Florida’s largest municipal utility, JEA, is now leaderless
Florida’s largest municipal utility is in a state of flux over a failed privatization attempt that led its entire board of directors to resign after terminating the former chief executive officer for cause.
Both actions occurred Tuesday in Jacksonville, when JEA’s board of directors voted unanimously to fire former CEO and managing director Aaron Zahn with cause, after a city attorney cited list of improper actions that he said the office of general counsel uncovered as the result of an investigation into Zahn’s activities.
Sean Granat, the city's deputy general counsel for tort and employment litigation, outlined two dozen allegations of potential wrongdoing by Zahn while he led an effort to privatize the utility in the last six months of 2019, a process that cost the utility an estimated $10 million.
Granat concluded his presentation saying that his office recommended focusing on at least two specific charges as reasons for terminating Zahn with cause. One charge centers on Zahn’s alleged failure to adequately advise the board regarding the beneficial terms of employment contracts negotiated for himself and 12 members of the senior leadership team.
Except for Zahn, no JEA employee had a contract before the agreements were approved by the board July 23, 2019, the same day the board of directors approved a controversial strategic planning process that included getting bids from companies interested in buying JEA’s water and electric divisions.
A second charge involves Zahn allegedly misrepresenting the cost of the Long-Term Performance Unit Plan, a bonus plan in which some employees stood to reap “a financial windfall” if the utility was sold.
Granat said JEA may incur additional legal fees if Zahn opts to seek arbitration concerning the terms of his dismissal.
John D. Mullen, a partner with Phelps Dunbar LLP who is representing Zahn, said the investigation by the city’s office of general counsel was “regrettably predictable in the currently overheated political and media environment, but it certainly was not accurate.
“We are confident that an impartial arbitrator will arrive at a starkly different conclusion once a full hearing of the facts has taken place,” Mullen said.
In Tuesday’s meeting, the board also voted unanimously to rescind the resolution that gave Zahn “broad authority” to pursue privatization.
Board chair April Green apologized to the senior leadership team, as she did to the employees of JEA in a previous meeting, saying she recognized it wasn’t easy to work while “allegations and speculation” enveloped the utility over the lack of transparency in the sale process, which the board voted to discontinue on Dec. 24.
Green said she supported JEA remaining a municipally owned utility.
“The men and women of JEA are some of the finest people in our community and they deserve leadership worthy of that,” Green said. “I am not among those who look to place blame and not accept responsibility so I remain available to any future investigations and any way that I can help this organization, but at this time I will be resigning as the chair of the JEA board.”
Four other board members later turned in their resignations to Mayor Lenny Curry, who said all board members were asked to continue serving JEA until the end of February. The term of the other board member, Kelly Flanagan, expires at the end of February.
“I will work with City Council to identify and appoint a new executive board of directors as soon as possible understanding that among their first orders of business will be rebuilding public trust and strengthening the future of this vital and valued community asset,” Curry said in a statement.
Zahn, who earned $520,392 annually but had no experience in the utility business when he became CEO in April 2018, presented employment contracts and the bonus plan to the board as part of the process of getting bids for the utility.
According to Carla Miller, the city’s ethics, compliance and oversight director, the contracts were given to the board for approval without payment amounts filled in. The amounts were added later, Miller said in a Jan. 17 memo.
Zahn’s contract gave him benefits worth about $850,000 if he was terminated without cause, which was the case when the board initially voted to fire him Dec. 17. City officials later urged the utility board to allow attorneys to conduct an investigation before negotiating a final separation package.
The utility board’s change of mind Tuesday to fire Zahn for cause means he may not receive the entire financial payout that would have included 20 weeks of severance pay, a 12-month consulting contract, and 20 weeks of paid insurance benefits under the Consolidated Omnibus Budget Reconciliation Act, or COBRA.
Mullen, Zahn’s attorney, said a little over a month ago JEA’s board decided to terminate Zahn without cause, a move that would have paid him severance in accordance with the employment contract the board approved a few months earlier.
To avoid honoring Zahn’s contract, Mullen said the city’s office of general counsel “set out not to conduct an independent investigation of the facts, but to manufacture reasons and second-guess Mr. Zahn’s conduct so that it could try to argue that cause existed for Mr. Zahn’s termination.”
Mullen also said Tuesday’s report by the office of general counsel focuses on Zahn, but ignores the roles others played in the decision-making at JEA, including the board of directors, staff attorneys, other JEA employees, consultants, and specialty legal advisors.
Melissa Dykes is currently the interim managing director of JEA, although she has publicly stated she will not to apply to become the permanent CEO.