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Jax Daily Record Tuesday, Mar. 10, 202010:13 AM EST

City Council committee orders subpoenas in JEA probe

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Chair Rory Diamond called the slow response to the investigative committee’s document request “the incredible foot-dragging of JEA.”
by: Mike Mendenhall Staff Writer

The City Council Special Investigatory Committee looking into JEA has asked city attorneys to prepare subpoenas for JP Morgan Securities LLC and Morgan Stanley & Co. LLC for documents tied to JEA’s failed attempt to privatize.

After the March 9 committee hearing, committee Chair and District 13 Council member Rory Diamond said he wants to obtain the value letters the firms were contractually required to generate as part of their work for JEA. 

Diamond said the documents will show what the investment banks estimate JEA would be worth in a sale.

The three-member committee of Diamond and Council members Brenda Priestly Jackson and Randy DeFoor is investigating efforts to sell JEA to a private company through an invitation to negotiate, which the utility’s board of directors voted to end Dec. 24.

Three of the bidders — Florida Power & Light Co. parent NextEra Energy Inc., Duke Energy Corp. and American Water Works Co. Inc. — have refused to release their monetary offers for JEA, claiming those are trade secrets. 

“I think there was a bid rig, and I want to get as much information to show that this thing was rigged for one of the buyers,” Diamond said after the meeting.

Diamond said the committee wants to interview the bidders and discover if the companies had detailed access to JEA’s asset information. He also wants to know who represented the companies locally. 

“Who are their lobbyists and who were they paying to push this thing through?” Diamond said. “I think that an unspoken part of this is there were many people in Jacksonville who were working at selling JEA and we don’t know who they are. I don’t know how you do an investigation if you don’t know who the players are.”

Diamond did not say if the committee would subpoena the bidders.

City attorneys told the committee March 9 there are pending lawsuits with the companies to release the information, which the city Office of General Counsel maintains should be public record. The companies are claiming the bid amounts are trade secrets and should be privileged information.

The subpoena request comes as the committee tries to obtain emails and other documents from JEA. Diamond said the utility has not provided any documents toward filling the committee’s 84-point records request made Feb.10.

Diamond argues that JEA is “intentionally dragging its feet” in producing the requested emails and data. The committee is threatening to issue subpoenas by the end of next week to obtain the data if the utility’s senior leadership doesn’t comply. 

The paper trail

JEA hired Tampa-based law firm Hills Ward Henderson to assist in mining JEA servers for the information. According to the general counsel’s office, the firm is billing JEA $55,000 per terabyte of data analyzed.

Assistant General Counsel Kyle Gavin said city and Hills Ward attorneys must wade through 24 terabytes of data to fulfill the committee’s request. 

Gavin said consolidating the data on one searchable server and scanning it for the privileged bidder information and exempt JEA human resources and employee information prompted the slow response.

Diamond said that JEA has been billed roughly $100,000 for the work to date.

The committee members said March 9 they believe JEA’s pace in fulfilling the document request is intentional. 

DeFoor refers to a document request by Diamond and Council member Ron Salem as part of a JEA hearing in December that produced more than 400 relevant documents within three days.

“Honest to God, this is embarrassing for you and the JEA. It just proves everything we’ve been dealing with,” DeFoor said. “The (JEA) leadership we were dealing with before is some of the same leadership we’re dealing with today, and it proves they don’t care about the public. They don’t care about transparency.”

Priestly Jackson said she intends to file a written request with JEA asking the utility to complete the document search by the committee’s March 17 meeting.

The committee also instructed Council’s outside attorney, Steve Busey of Smith Hulsey & Busey LLC, to obtain a sworn deposition from interim JEA CEO Melissa Dykes. 

The JEA board promoted Dykes on Dec. 17 after it placed former JEA CEO Aaron Zahn on administrative leave. He was fired for cause Jan. 28.

Diamond said he wants to understand Dykes’ involvement in the creation of the failed stock option-style employee Long Term Performance Unit Plan, which the Council Auditor’s Office said could have cost the city more than $600 million had JEA been sold.

Diamond said the committee also wants to know her role in the privatization process and how she determined what data to present to the JEA board and public as utility executives made  the case to sell. 

Attorneys with Nelson Mullins Riley & Scarborough told the committee Feb. 24 that JEA used “somewhat manipulated data’’ to show a decline in energy sales, which was used as an argument for privatization.

“We also want to know what her day-to-day interactions with Aaron Zahn were, and if she ever tried to put a lasso on him and slow him down from some of the poor decisions he was making,” Diamond said.

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