MONEY & POWER
Local investigation into JEA sale nearing end; status of federal investigation unknown
DAVID BAUERLEIN | The Florida Times-Union
IN THE YEAR SINCE THE JEA BOARD voted in July 2019 to put the utility up for sale, the attempt has gone from being potentially the biggest deal in the history of city government to becoming one of the most investigated ventures.
The collapse of an attempt to find a buyer for JEA in December was just the beginning of wide-ranging probes that have put the failed venture under scrutiny by a federal grand jury, a special City Council investigative committee and the city Inspector General’s office.
The City Council investigative committee, which has interviewed key figures under oath but has stopped short of questioning Mayor Lenny Curry, and the city Inspector General are both nearing the home stretch of their investigations. Each has goals to release their findings by the end of September.
The federal grand jury’s probe of whether anyone broke the law has no public timeline and remains the biggest unknown in the autopsy of the doomed sales process. It’s unclear what federal authorities are focusing on, but they have obtained thousands of JEA documents on a range of topics.
And JEA continues to review whether it will pay or reject millions of dollars in bills submitted by law firms and consultants brought on board during the sales process.
Taken together, the various investigations, reviews and court proceedings have already spanned more time than the five-month sales process that met a messy end when the JEA board pulled the plug on the negotiations.
Opponents of selling JEA say the investigations will spotlight the root causes of what went wrong and minimize the chances of it ever happening again.
“To me, it’s a very worthwhile investment by the city because we were potentially on a path that would have been very bad for the city, and this will show us what happened,” said Michael Ward, chairman of Our Jax, a non-profit that formed to push for more government transparency. “We need to know what happened.”
A lawsuit filed by NextEra Energy to block the public release of what it offered to pay for JEA went to closing arguments last week, setting the stage for a future ruling by Circuit Judge Virginia Norton.
A separate suit filed by JEA against fired CEO Aaron Zahn will have its first court hearing on Aug. 10. JEA is trying to stop Zahn from having an arbitration hearing on his contention he was wrongly dismissed with cause, which cost him more than $800,000 in golden parachute benefits.
Then there is the ongoing review by the JEA and the city Office of General Counsel of about $13.4 million in invoices submitted by law firms and consultants in connection with work they did on JEA’s pursuit of privatization. So far, JEA has paid out nearly $3.2 million of those bills, according to the most recent update by the utility.
When the JEA board meets Tuesday, utility administrators will give a report that recommends paying another $1.49 million in invoices and then do further review on $8.8 million in bills.
The biggest outstanding balance is for the Pillsbury Winthrop Shaw Pittman law firm that has been paid about $1 million and still has about $5.4 million in invoices pending. McKinsey & Company, which provided strategic planning advice, still has $2.9 million in pending invoices, JEA records show.
General Counsel Jason Gabriel said in February that JEA failed to follow its own procurement code when it used the Pillsbury law firm to award contracts to McKinsey and two other firms in 2019 without going through the competitive bidding process.
The special City Council committee’s investigation also is examining how JEA awarded contracts.
City Council member Rory Diamond said JEA showed “insane willingness to spend money — the ratepayer’s money — without any process that looked anything like government procurement. They just used the Pillsbury Winthrop law firm to go on a spending spree to use whatever consultants they wanted.”
City Council hired the Smith Hulsey & Busey law firm to assist its probe in a contract that will pay up to $750,000 for the firm to dig through documents, conduct interviews and prepare a blow-by-blow report. The council committee currently is set to end its work by Sept. 30.
Diamond, who is a member of the special council committee, said the overlapping federal investigation has put some people off limits to the council committee for interviews.
For instance, the committee had gotten agreement from former JEA executive Melissa Dykes and former chief legal counsel Lynne Rhodes to interview them, but those sessions didn’t happen because federal authorities said it could conflict with their investigation.
“Essentially what happened was we have our investigatory plan which is working up the chain from lesser important people to the most important people, and as we got to some of the very important people, the federal government said we’re also doing this investigation and it would be helpful if you didn’t pursue those further,” said Diamond, who was chairman of the committee through the end of June.
He said the committee still has compiled enough information to give the community a solid take on what went wrong.
“At the end of the day, I think we know what happened, and I didn’t want in any way to undermine the ability of the federal government to get justice for the people of Jacksonville for what happened,” Diamond said.
The council committee has not interviewed Curry and has no plans to do so.
Diamond said there’s “no question” Curry was interested in JEA negotiating a potential privatization deal, but the committee has not uncovered anything that shows Curry directly told JEA to commence the sales process.
