Nate Monroe: JEA executives cut out experts in get-rich conspiracy, testimony shows

COMMENTARY | Federal prosecutors plan to show that JEA's former executives systematically left key utility employees and consultants out of the loop when crafting a lucrative bonus scheme that allegedly could have paid them millions of dollars, creating only the illusion that they worked collaboratively and received careful legal advice along the way.

That theme emerged during a pre-trial hearing Thursday that included testimony from witnesses whom prosecutors plan to call at trial. The trial is slated to begin Feb. 5, though U.S. District Judge Brian Davis is weighing a request from the defense team to push it to March. He said Thursday he would rule on that request soon.

Former JEA CEO Aaron Zahn and CFO Ryan Wannemacher were indicted nearly two years ago on conspiracy and wire fraud charges stemming from that alleged bonus scheme, which they concocted simultaneously as they led an unsuccessful effort to sell the city-owned electric, water and sewer utility to a private power company. Prosecutors viewed the privatization push and the bonus scheme as symbiotic: In essence, they accused Zahn and Wannemacher of devising a complex plan to skim millions in profits off the top of a sale, estimated to be as high as $11 billion. Only a sale, in other words, would have triggered astronomical payouts, math prosecutors believe Wannemacher had spelled out in spreadsheets that were never disclosed to the utility's board of directors.

A key part of their conspiracy, in the government's telling, was disguising the scheme as a modest employee-incentive program with a total cost of only a few million dollars that had been reviewed by attorneys and compensation consultants.

In truth, the government plans to tell jurors, Zahn and Wannemacher either cut out or siloed those experts, particularly when they raised questions or concerns about the potential plan, because they were determined to find a way to make money regardless.

Testimony on Thursday from Kevin Hyde, an attorney at Foley & Lardner, which advised JEA throughout the privatization campaign, drove that point home. He told the court that Zahn had asked him to research a question central to an earlier version of what would later become the alleged bonus scheme: Could municipal bond proceeds be used to fund an employee-incentive program? Hyde got with a partner at the firm to determine the answer — which turned out to be, "no."

When Hyde relayed that to JEA's CEO, Zahn responded, "Tell your partner I'm not going to pay for that advice."

Thursday's hearing was a continuation of a pre-trial controversy that has been argued since the summer: Did prosecutors violate Zahn and Wannemacher's constitutional rights during their two-year criminal investigation? Davis, the judge overseeing the case, has already determined that prosecutors did not, but Davis did agree to hold more hearings to ensure that some witnesses the government plans to call were not influenced by protected testimony Zahn and Wannemacher provided city attorneys years ago during an employment investigation Zahn's tenure. Prosecutors are barred from using that protected material in their case against the two men.

As was the case over the summer, the legal context Thursday made the hearing a one-sided presentation. Prosecutors called witnesses and walked them through what they plan to tell jurors during the trial; defense attorneys were strictly limited to asking about the witnesses' potential exposure to the protected material rather than challenging the government's version of events.

But the hearings have also provided the defense, and the public, an unusually early view into the nooks and crannies of the case prosecutors plan to present at trail, as well as some of the evidence they marshaled over the course of their two-year investigation into the privatization effort.

The case revolves around a JEA board of directors meeting on July 23, 2019, during which the board, at the urging of Zahn and his team, gave the green light to move forward with a potential sale of the utility and signed off on the bonus scheme. During that meeting, materials Wannemacher and the executives provided the board showed the bonus plan to be modest in size — costing as little as $3.4 million total. The presentation also left some with the impression it had been created in conjunction with an outside compensation consulting company. Prosecutors plan to allege that the consultant played no role in the plan's creation, and contrary to the understanding some board members had of its low cost, the bonus plan had the potential to pay out tens of millions of dollars if JEA had been sold.

Pat Maillis, JEA's senior director of employee services, testified Thursday that although she was tasked by JEA's executive team of helping create a "long-term incentive plan" in partnership with that outside consulting company, the plan presented to the board during its July 2019 meeting was not what either she or the consultant had contemplated — and one she'd never seen previously.

At the time, Maillis testified, it struck her as odd to simultaneously introduce a plan to sell the utility and a purported long-term incentive program given that one has a short time frame and the other a longer one. She also said she harbored concerns the plan presented a potential conflict of interest: Generally, Maillis testified, long-term incentive plans are for an organization's highest-paid employees, and in this case — with JEA executives planning to ask the board to privatize the utility, a plan that was not public knowledge — it seemed possible they might benefit from "insider information."

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: Nate Monroe: JEA execs ignored, siloed experts in get-rich scheme