City Council Auditor says contracts will have to be amended to account for the additional bills.
At least three of the seven firms contracted by JEA to provide expertise in the utility’s possible sale have exceeded the amount of money they are contractually allowed to charge.
A memo from City Council Auditor Kyle Billy sent Dec. 10 to Council member Randy DeFoor shows that law firm Foley & Lardner billed JEA $663,324 more than the $250,000 limit in its July 22 contract.
Two others, Radey Law Firm and Milam Howard Nicandri Gillam & Renner, have together exceeded their contracts by about $8,300.
Billy said invoices from Pillsbury Winthrop Shaw Pittman, which has the highest contract limit with JEA at $500,000, have not been provided as of Dec. 9.
In his memo, Billy said the contracts will have to be amended to account for the additional bills.
“The contracts with the seven law firms have not to exceed amounts that total $1,300,000,” Billy wrote. “However, information provided by the Office of General Counsel (attached) shows that at least three, and possibly four of the law firms have exceeded their not to exceed amount and will require contract amendments.”
As of Dec. 9, the seven firms advising JEA in the privatization negotiations have billed the utility $1.18 million. According to Billy, JEA has paid $230,307.46 to the firms to date.
DeFoor asked the Council Auditor during a meeting Dec. 6 to compile a list of what JEA has authorized its outside legal and financial firms to bill and what already has been paid out.
Billy’s memo also shows that financial advisers J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC show a more complicated pay structure for assisting JEA with the invitation to negotiate, which could include multimillion compensation packages should the firms assist in an opinion that results in a sale.
On the low end, JP Morgan and Morgan Stanley each could receive $6 million to $ 7 million should the city net $3.5 billion or less from selling JEA. If the city receives $5.5 billion to $6.5 billion, the financial firm could see $13.2 million to $17.5 million in payments.
This is in addition to JP Morgan and Morgan Stanley’s $3 million fees if the firm issues an opinion that leads to a sale or “recapitalization.” If JP Morgan issues more than one opinion, the fee is $2.25 million per opinion.
JP Morgan’s contract includes a $100,000 to $800,000 per quarter retainer fee, and Morgan Stanley’s quarterly retainer is a flat $100,000, according to Billy’s memo.
Both firms also have a $7.5 million transaction fee for a “recapitalization.”
JEA announced July 25 it had hired the global financial firms to assist in its move toward possible privatization, the same day JEA officials said they were contracting with Pillsbury Winthrop Shaw Pittman LLP and Foley & Lardner LLP.