“A lot of this evidence circumstantially points back to him, no question,” Diamond said. “I don’t have a document that says he directed person X to do Y.”
The highest-ranking administrator at City Hall to sit down for an interview is Chief Administrative Officer Brian Hughes. His session was Monday.
“He never once questioned that or pushed back,” Diamond said of Hughes doing the interview.
The committee hasn’t interviewed a handful of other figures who declined to voluntarily answer questions: Curry’s former chief administrative officer Sam Mousa, who became a lobbyist and was a consultant for NextEra Energy; Tim Baker, another close ally of Curry who worked on his mayoral campaigns and was an adviser as well for ousted JEA CEO Aaron Zahn; and former JEA board members who were on the board that hired Zahn.
The council committee balked at seeking subpoenas to compel interviews with Mousa, Baker and former board member Alan Howard when the committee met June 22. The committee is slated to meet again at 8 a.m. Monday to chart its next steps.
Mousa’s attorney said previously in a letter to the city that Mousa had provided information to the federal grand jury but did not elaborate. Dykes has said she voluntarily met multiple times with the State Attorney’s Office and federal authorities.
“My understanding is there are a lot of people who are cooperating and have offered to cooperate,” Diamond said.
The U.S. Attorney’s office for Jacksonville issued a subpoena on April 21 to JEA demanding a host of records about the attempt to sell JEA and an employees incentive program, called a Performance Unit Plan, that could have generated hundreds of millions of dollars for JEA employees if the utility had been sold.
The subpoena also sought records about a Jax Infrastructure Innovation Summit in 2018 that JEA funded by routing money through Innovation Alliance of Florida Inc., a non-profit affiliated with JAX Chamber.
Rounding out the federal grand jury subpoena is a demand for records from the JEA board’s decision to choose Zahn for the CEO post in November 2018 after conducting a national search.
The federal subpoena originally sought the records by May 20, but the U.S. Attorney pushed back the deadline to June 30.
The results of the federal investigation will only become public if prosecutors determine there is criminal wrongdoing.
But the public still will get detailed reports from the council committee and city Inspector General Lisa Green, whose office monitored the “invitation to negotiate” proceedings last year by watching the closed-door session in person.
Green said her report won’t weigh in on whether inviting offers for JEA was the right thing to do, but instead will look at whether JEA followed “their own protocols and procedures,” including the hiring of outside firms.
She said the Inspector General’s review also is auditing “some of the financial expenditures” by JEA in connection with the sales process.
Joe Orfano, who is treasurer at JEA, said in a May 19 interview with the council investigative committee’s attorney that he became aware of several off-site meetings by senior JEA executives when the Inspector General requested information from JEA.
Green and other members of the Inspector General’s office went to the closed-door negotiating session that were part of the sales process, which was done through an “invitation to negotiate” format that kept the public out of the meetings with the understanding that transcripts and documents would be released after negotiations ended.
But several bidders redacted the dollar amount for their offers when JEA began releasing documents from the sales process. After the Florida Times-Union made a public records request for that information, JEA agreed that the information is public record but gave bidders time to go to court if they disagreed.
NextEra Energy, which is the parent company of Florida Power & Light, Duke Energy and American Water went to court, but Duke and American Water later withdrew from the case, leaving NextEra as the only company seeking to keep the information confidential.
During a two-day hearing Wednesday and Thursday in Circuit Judge Virginia Norton’s court, NextEra argued that the final offers in the sales process would have been public record, but the JEA ended the sales process before it reached the stage of “best and final offers.”
NextEra told Norton that the offer made in November was subject to change and if it becomes public, rivals in the utility industry could use that “valuable information” to figure out NextEra’s strategy in bidding for JEA.
“Then armed with that knowledge of how NextEra approached this bid, those competitors could more effectively bid against NextEra in the future,” said E. Carson Lange, attorney for NextEra.
Lange said state public records law grants exemptions for confidential business information and for trade secrets.
Assistant General Counsel Kyle Gavin, representing JEA, told Norton that if companies can claim confidentiality for the dollar amount of bids submitted during the course of such negotiations, the public would be in the dark about how the negotiations reached the final bid numbers.
“When you’re on a journey, the first step is every bit as important and necessary as the last step on that journey,” Gavin said. “It’s not enough to say to the public you only get to know the final step.”
He said nothing in state law “even hints that if it’s sort of an early bid or a preliminary bid or an indicative bid that you get to keep that sealed.”
Norton said she will issue an order at a later date.
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