 million.
That November, JEA announced the performance unit plan was postponed indefinitely, saying it was not the right time to implement the plan, because it could interfere with a potential sale. Around the same time, the city’s Council Auditor issued a memo expressing concerns about the PUP. According to calculations provided in the memo, had the proceeds to the city from a JEA sale been $5 billion, the payouts under the PUP would have been more than $636 million.
The fallout
On Dec. 17, 2019, the JEA board voted to remove Aaron Zahn, initially suspending him with pay, while they determined whether he would be fired with or without cause. Following an investigation by the city and JEA, he was fired for cause in late January, following a board vote.
In mid-January 2020, state attorney Melissa Nelson, who said her office had been looking into how the city-owned utility requested bids and reviewed them in a closed-door process, announced federal investigators would take over the investigation of issues connected to the privatization of JEA. Around the same time, the city council launched a special investigative committee. Both the federal investigation, led by the U.S. Attorney’s Office and the FBI, and the council’s Special Investigative Committee, spent months reviewing records and conducting interviews. While the federal investigation largely unfolded behind closed doors, we did learn in April that a federal grand jury had issued a subpoena to JEA, seeking records connected to the scuttled attempt to sell the utility. The final report from the city council committee, issued in January 2021, called the plan to sell JEA greedy, and found that it cost the city millions of dollars.
The charges
On March 7, 2022, a federal grand jury indictment was unsealed, charging Aaron Zahn and Ryan Wannemacher with conspiracy to steal and obtain by fraud funds from the city of Jacksonville and JEA, and with wire fraud.
The indictment alleged that Wannemacher prepared two spreadsheets, which were accessible to Zahn, that calculated that a $4 billion increase to the book value of JEA would increase the value of the PUP units from $0 to $11,500, leading to a total PUP payout of $345 million. The indictment also alleges that the presentations to the JEA board, portraying the future of the utility in a “death spiral,” had a role in persuading the board to vote in favor of privatization – an event that would have led to the multi-million-dollar payouts under the PUP.
The wire fraud charge, according to the indictment, stemmed from the fact that the July 23, 2019, board meeting where the privatization plan and bonus plan were approved, was streamed over the internet, causing wire transmissions outside of the state of Florida.
The following day, Zahn and Wannemacher appeared in court for the first time, entering pleas of not guilty.
The trial
While the trial of Zahn and Wannemacher was initially set for May of 2022, attorneys quickly asked for delays. Prosecutors proposed a new trial date in March 2023, while defense attorneys asked for a trial in May of that year, and the judge went the later date. As a result of various pretrial issues that had to be decided, the trial faced additional delays, until it was finally scheduled to begin this month.
While Zahn and Wannemacher face the same charges, a separate jury will decide the verdicts for each one. While defense attorneys had asked that separate trials be held for each defendant, the judge instead ruled that a separate jury will be seated for each, to hear the case at one trial. In his order, the judge wrote that seating two juries would protect the constitutional rights of each defendant, because of a situation involving protected statements made by Zahn and Wannemacher.
Jury selection for the trial is set for Thursday and Friday, with opening statements scheduled for Tuesday, as Monday is a federal holiday.
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