Topeka Westar Energy Inc.Ã¢ÂÂs former top two executives - one of whom faces a federal bank fraud charge - could receive nearly $58 million from the company under employment agreements disclosed Tuesday.
As much as $42.5 million could go to David Wittig, 47.
Wittig resigned last month as WestarÃ¢ÂÂs president and chief executive officer in the face of the fraud charge and a continuing grand jury investigation. He has denied any wrongdoing. Douglas Lake, 52, the executive vice president now on indefinite administrative leave without pay, could receive as much as $15 million.
Disclosure of the employment contracts with Wittig and Lake was ordered by state regulators acting on a request by a group of industrial customers.
Jim Zakoura, an attorney for the industrial group, said the compensation agreements Ã¢ÂÂare extremely significant and extremely large. ItÃ¢ÂÂs an extremely rich payout, particularly based on the performance of the company,Ã¢ÂÂ which has been losing money.
Westar, a conglomerate that includes the largest electrical utility in Kansas, had spun downward financially under the direction of Wittig and Lake.
State regulators have ordered that the company restructure to remove debt from soured nonutility business ventures that was placed on the utility operations to be covered by ratepayers. Westar operates KPL, which provides electric service in Lawrence and much of northeast Kansas.
Federal law enforcement officials are looking at the compensation agreements with Wittig and Lake, according to WestarÃ¢ÂÂs filings with the Securities and Exchange Commission. Wittig was indicted on charges that he and a friend defrauded a Topeka bank on a $1.5 million loan transaction. The allegations are not related to Westar business, and both men have pleaded innocent.
Nothing paid out - yet
Westar officials Tuesday were quick to point out the company has not paid Wittig nor Lake any money under the compensation agreements.
Ã¢ÂÂAt this point, no request has been made, and no payment has been offered,Ã¢ÂÂ Westar spokesman Doug Lawrence said.
The agreements are contingent on whether the departures of Wittig and Lake were Ã¢ÂÂqualifying or nonqualifyingÃ¢ÂÂ terminations under their employment contracts, a question likely to be answered in court.
Under a best-case scenario for Wittig, he would receive nearly $43 million in salary, life insurance, health benefits and stock options from Westar, assuming he lived to age 75. The low-end scenario under the agreement would mean a total payout of $13.1 million for Wittig, according to the disclosures. LakeÃ¢ÂÂs payout could be as much as $15 million or as little as $74,000.
Lake, 52, is on indefinite administrative leave without pay and resigned as board chairman of Protection One Inc., the security alarm firm in which Westar has an 88 percent interest.
Lawrence said he hoped release of the documents would give a clearer picture of what was going on at the company. He noted that the new chief executive, James Haines Jr., a former Westar executive who returned to lead the company, started his tenure Monday by greeting employees as they came in the door.
Ã¢ÂÂThings are happening that werenÃ¢ÂÂt happening before, positive things,Ã¢ÂÂ Lawrence said.
Haines, former president and chief executive officer of El Paso (Tex.) Electric, will receive a base salary of $750,000, with 250,000 shares of stock that would be vested in a four-year period.
The 56-year-old Haines resigned in 1996 as chief operating officer of Westar, then known as Western Resources Inc., to lead El Paso Electric.
Today, WestarÃ¢ÂÂs board of directors is to elect an independent chairman, a position formerly held by Wittig.
Westar officials maintained that any payments to Wittig and Lake would not be part of the rates electric customers paid, but Zakoura said it would be impossible for any payments to Wittig or Lake not to affect ratepayers.
Zakoura said the compensation packages for the former executives didnÃ¢ÂÂt reflect the performance of the company. He said Westar had suffered $2 billion in losses in its unregulated businesses, including from Protection One.
Zakoura noted that the company reported $693 million in losses during the first nine months of this year. Much of that was related to changes in accounting for Protection OneÃ¢ÂÂs customer goodwill and the value of its accounts.
Lake joined Westar in 1998; Wittig joined three years earlier.
ZakouraÃ¢ÂÂs clients have asked the KCC not to allow Westar to use electric rates to cover the compensation packages.
Ã¢ÂÂThis year, theyÃ¢ÂÂre going to have to have the worst year in the history of Westar Energy,Ã¢ÂÂ Zakoura said. Ã¢ÂÂIt seems totally unnecessary to have that level of compensation. It is no matter reflective of the performance of the company.Ã¢ÂÂ
Shares of Westar closed at $11.40, up 26 cents, during regular trading Tuesday on the New York Stock Exchange.