A former member of the JEA board of directors told a federal grand jury she believed the utility's executives "buried" a long-term incentive plan at the very end of a marathon meeting in July 2019, according to the testimony of an FBI agent during a Thursday court hearing. That incentive plan, presented at the time as a program of modest size to retain talented employees, turned into the heart of the grand jury's indictment of JEA's former CEO and CFO on conspiracy and wire fraud charges.
That former board member, Kelly Flanagan, had previously told the Jacksonville City Council she approved that bonus plan believing its total cost to be $3.4 million, a figure she pulled from presentation materials the executives presented. In truth, federal prosecutors have alleged, the plan essentially would have allowed former CEO Aaron Zahn and CFO Ryan Wannemacher to skim millions of dollars off the top of a sale had JEA been acquired by a private buyer, a project the two were working on at the same time.
It was at that very same July 23, 2019 board meeting that Zahn and Wannemacher had asked the board to both allow them to put the utility up for sale and to green-light the bonus program — a meeting that lasted about three hours and that board members recognized in real time was particularly intensive. "Wow, that was a lot," the board's then-chair, April Green, said just before taking up consideration of the bonus plan.
The bonus plan was the final item the board considered that day.
Flanagan's grand jury statement about the "buried" plan was a focus of Zahn's defense attorney on Thursday. He learned by cross-examining an FBI agent that Flanagan's lawyers circled back with prosecutors last week to say her observation may have been "colored" by information she received from the city's Office of General Counsel, which had conducted a workplace investigation into Zahn's tenure in late 2019 and early 2020.
Part of that workplace investigation involved taking sworn statements from Zahn and Wannemacher that prosecutors are barred from using as evidence in their case against the two men. The defense team has been probing witnesses to determine if any parts of those interview transcripts directly or indirectly made their way into the case prosecutors presented to the grand jury — which is why Flanagan's concern her view might have been colored by information from city attorneys was of immediate interest to the defense.
Whether such a thing occurred is the question behind the multi-day proceeding, called a Kastigar hearing, that began Monday and is expected to continue into next week. The hearing requires the government to show it had an independent basis to pursue investigative leads outside the testimony Zahn and Wannemacher provided city attorneys in early 2020, for which they received immunity under a legal concept called Garrity rights.
The lead federal prosecutor, A. Tysen Duva, has said the prosecution team never read the protected interviews and avoided media coverage of them (the transcripts became public records that were reported on in the Jacksonville media).
To argue that point, Duva spent two and a half days using testimony from an FBI agent to meticulously walk through the government's evidence in the case, much of which was based on utility records and interviews with witnesses who never spoke with city attorneys. Some of those documents, like two spreadsheets showing the math behind the alleged payout scheme, had not been public knowledge before prosecutors unsealed their indictment, and neither Zahn nor Wannemacher had disclosed their existence when under questioning by city attorneys.
Flanagan's remark about the "buried" agenda item, Duva said, was in response to a question from a grand juror, not information he elicited from her as part of his own presentation to the grand jury.
The hearing has offered an unusual look into the interactions between Department of Justice prosecutors, FBI agents, the grand jury and members of the public during the course of an active criminal investigation, as well as a rare early preview of the kinds of evidence the government plans to use at trial. For that reason, much of the hearing has amounted to a one-sided argument about Zahn and Wannemacher's potential guilt. Their defense attorneys are most concerned with figuring out if knowledge of their protected statements was part of the government's evidence, rather than rebutting the substance of the evidence Duva has presented to the court.
The hearing will continue Friday morning.
Nate Monroe is a metro columnist whose work regularly appears every Thursday and Sunday. Follow him on Twitter @NateMonroeTU
This article originally appeared on Florida Times-Union: Former JEA board member told grand jury bonus scheme was 'buried'