Former Jacksonville Electric Authority CEO Aaron Zahn was sentenced for conspiracy to steal city funds and wire fraud.
U.S. District Judge Brian J. Davis has sentenced 44-year-old Aaron Zahn, formerly of Jacksonville Beach, to four years in federal prison for conspiracy to steal and embezzle City of Jacksonville municipal funds and for wire fraud.
According to court documents and evidence admitted at trial, Zahn became the interim CEO of the Jacksonville Electric Authority (JEA) in April 2018, then the permanent CEO in November 2018. During his tenure as CEO, Zahn led a process to convince the JEA Board of Directors that if JEA did not privatize or recapitalize, the historically successful municipal utility (in operation since 1895) faced daunting headwinds that it would not overcome over the ensuing decade, such that considering privatization through a statutorily required process known as an Invitation To Negotiate (ITN) was the only viable path forward.
During that process in the summer of 2019, Zahn developed a bonus plan known as the Performance Unit Plan (PUP) that appeared to pay reasonable bonuses to PUP unit holders if JEA hit certain performance metrics. In reality, the PUP had hidden aspects designed to pay Zahn and other JEA executives lavish bonuses based on a calculation tethered to a sale of the municipal utility.
Trial evidence showed that the 100,000 PUP units were designed to increase in value from $10 to upwards of $11,500, for a potential bonus pool of $315,000,000, which would have been funded from the sale or privatization of JEA. Zahn expected to personally benefit from the PUP if JEA was sold in the amount of approximately $40 million, and Zahn expected other high level JEA executives to make approximately $10 million. The PUP was a made-up stock tethered to a public entity (JEA) that had no concept of equity. The formula was engineered to lead to the certainty of large payouts of money if JEA was sold pursuant to minimum requirements for recapitalization that Zahn created.
On November 18, 2019, after studying the PUP and asking numerous questions of Zahn and others, the City of Jacksonville Council Auditor issued a memorandum to the Members of the Jacksonville City Council that exposed the true nature of the PUP, based on potential net proceeds to the City of Jacksonville upon a sale of JEA in the amounts of $3 billion to $5 billion.
After the Council Auditor revealed the intention to steal and embezzle funds from the sale of JEA, the ITN process was cancelled, and Zahn was terminated from his CEO position.
“Fraud and corruption pose a fundamental threat to our national security and our way of life, and the FBI will not tolerate those who seek to deceive American citizens. As a taxpayer, you are entitled to decisions based on the public’s best interest, and we take very seriously our responsibility to investigate and aggressively pursue individuals who attempt to defraud publicly funded institutions in a selfish effort to line their own pockets,” said Special Agent in Charge Kristin Rehler of the FBI Jacksonville Field Office. “FBI Jacksonville is committed to ensuring that anyone who violates the public’s trust is held accountable to the fullest extent possible.”
This Jacksonville Electric Authority CEO conspiracy case was investigated by the Federal Bureau of Investigation and investigators from the State Attorney’s Office for the Fourth Judicial Circuit assigned to the FBI. It is being prosecuted by Assistant United States Attorneys A. Tysen Duva and Chip Corsmeier. Zahn was found guilty after a four-week jury trial on March 14, 2024.
