Investment banker says he warned speeding up JEA sale could kill deal

The decision to move quickly was pursued anyway, according to testimony in the trial of ex-JEA executives Aaron Zahn and Ryan Wannemacher.

  • By Ric Anderson
  • | 6:28 p.m. March 4, 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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An investment banker who worked with JEA officials to solicit buyers for the city-owned utility in 2019 testified March 4 that a JEA executive ordered the sale process to be sped up amid mounting political pressure to keep the operation under city ownership.

Edward Manheimer, a Morgan Stanley managing director, testified in the trial of fired JEA executives Aaron Zahn and Ryan Wannemacher that former JEA Chief Operating Officer Melissa Dykes told him in late November or early December to accelerate the timeline for selling the utility. 

Believing that shortening the process could threaten the sale, Manheimer said he asked JEA to instead explain to Jacksonville residents the benefits the community could receive from selling the utility, including that it would provide billions of dollars to pay off debts and fund initiatives like Downtown revitalization.

“Why not just sort of advertise in a clear way the benefits of the sale and what it could bring to the city as opposed to racing to the finish line?” he testified. 

Manheimer said JEA didn’t follow the advice.

“The reaction was, ‘We’ve got to do this and we’ve got to do it quickly,’” he testified.

The government accuses Zahn and Wannemacher of devising an employee incentive plan that would have paid them tens of millions of dollars in bonuses through a sale of JEA. 

As alleged by prosecutors, the two defendants deceived JEA board members about the value of the incentives and falsely informed them that the utility was in dire financial condition and needed to be sold.

In July 2019, the board voted to direct staff to implement the incentive plan and for JEA to issue an invitation to negotiate, or ITN, which is a process for buyers to make offers.

Payouts in ‘hundreds of millions of dollars’

Another investment banker who consulted with JEA to develop the ITN testified that he was aware a sale could produce lucrative bonuses through the incentive plan. Jason Gredell, of J.P. Morgan Securities, said he had never seen a similar plan in a municipal utility. 

The plan involved offering “performance units” valued at $10 apiece to JEA’s 2,000-plus employees. Similar to shares of stocks in a private company, the value of the performance units would increase or decrease based on the financial fortunes of the company. 

The stated purpose of the plan was to incentivize JEA employees to work harder and boost the not-for-profit utility’s net value. 

Had a sale occurred, Gredell said, the payouts to all plan participants would have been “hundreds of millions of dollars.” 

Defense attorneys for Zahn questioned Manheimer and Gredell on the sale process, pointing out that it would have required approval from the Jacksonville City Council and a ballot referendum.  

Dykes testified Feb. 29 and March 1 that she knew the plan would have paid millions to her and other executives. Under occasionally confrontational questioning by Assistant U.S. attorney Tysen Duva, Dykes testified that she did not mention the magnitude of the payouts to board members because she believed Zahn had fully informed them about the plan during one-on-one meetings held before the July 2019 board meeting. 

Dykes testified that she did not believe the board would support the plan and was surprised when board members voted in favor of it.

Five former board members testified earlier in the trial that when they voted on the plan, they believed the total value of the incentives would be $3 million to $4 million across all plan participants. 

Zahn and Wannemacher are charged with conspiracy and wire fraud. Their trial is being held at the Bryan Simpson U.S. Courthouse in front of two separate juries, one each for the two defendants.

JEA at ‘top of the list’

In other testimony, Mark Hickson, a vice president of NextEra, said JEA was at the “top of the list” of utilities that NextEra wanted to acquire. 

NextEra, the parent company of Florida Power & Light Co., offered $11.05 billion in November 2019 for JEA.

Hickson said JEA was attractive to NextEra because of its service territory being “smack dab” in the middle of NextEra’s territory. That positioning would allow NextEra to extend into JEA’s market in a cost-effective manner. 

Manheimer and Gredell each testified twice March 4, starting with a morning hearing that was held with the jury out of the courtroom. That hearing was related to what are called Garrity protections, which are applicable to public employees who are compelled to testify as part of a workplace investigation and protect the statements from being used against them in a criminal case. 

Defense attorneys for Zahn and Wannemacher have challenged the use of statements that the two defendants gave to city attorneys in January 2020 during an investigation into whether JEA could fire Zahn for cause. Zahn is JEA’s former CEO, and Wannemacher served as the utility’s chief financial officer.

Zahn and Wannemacher were fired in January 2020. A month earlier, the JEA board had voted to rescind the incentive program and halt the sale process. That vote came after the City Council Auditor’s Office issued a report saying the value of the incentives could exceed $300 million from a sale.

The trial is scheduled to resume March 5 with testimony from Jason Gabriel, the former chief general counsel for the city of Jacksonville. 



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