Westar report unmasks deceit, extravagance

Ex-CEO at root of indiscretions

? David Wittig was a conniver who spied on his own Westar Energy employees, muscled out boardroom opponents who questioned his ways and misused lavish company jets to ferry family and friends on jaunts to Palm Beach, Fla., Europe and world-class sporting events.

Those were among the findings made public Thursday in a 367-page investigative report commissioned by current Westar officials who said they would try to make the company’s former golden boy and his top deputy, Douglas Lake, repay Kansas’ largest electric utility for legal fees, travel expenses and other wrongful costs racked up as part of Wittig’s reign.

“In our opinion, senior management, particularly Mr. Wittig, at times placed their own interests above the interests of the company in breach of their fiduciary duties. The corporate airplanes have been a prime target of abuse,” reported investigators from the New York law firm of Debevoise & Plimpton.

“We believe the extent to which Mr. Wittig and, to a lesser extent, Douglas T. Lake, an executive vice president currently on unpaid leave, exploited their authority for personal gain increased over time as potential obstacles to their excesses were removed,” the report stated.

Wittig, 47, through his attorney James Eisenbrandt, said nothing about the report, which offers a remarkable insider’s view of decision and deal making in the Westar corporate suites.

“We are continuing to review the report and will not have a comment at this time,” Eisenbrandt said.

Lake could not be reached for comment.

Wittig, the former chief executive, president and board chairman of Westar, resigned in November after being indicted on federal charges of falsifying bank documents in connection with a $1.5 million loan. He has pleaded innocent in that case and faces trial next month. Those charges stemmed from Wittig’s personal financial dealings, not those of the company.

James Ludwig, vice president of Westar Energy Inc., directs journalists' attention to former CEO David Wittig's office. Ludwig led a tour Thursday of the empty facility, whose executive offices are decorated with lavish woodworking. The construction project, which cost around million, is one of the examples of Wittig's excesses at the expense of ratepayers, according to a Westar internal report.

Exhaustive report

Westar initiated an internal investigation two months before Wittig’s indictment after being subpoenaed by a federal grand jury for records related to Wittig and the company.

The investigative report was released on the company’s Web site, wr.com, along with 246 exhibits. Investigators analyzed 450 boxes of documents and computer files and conducted 200 interviews. The report said investigators retrieved data from Wittig’s laptop and other computers.

Wittig initially was interviewed for seven hours, but after he was indicted, he refused to cooperate with the company probe, the report said. The company’s former outside accounting firm, Arthur Andersen, also declined to cooperate, saying it was too busy answering government orders for documents related to the Enron investigation.

During Wittig’s tenure, Westar went from being a blue-chip corporation to a heavily indebted issuer of junk bonds.

Consumer advocates said the report provided details to many of the controversies surrounding Westar during the past couple of years.

“This is clearly about a plan for individual wealth, not the benefit of the shareholders and ratepayers,” said David Springe, head of the state’s utility consumer protection agency. “This was about David Wittig making money and gaining control of the company.”

Chapter’s end

Westar President and CEO Jim Haines Jr. conjures a response to a reporter's question during a news conference in which he defended his company but condemned the conduct of Wittig.

Wittig’s replacement at Westar — Jim Haines Jr. — called a news conference to try to distance the company from Wittig’s tenure.

“We can begin to close a difficult chapter in the recent history of Westar,” Haines said.

The board will seek reimbursement for personal air travel from Wittig and other former top executives for the past five years. The report also recommended the company consider seeking legal counsel in ending severance agreements with Wittig and Lake that could be worth tens of millions of dollars.

But watchers of Westar said the report raised more questions that would be considered by the grand jury investigation.

“This is a great and interesting document, but the grand jury will determine what is legal or illegal,” Springe said.

The report, which was completed April 29, has been turned over “to the proper governmental officials,” Haines said.

Gold-plated seat belts on the Westar company jet, which was purchased while Wittig ran the company, are just one example of corporate opulence, critics say.

Kena Rice, a spokeswoman for the U.S. Attorney’s Office in Wichita, declined to comment.

Reputation rebuilding

The company, the largest electric utility in Kansas with 653,000 customers, released the report on the same day it announced a profit of $123.7 million, or $1.72 a share, for the first three months of this year. During regular trading on the New York Stock Exchange, Westar shares closed up 63 cents, at $14.76.

Haines, the company’s CEO for the past six months, said Westar was working to rebuild its reputation.

“With respect to what went wrong here, I think the report speaks for itself,” Haines said. “There is no reason to believe, in my opinion, that we have more serious problems that still need to be investigated.”

Part of the report dealt with corporate aircraft, concluding that Wittig and Lake repeatedly used the aircraft for personal reasons — then falsified flight logs or listed no reason for their travel.

Here is a view of the formal dining room in Wittig's Topeka home. Wittig came under fire by consumer advocates after he ordered the multimillion-dollar renovations done to the home, which was previously owned by the late Alf Landon, former Kansas governor.

“The clearest evidence that Messrs. Wittig and Lake knew that they were not authorized to charge the company for personal travel on the company airplanes is that the flight logs were falsified,” the report said.

Investigators found that Westar’s former audit firm, Arthur Andersen, failed to notify the company of interference by Wittig with an audit of aircraft use, including accounting for personal travel by himself, Lake and other company officials.

“The misconduct of senior management was facilitated by the absence of what should have been standard policy and procedures on basic matters,” the report said.

The report noted nine resolutions adopted last week by Westar’s board of directors, including one to require Wittig, Lake and others to restate their income for 2002 to reflect personal travel on corporate aircraft. Others adopted by the board call for reviews of compensation packages, political fund-raising practices and reform of corporate governance.

Haines also said a 44-member employee group was working a “statement of values” for Westar.