KANSAS CITY, KAN. ? Former Westar Energy Inc. chief David Wittig had no obligation to report a loan he made to a Topeka banker, his attorney said on the opening day of Wittig’s federal bank fraud trial.

The $1.5 million personal loan made by Wittig to Clinton Odell Weidner II, former president of Topeka’s Capital City Bank, is at the center of the trial, which began Wednesday after two days of jury selection.

In opening statements, Wittig’s attorney, James Eisenbrandt, said Wittig not only had no obligation to report the loan, he did not even know Weidner hadn’t told the bank about it.

Prosecutors accuse the men of concealing the reason Weidner approved a $1.5 million increase in Wittig’s $3.5 million personal line of credit at the bank. They say Wittig loaned that money to Weidner, who used it to invest in a Scottsdale, Ariz., real estate development.

Weidner’s lawyer, Bob Eye, acknowledged in his opening statement that Weidner tried to hide the loan from the bank and for that reason had pleaded guilty to two counts of making false bank entries.

But, Eye said, that was the extent of the illegal activity, and the bank didn’t lose any money in the deal.

Both men were charged with seven felony counts — one each of conspiracy and money laundering, four of making false bank entries and one seeking forfeiture of the $1.5 million plus real estate in Arizona.

Prosecutors say the defendants broke federal law by failing to disclose Wittig’s loan to Weidner on several bank documents, including personal financial statements they filed with Capital City Bank.

On Monday, just as jury selection was about to start, Weidner pleaded guilty to two of the counts of making false bank entries. No plea agreement had been offered by prosecutors, and the jury will try him on the five remaining counts while trying Wittig on all seven.

David Wittig gets into a car after leaving the federal courthouse in Kansas City, Kan. Wittig, the former head of Kansas' largest utility, faces seven felony counts in a federal bank fraud trial. The trial opened Wednesday.

Investment opportunity

In his guilty plea, Weidner insisted to the judge that he acted alone when he wrote on a bank form that Wittig wanted the additional credit to buy stocks and finish renovating his Topeka mansion.

Evidence presented by Assistant U.S. Atty. Richard Hathaway on Wednesday included documents he said showed that when Wittig made the loan in April 2001, he also wanted Weidner to arrange a $20 million loan to Wittig and other Westar executives so they could make a lucrative investment.

At the time, Westar planned to split its regulated utility operations from its unregulated nonutility operations. The restructuring plan called for an offering of common stock in Westar subsidiary Westar Industries, which held the company’s unregulated business interests. Westar executives, including Wittig, planned to use the $20 million loan to buy stock in the new company.

Kansas regulators, however, rejected the plan, saying the reorganization would have allocated too much of Westar’s debt to the utilities.

On Wednesday, Hathaway presented three letters that Wittig sent to Weidner in April 2001. In the first, Wittig told Weidner he was not interested in the Scottsdale, Ariz., real estate transaction, because he felt he could get “a better return, with less risk, from Westar.”

In a letter sent later that month, Wittig asked Weidner whether he should seek financing elsewhere for the Westar investment or “if there was a way to structure things so that I can use Capital City for all my financing needs.”

Prosecutors contend this triggered the discussions that led to the alleged conspiracy between the two men.

Lucrative benefits

Among those who testified Wednesday was former Westar chief administration officer Carl Koupal, who discussed Wittig’s employment contract. Under the agreement, Wittig stood to gain between $37 million and $65 million if Westar’s utility operations were sold to the Public Service Co. of New Mexico, or PNM, according to an outside consultant hired to explain to Westar executives how they might benefit from that deal.

Prosecutors claim Wittig’s compensation agreement helps explain his motive for loaning Weidner the money.

There are no allegations that Wittig’s loan to Weidner somehow affected Westar, where an internal investigation completed in May concluded that Wittig abused his position for personal gain.