Washington ? The former chief executive of Westar Energy Inc. was accused Thursday of looting Kansas’ largest electric company of millions of dollars and using the money to renovate his mansion and buy a Ferrari while the utility nose-dived.

A 40-count federal indictment charged David Wittig and former executive vice president Douglas Lake with conspiracy, fraud and other crimes. Wittig, 48, was convicted this year of bank fraud unrelated to Westar business.

During their tenure from 1998 to 2002, Westar’s debt soared to $3 billion and stock shares tumbled from a high of $44 to $9. Westar serves Lawrence and much of Kansas. It has about 650,000 customers.

“The indictment alleges that through theft, fraud and outright intimidation, Wittig and Lake concocted a scheme to loot the company of tens of millions of dollars,” acting Deputy Atty. Gen. James Comey said at a Justice Department news conference with the U.S. attorney for Kansas, Eric Melgren.

According to the indictment, Wittig and Lake sought to systematically loot Westar of money and assets; circumvented internal controls, programs and practices designed to insure the accountability for Westar assets; sought to consolidate all power and authority in themselves in ridding the board of directors of outspoken and independent members, and reduced the size of the board when independent members resigned in protest.

“The indictment also charges that, to cover up that theft, the defendants got rid of, spied and tried to intimidate those who they thought might uncover their crimes,” Comey said. “The message of this indictment … is simple. Public utilities are not piggy banks.”

Wealth of charges

The executives called their cover-up “Project X,” the indictment said, and spent $100,000 on private investigators and lawyers to find out which employees were talking to regulators and the media, and did background checks on news reporters and regulators.

Federal authorities are seeking the return of $25 million from Wittig — including the restored mansion of the late Kansas Gov. Alf Landon in Topeka, $2 million in art and furnishings and his 2001 Ferrari — and $7 million from Lake, assets prosecutors say were derived from illegal activities. The art collection is thought to include Grant Wood lithographs and at least one painting by Birger Sandzen.

The 40-count indictment, returned Wednesday by a federal grand jury in Topeka and unsealed Thursday, charges Wittig and Lake each with:

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• One count of conspiracy to defraud Westar.
• Fourteen counts of circumventing internal accounting controls and falsifying books and records.
• Eight counts of wire fraud.
• Ten counts of submitting false statements.
• Six counts of engaging in monetary transactions derived from an unlawful activity.
• A forfeiture count seeking property the prosecutors said was “traceable” to the offenses.

If convicted, Wittig and Lake each would face a maximum of five years in federal prison, without parole, for each count of conspiracy; a maximum of 10 years for each count of circumventing internal accounting controls; a maximum of 20 years for each count of wire fraud; a maximum of five years for making false statements to an agency of the United States; and a maximum of 10 years for each count of engaging in a monetary transaction from property derived from an unlawful activity, federal officials said.

‘A sad chapter’

Wittig, a Kansas University alumnus, is free on bond at his Topeka home. His wife, Beth, answered the intercom at the mansion’s gate Thursday and said her husband was not available.

Lake, 53, is free on bond. He lives in New Canaan, Conn.

A statement issued on Lake’s behalf by a New York law firm said Lake “firmly denies” the charges and looks forward to a trial.

Both are to appear Dec. 30 in U.S. District Court in Kansas City, Kan., before U.S. Magistrate Judge James P. O’Hara.

Westar spokesman Jim Ludwig said the indictment was “a sad chapter in our past history.” He said it would not affect rates or service.

The indictment says Wittig used company stock to get loans for a $6 million renovation of his home and spent $6.5 million of Westar money to renovate his office, adding a gourmet kitchen, dining room, bathroom, dressing area and a $29,000 custom-built television wall unit.

Wittig and Lake also got the company to give them relocation costs for selling their New York homes — $825,000 for Wittig and $262,000 for Lake — but never intended to sell and continued to use the residences, the indictment said. Lake used the corporate aircraft as a shuttle from Topeka to New York, the indictment said.

The government said Wittig tried to get reimbursed for lodging in New York even though he stayed in his own apartment.

The indictment also accuses Wittig and Lake of trying to split a new company from Westar’s regulated electric utility, structuring the deal so their new spinoff, Westar Industries Inc., kept assets worth $1.45 billion while saddling the utility and its ratepayers with nearly all the debt.

The deal’s employment agreements — never fully disclosed — were to provide Wittig with as much as $65 million and Lake with as much as $35 million, the indictment alleged.

State regulators rebuffed the spinoff attempt, saying ratepayers were not responsible for the company’s debt. The debt remained as Westar’s board of directors began their own investigation shortly before Wittig resigned in November 2002 to defend himself against the unrelated bank fraud charges.

Internal troubles

In May, Westar’s board of directors issued a 376-page report charging that Wittig sought to enrich himself, tried to stifle dissent within the company and misused corporate aircraft. The report also accused Wittig of having aircraft flight logs falsified. As a result of its investigation, Westar asked five former executives, including Wittig, to pay back the cost of personal travel and use of company aircraft for the past five years.

Ludwig said Thursday that Westar was in arbitration attempting to retrieve more than $100 million in past and scheduled compensation from both Wittig and Lake.

The directors’ report also raised questions about political activity involving Wittig and other Westar executives.

E-mails disclosed by the company earlier this year detailed a plan for Westar and its top executives to give $56,000 to Republican congressional campaigns last year “to get a seat at the table” of a House-Senate conference committee on an energy bill. House members on the committee supported a regulatory exemption sought by Westar.

After the disclosures, the Westar board revised its policy for making political donations.

Thursday’s indictment against the two executives capped a 14-month investigation, officials said. Comey said Westar had been cooperating in the investigation.

“Top executives hold a company in trust for the people who really own it — the shareholders. They are obligated to tell the truth to their shareholders, their boards and regulators,” said Comey, who is the head of President Bush’s Corporate Fraud Task Force. “Whether they work on Wall Street or on Main Street, executives who violate that responsibility — and the law — must be held accountable.”