Councilman Diamond Says JEA Attempted ‘Swindle’ With ‘Biggest Lie Ever Told’
The Jacksonville City Council held a Special Investigatory Committee Meeting Monday morning where they heard from attorneys and a witness outlining the issues of JEA’s inquiry into privatization.
Attorney Nelson Mullins described several ways in which former CEO Aaron Zahn and management withheld important information from the utility’s board of directors that made it appear the company was in worse shape than it actually was.
“This analysis shows that this was an attempt, maybe the biggest attempt to swindle the people of Jacksonville based on the biggest lie ever told in our city's history,” said Committee Chair Rory Diamond. “I find it absolutely disgusting.”
In a PowerPoint slide shown to the JEA Board of Directors last year during the long-term strategic plan meeting, graphs showcased an 8% loss in sales from 2006 to 2018.
However, Mullins said the number was not telling the full story. Forty-five percent of the loss of sales came from an expiration of a contract with Nassau County in December 2017 that would chop the actual loss in sales nearly in half.
“What you're looking at here is a comparison between actuals of 2006 and 2018,” Mullins said. “But what it doesn't say is it's an apples to oranges comparison, because some of the data that was in 2006, some of the revenues that were being generated are no longer being generated.”
“It's a selective comparison of only two years worth of data, but it's presented as a trend,” Mullins said. “And that's problematic.”
The attorneys also outlined how graphs were altered by changing the scale and the landscape of the graph to make the upward trends look more defined and the downward trends to look worse.
Those same numbers were used in the graphs outlining the utility’s projections for the next decade.
Management had to share truthful information with the Florida Public Service Commission in the process, but those presentations were not the same shown to the board, according to Mullins.
The attorneys said they do not know who made the alterations to the graphs but that the changes were made while Zahn was CEO.
“It gave management a storyline that energy efficiency was essentially destroying their business,” said attorney Daniel Nunn.
When looking at retail sales, the attorneys found that the sales numbers were increasing from 2012 to 2019, largely contradicting the slides shown to the board.
One of the only times retail sales saw a dip was during 2017, which the attorneys attributed to unusual weather and hurricanes.
The attorneys said that after looking at every other Florida public utilities’ 10-year plans, JEA’s stood out as inconsistent.
“All of them have rosier projections for what this industry is going to look at going forward than what is presented here,” Mullins said.
After presenting their findings, District 14 Councilwoman Randy DeFoor asked if their conclusions would amount to fraud.
“I think that I would leave that for the courts to determine,” Mullins said. “But I will say that I do think that it justifies Mr. Zahn’s termination for cause.”
Later in the meeting, Nunn said JEA’s management told the board in a presentation that if it didn’t explore investor-owned privatization, JEA would have to move out of its downtown location.
“It was being used as additional leverage to get the board to approve a recapitalization,” Nunn said.
The committee also brought in JEA Director of Employee Services Patricia Maillis as a witness. She evaluated the potential of a long-term incentive plan that Zahn was pushing for.
Maillis told the committee that she helped evaluate 14 public utilities, and none of them offered long-term incentive plans. And after consulting with Willis Towers Watson, an insurance company, the entity told her that long-term incentive plans in the public sector were very rare.
“They even went on to say that they bought that the perceptions would not necessarily be positive,” Maillis said.
Still, Zahn and the board continued to look into long-term incentive plans. Maillis said discussion with Willis Towers Watson about a long-term incentive plan stopped in May 2019, when the company didn’t want all of the modifications and edits to be public.
Willis Towers Watson never presented its plan to JEA’s compensation committee to move the plan forward.
Maillis said she didn’t find out about the approved Performance Unit Plan until it was approved by the board on July 23.
Diamond asked if the Director of Employee Services was normally involved in compensation plans.
“Yes,” Maillis said. “I would have been involved in designing it.”
Public comments were heard at the end of the testimony, and employees took to the podium to say they never even heard of the stock options.
“If they were available for other individuals to then purchase them, they’d properly go to senior leadership,” Maillis said.
At-Large Group 2 Councilman Ron Salem said the findings at the meeting made it even more necessary to remove the current JEA board.
“We have a team running JEA today that was involved in this,” Salem said. “I think it's extremely important that we get a board over there as quickly as we can so that this can be dealt with, because I am just furious at what I've heard.”
The Special Investigatory Committee plans to meet again in early March.
The attorneys who spoke at Monday’s meeting are not employed by either the city or JEA, but rather volunteered their time to look into the matter.
Sky Lebron can be reached at email@example.com, 904-358-6319 or on Twitter at @SkylerLebron.