Jacksonville Electric Authority CEO convicted of conspiracy to steal city funds and wire fraud

Former Jacksonville Electric Authority CEO Aaron Zahn was convicted of conspiracy to steal city funds and wire fraud.

U.S. District Judge Brian J. Davis has sentenced Aaron Zahn, 44, formerly of Jacksonville Beach, to four years in a federal prison for conspiracy to steal and embezzle municipal funds from the City of Jacksonville and for wire fraud.

According to court documents and evidence admitted at trial, Zahn became interim CEO of the Jacksonville Electric Authority (JEA) in April 2018 and its permanent CEO in November 2018. During his tenure as CEO, Zahn led a process to convince the JEA board that without privatization or recapitalization, the historically successful municipal utility (in operation since 1895) would face tremendous headwinds that it would not overcome over the course of the following decade, and that exploring privatization through a statutory process called an Invitation To Negotiate (ITN) was the only viable path forward.

During that process in the summer of 2019, Zahn developed a bonus plan called the Performance Unit Plan (PUP) that paid PUP shareholders seemingly reasonable bonuses when JEA achieved certain performance metrics. In reality, the PUP had hidden aspects designed to pay Zahn and other JEA executives lavish bonuses based on a calculation tied to a sale of the municipal utility.

Evidence from the trial showed that the 100,000 PUP units were designed to increase in value from $10 to over $11,500, creating a potential bonus pool of $315,000,000 that would have been funded by the sale or privatization of JEA. Zahn expected to personally benefit from the PUP if JEA was sold, to the tune of about $40 million, and Zahn expected other senior JEA executives to earn about $10 million. The PUP was a fictitious stock tied to a public entity (JEA) that had no equity concept. The formula was designed to be certain to result in large cash payouts if JEA was sold under the minimum recapitalization requirements created by Zahn.

On November 18, 2019, the Jacksonville City Council Auditor, after investigating the PUP and asking Zahn and others numerous questions, issued a memorandum to Jacksonville City Council members disclosing the true nature of the PUP based on potential net proceeds to the City of Jacksonville from a sale of JEA of $3 billion to $5 billion.

After the Council's auditor uncovered an intent to steal and embezzle funds from the JEA sale, the ITN proceedings were terminated and Zahn was fired from his position as CEO.

“Fraud and corruption pose a fundamental threat to our national security and our way of life, and the FBI will not tolerate anyone who attempts to deceive American citizens. As taxpayers, you are entitled to decisions made in the best interest of the public, and we take very seriously our responsibility to investigate and aggressively prosecute individuals who attempt to defraud publicly funded institutions to line their own pockets,” said Special Agent in Charge Kristin Rehler of the FBI's Jacksonville Field Office. “The Jacksonville FBI is committed to ensuring that anyone who abuses the public's trust is held accountable to the fullest extent possible.”

This conspiracy case involving the CEOs of the Jacksonville Electric Authority was investigated by the Federal Bureau of Investigation and investigators from the United States Attorney's Office for the Fourth Judicial District, which reports to the FBI. The prosecution is being led by Assistant U.S. Attorneys A. Tysen Duva and Chip Corsmeier. Zahn was found guilty after a four-week jury trial on March 14, 2024.