JEA a picture of health vs. going the way of Kodak

The trial of ex-JEA executives Aaron Zahn and Ryan Wannemacher focused on the utility’s viability.

  • By Ric Anderson
  • | 7:11 p.m. February 22, 2024
  • | 4 Free Articles Remaining!
Fired JEA Managing Director and CEO Aaron Zahn and CFO Ryan Wannemacher are charged with conspiracy and fraud in the abandoned effort to sell the city-owned utility.
Fired JEA Managing Director and CEO Aaron Zahn and CFO Ryan Wannemacher are charged with conspiracy and fraud in the abandoned effort to sell the city-owned utility.
Romolo Tavani -
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JEA was “extraordinarily healthy” in the spring of 2018 before Aaron Zahn became the utility’s top executive, Zahn’s predecessor testified Feb. 22 in the criminal trial of Zahn and JEA’s former chief financial officer.

Paul McElroy, who spent 16 years in leadership at JEA before resigning as CEO in April 2018, told jurors that the city-owned utility was facing challenges when he stepped down, but nothing that other utilities weren’t also experiencing. 

Zahn was installed as interim CEO days after McElroy’s departure and was made permanent CEO in November 2018. 

McElroy was the government’s first witness in the trial of Zahn and former JEA CFO Ryan Wannemacher, who are accused of crafting an unlawful bonus plan that would have paid them tens of millions of dollars through the sale of JEA. 

A key argument for federal prosecutors is that Zahn and Wannemacher falsely claimed JEA was in poor financial condition and needed to be privatized in order to save it. 

Jurors also heard testimony Feb. 22 from Angela Hill, a special FBI agent who investigated the case. 

The trial is being held in a 13th-floor courtroom at the Bryan Simpson U.S. Courthouse, with Senior U.S. District Judge Brian Davis presiding. 

If convicted, Zahn and Wannemacher could face sentences of up to five years on the conspiracy charge and 20 years on the wire fraud charge.

In a video from McElroy’s resignation announcement before the JEA board in April 2018, jurors heard McElroy report that customer bills had been lowered during his 5½ years as CEO while JEA had also reduced its debt by $2 billion. 

In addition, McElroy told the board that the utility’s financial contribution to the city was running strong, its credit rating had improved and it was on track to cut its greenhouse gas emissions by 45% by 2024. 

After the video, the government’s lead prosecutor, Assistant U.S. attorney Tysen Duva, asked McElroy for an assessment of the utility at the time.

“From a financial perspective, it was extraordinarily healthy,” McElroy testified. “We had some challenges … but it was in very good shape.”

Defense attorneys say the alleged conspiracy never happened and have used terms like “absurd” to describe the government’s accusations. 

They say Zahn, who brought experience in finance and investment but not utilities to JEA, brought innovative options into an entrenched bureaucracy before being ousted for political reasons. 

As for Wannemacher, his attorney told jurors he never conspired with anyone but rather followed instructions by crafting a formula for the bonus plan and explaining it to leadership. 

McElroy, in testimony that began Feb. 21, said he stepped down amid a growing debate about selling the utility. Mayor Lenny Curry, who had publicly expressed support for the sale, appointed Zahn to the JEA board in late 2017. Zahn joined the board in early 2018 after the Jacksonville City Council approved his appointment. 

McElroy testified that around the time Zahn joined the board, JEA board member Alan Howard told him that the mayoral administration wasn’t happy with his leadership and that “things could be made very difficult for you” if he remained at JEA. 

Telling board members it was time for “a different set of leadership skills” at JEA, McElroy resigned. He said he broke off ties to the utility so as not to be “the old CEO hanging around, casting a shadow over the decisions the new leadership was making.” 

The board named Melissa Dykes, then JEA’s CFO, as interim. She would be replaced by Zahn as interim a short time later.

“I was surprised at the appointment and somewhat disappointed,” McElroy testified, saying he believed there were highly competent managers and executives at JEA who could have filled the interim role. 

Fast-forward two years, and McElroy found himself back at JEA as interim CEO. At that time, the JEA board had halted a sales process for the utility and had fired Zahn and Wannemacher after concerns arose over their actions.

In McElroy’s time away, Zahn had presented the board with three scenarios for JEA’s future, one of which involved a sale. In the other two, projections included layoffs of more than 500 employees – 30% of the JEA workforce – an end to the city’s financial contribution to the city and a rate increase of up to 26%. 

Prosecutors allege that Zahn and Wannemacher created a long-term incentive program, known as the performance unit plan or PUP, that would have given them and other executives a windfall if JEA had been sold. The plan involved offering $10 units of payment to employees. The value of those units, similar to stocks, would have risen or fallen with the financial condition of the operation. 

The JEA board voted to explore a sale of the utility and approved the PUP plan in July 2019. The plan was later postponed and the board halted the sale process after the City Council auditor issued a report showing that payouts from the PUP would potentially be far higher than initially reported. 

McElroy testified that when he returned to JEA as the interim CEO following Zahn’s dismissal in 2020, the utility was facing no new challenges outside of those it had experienced when he resigned in 2018. 

Defense attorneys contend the JEA was not thriving under McElroy’s leadership and that the board brought in Zahn to infuse private-sector ideas and innovations into the operation. 

Brian Albritton, an attorney for Zahn, questioned McElroy’s assessment of JEA based on challenges such as the increased use of rooftop solar and JEA’s agreement to purchase energy from the Plant Vogtle nuclear power facility in Georgia. JEA is responsible for more than $3 billion to pay for the Plant Vogtle project, which was plagued by work delays and construction cost increases. 

Albritton showed the jury copies of JEA presentation slides from McElroy’s time as CEO, with headings and body text such as “Electric Growth Has Been Sluggish (modest - flat - down),” “Rising Contributions + Falling Sales = Rates Pressure,“ “JEA Electric Sales Growth is a Challenge” and “But dark clouds are on the horizon.” 

Responding to questions from Duva, McElroy testified that before his 2018 resignation and after his return in 2020, he saw no need to take steps like steep rate increases, mass layoffs or elimination of the contribution to the city to keep the utility on solid financial footing.

Hill, the FBI agent, answered questions about JEA board meeting recordings that were reviewed as part of the investigation. Parts of those recordings were shown to the jury, including a segment from the May 2019 board meeting in which Zahn explained a scenario in which JEA would face alarming consequences if it stuck to its status quo. 

“You’ve seen this story before,” Zahn said in the video. “You’ve seen wire line to mobile transformation. You’ve seen taxis and Uber. You’ve seen hotels and Airbnb. You’ve seen Kodak.”



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