JACKSONVILLE, Fla. — Political intrigue took a central role in at hearings in the federal criminal case against former JEA executives Ryan Wannemacher and Aaron Zahn Friday.
Former CEO Zhan and CFO Wannemacher have pleaded not guilty to fraud and conspiracy charges. The criminal case grew out of a lucrative benefit deal they created, which prosecutors say could have generated millions for both men.
Testifying Friday, former JEA CEO Paul McElroy talked about City Hall pressures on the JEA Board which he said made it “difficult for anyone to succeed.”
McElroy didn’t mention Mayor Lenny Curry by name, but former Board Member Kelly Flanagan did. Flanagan, a Curry appointee, testified he contacted her days before Aaron Zhan applied to become JEA’s CEO to tell her a candidate was coming and “to keep an open mind.”
Curry’s former campaign manager Tim Baker was also spotlighted in testimony. Pamela Rauch, Vice President for External Affairs at Florida Power and Light, testified about a meeting she had with Zhan and Baker on July 17, 2019, to discuss the possible sale of JEA. That meeting occurred well before the July 23, 2019, meeting at which the Board was similarly informed. Baker, whom Rauch said was representing JEA at the meeting, previously worked as a consultant for FPL, shortly before the sale process got underway.
The July 23, 2019, board meeting was the same one at which JEA executives authorized the Performance Unit Plan, or PUP, a long-term incentives package that prosecutors say would have been a financial windfall for executives if JEA was sold, as planned.
Jeff Rodda, an auditor with the Council Auditor’s Office assigned to JEA, described trying for days to get the package of board materials for that meeting. Though such materials are typically distributed days or even weeks in advance, Rodda said he got them less than two hours before the fateful meeting.
Rodda described how he finally received the board packet, in paper form, at a “strange meeting” with then-CFO Wannemacher at Chamblin’s Bookmine in Downtown Jacksonville. When he arrived, he said Wannemacher told him it was a “red pill blue pill meeting,” referencing the movie “The Matrix.”
“In this context, it meant: if I took the red pill I would get the board package,” Rodda testified. “As long as I agreed not to share it with anyone else.”
“If I took the blue pill,” Rodda continued, “then we would have a cup of coffee and talk about our families and go about our day.”
“Which pill did you take?” Assistant U.S. Attorney Tysen Duva asked.
“The red one,” Rodda answered
“Did you get the board package?” Duva asked
“Yes.”
Rodda said when he read the package, he realized the utility was finally, openly pursuing the long-rumored privatization. “It was surreal that it was actually occurring,” he said.
Rodda’s testimony showed how crucial his role was in building the government’s criminal case. He located key documents showing what prosecutors say are early calculations by Wannemacher of the value of PUP shares in the event of a sale. The earliest date of one such spreadsheet was March 9, 2019.
Rodda also described the process that the Council Auditor went through trying to determine the cost of the PUP. Their initial calculations showed the value of a purchased share would soar even without a sale of the utility. The three years between FY 2014-2015 and FY 2017-18 showed a $10 share would be worth more than $1,000.
When Rodda calculated the value of a $10 share in the event of JEA’s sale, it ranged from a return of 31 thousand percent to a return of 63 thousand percent.
Former CEO McElroy testified about seeing a calculation of the true value of the PUP after he retired, in a November 2019 memo from the Council Auditor. “I can remember, I was having breakfast with my wife. I said, ‘This can’t go forward, this has got to stop. It’s inconceivable.’”
The pretrial hearings are expected to continue through next week. The trial is set to begin in October.
