Archive for Wednesday, November 20, 2002

Westar chief pleads innocent

David Wittig makes first appearance in hearing on fraud charges

November 20, 2002


— Westar Energy chief executive David Wittig and a former bank officer pleaded innocent Tuesday to illegally steering a $1.5 million loan for Wittig into a real estate investment for the banker.

Wittig received the loan last year from the Capital City Bank in Topeka with the help of former president Clinton Odell Weidner II. A federal grand jury indictment alleges that instead of using the money as documents suggested he would, Wittig turned it over to Weidner, who bought into an exclusive housing development planned outside Scottsdale, Ariz.

The charges against the two include money laundering, filing false documents, conspiracy and misapplication of bank funds. The indictment does not say why Wittig would allow the money to go to Weidner.

The allegations are not related to Westar's operations. Westar is the state's largest electric company, providing power to 647,000 customers, but it also has nonutility interests, most notably its 88 percent share of the Protection One security alarm firm.

Wittig is on administrative leave without pay from his position as Westar's chairman, chief executive officer and president. Weidner left the Topeka bank earlier this year.

The two men had their first appearance Tuesday in U.S. District Court in Topeka to hear the charges against them and enter their innocent pleas.

U.S. Magistrate Judge James O'Hara scheduled their trial for Jan. 22, but attorneys for Wittig and Weidner said they needed more time to prepare an adequate defense.

Neither Wittig nor Weidner had any comment after the 45-minute hearing, and their attorneys declined comment. During the hearing, O'Hara reminded the two defendants that any statements could become part of prosecutors' case.

"You ought to be very careful about what you say and to whom you say it, both inside and outside the courtroom," O'Hara said from the bench.

Westar has said Wittig asked to be placed on administrative leave so that he could defend himself. Westar's board of directors plans to name an interim chief executive officer, and other executives are running the company.

Conflicting stories have emerged about Weidner's departure from Capital City Bank. In May, the bank said he left to pursue the Arizona real estate venture. However, the indictment said the bank placed Weidner on administrative leave in March, after it discovered the true nature of the loan to Wittig.

Indictment alleges laundering

The grand jury indictment alleges that Weidner helped Wittig increase his credit limit at Weidner's bank from $3.5 million to $5 million.

It also alleges that Weidner and Wittig said in documents that the money would be used by Wittig for business investments, stock purchases and the remodeling of Wittig's home. Wittig purchased and renovated the former residence of Gov. Alf Landon, the 1936 Republican presidential nominee, who died in 1987.

Instead, according to the indictment, the money went to Weidner so that he could obtain a 50 percent interest in the Arizona real estate development. The indictment also contends that the government can seize the property in Arizona and $1.5 million.

In defending Wittig and Weidner, their attorneys have said both the increase in Wittig's credit line and the loan to Weidner were proper and that both were repaid with interest. They also have said the bank did not lose any money.

But Assistant U.S. Atty. Rich Hathaway said the lack of losses for the bank didn't matter under federal law. He declined to discuss the case further.

Trial set for Jan. 22

Wittig and Weidner remained free on bond. Hathaway asked O'Hara to force them to surrender their passports and have any travel approved by a court officer, but O'Hara declined to impose those conditions.

O'Hara also declined to change the Jan. 22 trial date, despite protests from James Eisenbrandt, a Prairie Village attorney representing Wittig, and Pedro Irigonegaray, a Topeka attorney representing Weidner.

He later told the attorneys they should request a change from U.S. District Judge Sam Crow, who is set to preside over the trial.

Irigonegaray told O'Hara during the hearing: "This is a very complex case. There are significant documents to be reviewed."

Under criticism

Attending the hearing Tuesday were several Westar stockholders.

Wittig has faced criticism from some stockholders and others for his management of the company. Westar officials have said its problems mirror those of other utility holding companies.

Four years ago, Westar's stock traded at more than $35 a share after having risen to more than $42. In early November 2002, it fell to below $10 a share.

While the allegations against Wittig in the indictment aren't related to Westar, stockholder Richard Bennett said, "It just shows his character."

Bennett said Westar's board of directors should fire Wittig, "immediately, if not yesterday, without further compensation."

"The company didn't go to pot until Wittig took over," said Bennett, a retired Lawrence accountant.

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