Zahn - Victim Impact Statement

May it please the Court. My name is Lee Wedekind and I am here today to speak on behalf of JEA and its employees, who are among the many victims in this case. In his pre-sentencing brief, Mr. Zahn repeated the argument he made at trial that nobody suffered any actual damages as a result of his fraud scheme. Accordingly, Zahn argues, that his sentence should be reduced or include no jail time. I am here today to refute that argument. JEA has suffered extensive damages, both monetary and non-monetary. Mr. Zahn’s scheme to sell JEA and to skim for himself what we calculate to be $26 million in the process has correctly been referred to as the largest fraud in the history of Jacksonville. As a result, JEA has incurred actual costs of about $76 million. These dollars are not speculative or assumed or theoretical - they are real out-of-pocket costs that have been actually incurred by JEA. In February 2020, S&P lowered its rating on $1.4 billion of JEA’s water and sewer bonds, citing “governance instability and evidence of weak controls on the heels of the utility terminating its CEO, the departure of the CFO, and the resignation of five of the six then-sitting board members.” S&P went on to state: “We believe both management and the board will need to rebuild public trust, which has eroded as a result of the failed privatization attempt and the disclosure of the initiative's high costs for consultants and severance payments. Unless addressed, this erosion of trust can translate into a loss of customer confidence and support, which could impair JEA's credit quality if it encounters resistance to rate adjustments or its implementation of strategic initiatives.” This downgrade was directly attributable solely to Zahn, because S&P recognized that “the water and sewer system's financial metrics, including its available liquidity position, have been very strong.” The Court heard Jeff Panger testify at trial about how out-of-line Zahn’s financial forecasts were with reality. In 2018, S&P downgraded several of JEA’s electric system bonds as a result of JEA’s litigation with MEAG in connection with Plant Vogtle, which was designed to make JEA more attractive to potential purchasers as part of the sale process. S&P said: “The negative outlook also reflects JEA's litigation, and what, in our opinion, it means regarding the utility's willingness to meet its contractual obligations. Of importance, at this time, JEA continues to make regularly scheduled payments as billed by MEAG. Absent this, we would view a failure by JEA to honor these obligations as an abrogation of its contractual responsibility, and we would likely take significant further action on the ratings on JEA.” These credit downgrades resulted in increased financing costs of $63 million. That is the net present value of actual costs incurred by JEA that are directly attributable to the failed scheme to sell JEA. JEA also paid vendors about $13 million related to the ITN process. The total amount of actual, out-of-pocket expenses paid by JEA - funds that cannot be reinvested in the Jacksonville community – is $76 million. Equally as important are the non-monetary damages that JEA has suffered in the form of reduced employee morale, a damaged reputation, and a breach of the public trust, all of which are the result of Mr. Zahn’s actions. Unlike JEA’s financial losses, it is difficult to quantify the non￾monetary damages suffered by JEA. Mr. Zahn’s pre-sentencing brief contained an extensive personal narrative about his upbringing and life. While his background may be interesting, it really should have no impact on this Court’s sentencing determination. This case is not about Zahn’s role as a son, husband, or a father, and his family life is immaterial to these claims. What is material, and what this Court should consider, is how Mr. Zahn carried out his role as JEA’s CEO. And the people who worked directly for Mr. Zahn at that time tell a very different story of the man. But if the Court is inclined to consider Mr. Zahn’s family in its determination, we ask that the Court also consider the families of the senior leadership team who were fired or quit as part of the fallout of Zahn’s scheme. We ask the Court to also consider the 574 families of JEA employees that Zahn threatened to fire as part of Scenario 2 if the JEA board did not approve the sale and PUP at the July 2019 board meeting. Think about that for a minute. He put the jobs of 574 employees at risk so he could make tens of millions of dollars. Consider not only the callousness that that requires, but the emotional impact it had on those families. JEA’s employees were in constant fear of losing their jobs during Zahn’s tenure. To this day, JEA management regularly fields questions about whether JEA is for sale. The fraud may be over, but the scars remain. As for Mr. Zahn’s role as CEO, JEA employees describe that Zahn created a toxic work environment that took a psychological toll on employees. Many report suffering the same traumatic effects as PTSD. They describe Mr. Zahn as an arrogant bully and his leadership style as abusive, impulsive, and profane. He would berate and ridicule employees, especially those that either did not agree with him or give him answers that did not serve his specific narrative. He went on a tirade at Jody Brooks, JEA’s then General Counsel, because she explained to him the legal requirements of Florida’s public records laws, which he did not like. He attempted to fire Jason Baber when Mr. Baber disagreed with him about a project he was working on. He was dismissive and demeaning to even the senior management team. Kerri Stewart described that his attitude was that nobody but him knew what they were doing – they were incapable of thinking outside the box like he was. These are just a few examples that illustrate my point. I could tell similar stories for the rest of the day. Almost everything Zahn did during his tenure as CEO was designed with a sale in mind - to maximize the amount a buyer would pay for JEA, which would maximize his payout under the PUP. His entire scheme was based on lies. He lied to the JEA board, he lied to the ratings agencies, he lied to the employees, and he lied to the ratepayers. His lies included doctoring the reports of JEA’s consultants, including Willis Towers Watson, and manipulating the financial information given to bidders during the ITN process. Publicly, Zahn promised ratepayers at least 3 years of a guaranteed rate freeze to garner public support for the sale. Privately, Zahn manipulated the financial model that JEA provided to bidders in the ITN process to artificially inflate the sale price by allowing a buyer to increase rates dramatically during the rate freeze. These lies would have cost JEA’s ratepayers $1.5 billion in increased rates. This Court had the opportunity to witness Mr. Zahn’s true character firsthand at trial, when during closing argument he shamelessly attempted to impugn the character of JEA’s former chairman John Baker in a desperate attempt to justify his own bad acts. Throughout this entire process, Mr. Zahn has shown zero remorse, zero contrition. He claims that he is a victim here, not the perpetrator. He has not accepted responsibility for his actions or the harm he has caused to so many. That is the real Aaron Zahn. The Court’s sentence should reflect that reality.