Where was the board?

When David Wittig was flying on the corporate jet for personal reasons, giving himself big bonuses, refurbishing his office or making business decisions that led to the company’s mounting debt, the question is asked again and again — where was the Westar Energy Inc. board of directors?

In some cases, board members were along for the rides on the corporate jet with Wittig, traveling to Kansas University sports events or pricey locations for meetings, according to an internal investigation of the company that was released Thursday.

“They were out to lunch,” David Springe, head of the Citizens Utility Ratepayer Board, said.

“Any board member that expressed dissatisfaction or did their job was gotten rid of. Over the course of time, the only people left were the ones who were already saying yes to everything,” Springe said.

And the new report goes into detail about how the board and Wittig shared Kansas University connections.

“A common observation heard in our investigation was that in recent years the board has seemed disproportionately represented by directors who share common memberships and interests in organizations associated with the University of Kansas,” the report said. “We recommend that the future composition of the board reflect greater diversity.”

“KU is a great institution, but the web of personal relationships may have played a part in the people’s unwillingness to be independent,” said Jim Zakoura, an attorney who represents large industrial customers.

Last week, two board members with thick KU connections — Gene Budig, a former KU chancellor, and Frank Becker, a prominent KU alumnus and Lawrence businessman — resigned. Neither has returned repeated telephone calls seeking comment on developments at Westar.

Late last year, another high-profile KU alumnus, John Dicus, also resigned from the board.

The report noted that Becker, Dicus and Wittig all held positions with the KU Endowment Fund, and the endowment received $579,001 from 1999-2001 from Westar’s foundation, the most of any school.

KU Chancellor Robert Hemenway said Thursday that corporate directors tend to reach out to people they know to fill vacancies. As for the strong ties to KU on the Westar board, Hemenway said, “That’s something that’s been pointed out before.”

Deceiving shareholders

The report said at times the board was misled by Wittig but other times worked with Wittig to deceive shareholders.

An example of this was in the company’s 2002 proxy statement that says Wittig didn’t receive a bonus. The investigation report said that Becker and Budig acknowledged the $267,000 bonus was deferred “merely to delay disclosure until after the company shareholder meeting to avoid criticism of Mr. Wittig’s compensation. Mr. Dicus said that Mr. Wittig recommended the deferral. Dr. Budig said the H.R. (human resources) Committee members knew the amount of Mr. Wittig’s bonus in February.”

The report said the committee and Wittig “failed in their duties to the company and all shareholders.”

Zakoura said the dysfunction of the board and other parts of the company is one of the amazing stories of Westar’s travails.

“Where were the internal controls, where were the directors of the board, where were the auditors? There were many red flags,” he said.

‘Greater diversity’

Westar’s current chief executive, Jim Haines Jr., said, “The board has to be an independent, candid overseer” of management.

He agreed with the investigative report.

“We need to have a board with a greater diversity of world views. That is a conclusion that ought to be self-evident,” he said.

He would not predict whether there would be more resignations from the board.

In the last months of Wittig’s tenure, six of eight board directors had KU ties. Here are the KU ties of current and former Westar directors and officers during Wittig’s reign as CEO:

• Wittig graduated from KU in 1977 with a business degree. He also is a trustee of the Kansas University Endowment Association.
• Former director Budig is a former KU chancellor and Endowment Association trustee emeritus.
• Former director Becker is a Lawrence resident, a 1958 KU graduate, chairman of the Endowment Association’s board of trustees and a member of its Executive Committee. He also is a former member of the Kansas Board of Regents.
• Director John C. Nettels Jr. has a KU undergraduate degree and earned a KU law degree in 1985. He roomed with Wittig at a KU fraternity when the men attended the university.
• Director R.A. Edwards earned undergraduate and graduate degrees in business at KU. He also serves on the Endowment Association’s executive committee.
• Former director Dicus graduated from KU with a business degree in 1955 and is a member of the Endowment Association’s executive committee.