JACKSONVILLE, Fla. — The second week of former JEA CEO Aaron Zahn and former CFO Ryan Wannemacher's shared trial began with prosecutors starting to build a case that their bonus plan was created in the dark.
The bonus plan, also referred to as a long-term incentive plan and a performance unit plan, would have yielded them hundreds of millions of dollars -- but after it fell apart, it stuck them with charges of conspiracy and wire fraud.
Zahn and Wannemacher's attorneys argue they were advised by both lawyers and city officials that they were doing everything by the book, and it would have been impossible to fool everyone when JEA meetings and files were public.
But prosecutors argued both in their opening statements, and in court documents, that Zahn and Wannemacher crafted their plan largely in secret, while deliberately misleading and confusing those who may have caught onto them.
Monday's testimony laid the foundation for that argument, with jurors hearing that advisors were kept out of meetings and an attorney who worked on the plan was misled.
Consultant 'never would have endorsed’ plan to enrich JEA execs, was unaware of sale efforts
David Wathen, who works with consulting firm Willis Tower Watson, consulted on the long-term incentive plan -- but he testified that he did not approve a final draft, and he had to find out the plan had been officially pitched when a friend saw it in media reports.
He testified that a PowerPoint presented to the JEA Compensation Committee, claiming to be a proposal by Willis Towers Watson and bearing their logo, was a plan he “never would have proposed or endorsed.”
On June 25, 2019, a PowerPoint presentation was brought before the JEA board that bore the Willis Towers Watson logo throughout. But Wathen testified that this plan did not belong to the firm; while it had “some likenesses” to their proposal, it also had differences. The document Wathen had turned over to Zahn ahead of the meeting was titled “Discussion Draft,” but that title was removed from the presentation.
Wathen testified he does not know who modified the title.
The presentation also contained information that Wathen had redacted should the proposal be presented to the public.
Wathen said he wasn’t warned that this presentation would be given, or that his firm would be credited for it. He was only able to view the PowerPoint on the portal for JEA's public records.
He was not at the meeting because he had been told by Compensation Committee Chief Jon Kendrick that his support would “not be needed.”
If they had asked him to attend and provide support, Wathen wouldn’t have given it: He wrote in a letter to JEA that he “never would have proposed or endorsed” the plan, a testimony he repeated Monday and has delivered under oath in pre-trial hearings.
Wathen was also one of two witnesses to testify they were kept in the dark about a potential sale Monday, laying the foundation for the prosecution’s argument that Zahn and Wannemacher made their plans for a sale in secret.
Documents displayed for the jury show he proposed a three-year plan for JEA’s long-term incentive plan. But, he said, “If the company was gonna consider a sale… that plan would not have been able to play out.” He also said in his testimony that in his correspondence with Wannemacher, there was no discussion about a sale, and that his understanding was that the utility would remain public.
Compensation expert left out of discussions
Director of Employee Services Patricia ‘Pat’ Mailis also testified she was unaware of the sale, and largely kept out of the long-term incentive program development. She told the jury she was "concerned" that the plan was being kept as "insider information."
Mailis's position consists of creating compensation packages for employees. She testified that she had expected to be involved throughout the process of developing an LTI because of her position at JEA, but she corresponded with Zahn “less than a dozen times,” and was left out of Compensation Committee meetings on the topic.
The prosecution repeatedly demonstrated that despite her higher standing at JEA, she was only involved in the very early planning stages and then shut out.
Mailis testified she doesn’t know who came up with the PUP plan, she doesn’t know if the Compensation Committee had reviewed a draft plan by Willis Towers Watson or if plans had been legally reviewed, she had never seen spreadsheets that allegedly show Wannemacher's plans for expected payouts -- and she thought the PUP plan had “gone away” by the time it was proposed in full.
If Mailis had been invited into the planning process, she also would not have given the PUP plan the green light. She said that once she heard the details, she believed there were conflicts of interest and expressed her concerns to then-JEA Chief Legal Officer Lynne Rhode, who told her the plan had been reviewed.
Wannemacher's attorney, Jim Felman, asked: "Did this comfort you?"
Mailis's answer: "No."
Aaron Zahn says his plan had legal approval. Lawyer testified they wouldn't endorse it
Throughout the trial and court hearings for the past two years, Zahn’s attorneys have argued that the report was continuously vetted, and approved, by attorneys. However, in the first four days of testimony, Wathen is the second expert to testify they did not support the plan.
On the first day of the trial, Elizabeth Columbo, a consultant with Nixon Peabody, a firm that was consulted on the incentive plan, took the stand. She said that she believed there was a conflict of interest with the performance unit plan and told JEA that. She testified that she didn't feel it was wise to go forward with the plan -- and in her opinion, it wasn't legal.
Columbo ultimately was recused from advising JEA on this initiative after she advised they find a lawyer who was licensed in Florida.
The defense has pointed to approval by the Office of General Counsel as the official legal stamp on the performance unit plan -- but the prosecution argues that complicated math kept them from understanding what exactly they were looking at.