Federal prosecutors rested their case March 11 in the criminal trial of former JEA executives Aaron Zahn and Ryan Wannemacher, whose defense attorneys opened their portion of the trial by presenting an accounting expert who criticized an auditor’s report at the center of the government’s case.
In the 15th day of testimony and 18th day of the trial overall, the government’s final two witnesses testified that they initially didn’t know that an incentive plan approved by the JEA board in July 2019 could potentially pay tens of millions of dollars in bonuses to Zahn and Wannemacher through a sale of the city-owned utility.
Several of the government’s witnesses offered similar testimony in the weeks since the trial got underway Feb. 15. Prosecutors allege that Zahn and Wannemacher deceived JEA board members about the magnitude of the incentive plan’s payouts and also misled board members into exploring the privatization of the utility by falsely claiming the organization was failing financially and needed to be sold.
Attorneys for Zahn and Wannemacher have presented a starkly different narrative. They contend the conspiracy at the heart of the government’s case never happened, and that the JEA executive team installed “circuit breakers” that would have prevented anything unlawful from taking place.
The defense’s case got underway after Senior U.S. District Judge Brian Davis told attorneys he would reserve making a ruling on motions by the defense for an acquittal on grounds that the prosecution didn’t prove its case.
Payout plan ‘inappropriate’
Herschel Vinyard, JEA’s chief administrative officer for about a year beginning in April 2019, testified that he believed the plan was inappropriate for a government organization regardless of how much it paid out. He said he insisted on establishing “circuit breakers” in the implementation process for the plan, including reviews by the state Attorney General’s Office and the Florida Commission on Ethics.
“If it’s a problem for a dollar, it’s a problem for a dime, it’s a problem for $100,” Vinyard testified. “In my view, you’ve got to start with what does the law say?”
Repeating testimony from an earlier hearing in the case, Vinyard said he “probably would have resigned from JEA” if he had been told at the time the plan was approved that it could potentially yield lavish payouts.
Federal prosecutors also called Jon Kendrick, JEA’s chief human resource officer in 2019, to the stand.
Kendrick testified that he was unaware of the potentially large payouts until the City Council auditor’s office issued an analysis in November 2019 showing that the plan could pay upward of $300 million across all of the plan’s participants through a sale of JEA.
The incentive plan was known as the Performance Unit Plan, or PUP. It involved offering JEA’s 2,000-plus employees performance units that were similar to stocks in a private company in that their value could rise or fall based on JEA’s financial value. The units were to be sold for $10 apiece and redeemable after three years or when the city sold.
Several former board members testified they believed the total value of the PUP would be $3 million to $4 million across all of the plan’s participants.
Shortly before the auditor’s report was released, Zahn sent a memo announcing that the PUP had been indefinitely postponed. The auditor’s report touched off a series of events that included the board rescinding the PUP and calling off the sales process in December 2019, followed by the firings of Zahn and Wannemacher in January 2020.
Auditor’s report ‘flawed’
Defense witness Ernest Dixon, a certified public accountant from the California-based Berkeley Research Group, testified that the Council auditor’s report was flawed in several ways. Dixon said the analysis was based on the issuance of 100,000 PUP units despite the board only approving 30,000.
He said the city’s proceeds from the sale of JEA were miscalculated, the formula from the plan was misstated and the analysis didn’t use standard accounting practices.
Dixon, under questioning from defense attorney Brian Albritton, called the analysis a “hypothetical” that was based on “assumptions and things that aren’t factual.”
Dixon also testified that the value of the PUP would have been $31 million across 30,000 performance units from an $11.05 billion sale of JEA, the top bid offered after the sale process was launched. Each performance unit would have been worth $1,050, he testified.
In addition, Dixon testified that the city would have absorbed $3.8 billion in debt in a sale of JEA due to the utility’s contract for energy from the Plant Vogtle nuclear energy plant in Georgia. Of the Vogtle agreement, Dixon said he had never seen a deal so one-sided in his 30-plus years of performing financial analysis of utility companies.
As the day came to an end, Zahn’s attorneys said Dixon would be the only witness they would call to the stand before resting. Wannemacher’s defense team announced it would present excerpts from sworn statements.
Assistant U.S. attorney Tysen Duva told Davis that prosecutors had not determined whether they would call rebuttal witnesses. If not, the case could go to the jury on March 12 or March 13.