JACKSONVILLE, Fla. — Aaron Zahn was “seething,” when he was told the bonus plan that led to his firing and federal conspiracy charges may not be legal, Jason Gabriel, then-general counsel for the city of Jacksonville told jurors Tuesday.
Gabriel was called to testify at the trial of Zahn and ex-JEA CFO Ryan Wannemacher, who are accused of hatching a bonus scheme where JEA employees could buy "units" of the company, which could balloon in value if the utility was sold. The defense has argued throughout the trial that Zahn and Wannemacher worked in tandem with attorneys and experts to create the plan. But Gabriel argued that he didn't understand the plan, thought the units were worth little money and harbored concerns throughout the approval process -- which led to clashes with Zahn.
Earlier in the day, Lynne Rhode, who was the chief legal officer for JEA at the time, referenced Zahn and Gabriel leaving a meeting on Nov. 5, 2019 to talk in the hallway. She didn’t know what was said during the conversation, but she saw it as a precursor to the plan being “indefinitely postponed,” she said.
Gabriel recalled the meeting for the jury. “I was fed up at this point,” he said, having gone back and forth with JEA leadership about the legality of the plan for months. He wasn’t sure it was illegal, but had many questions, and a “gut feeling” that something wasn’t right. He hadn’t done the math on what potential payouts, but was growing suspicious of what the numbers might be. He felt attempts by attorneys hired by JEA to get the Office of General Counsel comfortable with the plan were “superficial,” and lacked “a lot of substance.”
Zahn motioned to Gabriel to step outside, he said. “I could tell he was really pissed at me. He said, ‘Jason, if you’re gonna kill it, kill it.’ I said, I want you to understand, there’s a lot of issues and a lot of deficiencies.”
Gabriel said Zahn packed up early shortly after.
The meeting didn’t ‘kill’ the plan, called the performance unit plan, or PUP. The PUP in its current form didn’t comply with a Florida statute that lays out the rules for bonuses to public employees, Gabriel said, but they left the meeting open to constructing another option.
However, Zahn emailed him a week later to inform him the plan had been “indefinitely postponed.”
Throughout the trial, Zahn’s attorneys have argued that while this phrase doesn’t sound final, Zahn didn’t actually have the authority to shut the plan down entirely, because it had already been approved by the JEA board of directors.
However, Gabriel was the first person to testify that Zahn also didn’t see “indefinitely postponed” as the end of the PUP plan. In text messages shown to the jury, Zahn asked Gabriel to continue drafting a letter that would say the plan was legal, “should we choose to pick it up in the future.”
A memo from the OGC to the board has been referenced several times throughout the trial, as a stamp of approval showing the plan hatched by Zahn and Wannemacher was legal.
However, Gabriel said the memo only told the board they had the authority to approve one of the several plans they were considering at a July 23, 2019 meeting, where they ended up approving the bonus plan.
He told the jury that the memo came from a specific request by Herschel Vinyard, a member of the JEA board. Vinyard told him “Aaron Zahn would like a memo,” and he wrote it with a “very general” understanding. Gabriel mentioned a footnote on the memo, which said the OGC hadn’t prepared the resolutions the board may be approving and hadn’t looked at the underlying documents at the time of writing.
Gabriel said that throughout his involvement, there was no discussion of how much money would go into the bonus pool if JEA was to be sold. He didn’t know how much money might be involved, but became suspicious after another attorney suggested it could yield “outlandish” bonuses of millions of dollars. Why didn’t he ever do the math himself? “The legal mechanics of it were bad enough.”
The PUP plan has been referenced several times of something that had never been tried before with a public utility. While the prosecution argues that Zahn and Wannemacher knew all along they would privatize JEA, the defense argues that while it was novel, it wasn’t impossible for them to enact the plan as a public utility.
The defense and witnesses have referred to the plan as a “unicorn.” When Suarez asked Gabriel about this phrase, he said the term fit the plan because it was “a fantasy.”
Suarez also posed the question: “It would be a new thing?”
Gabriel replied, “It would be an absurd thing.”
Gabriel was also the first to bring up Zahn’s temper, which several people who knew Zahn described to the Florida Times-Union during their investigation on JEA. In addition to their argument in the hall, Gabriel talked about a phone call where he shot down another idea of Zahn’s, saying, “Aaron, you don’t want another PUP situation.”
He said Zahn “cursed him out,” and described them trading “F words.” “I told him, you need to calm down or I’m going to hang up,” he said.
Gabriel testified that in the years since the failed plan, he has looked back at the documents on the plan, making it clear to him that the plan was, at least, not ethical.
When Zahn’s defense pointed out Gabriel was using qualifiers in many of his answers, he said, “So many times I was duped, or deceived, that I have to speak, even now, with these caveats.”
Lynn Rhode, who was assigned to the Office of General Counsel as chief legal officer, testified before Gabriel Tuesday morning. Her advisement has been used to bolster the defense's advice-by-counsel argument. But she also testified that she didn't know the potential payout, which the prosecution says could have been $11,500 per unit -- like nearly every other witness.