Archive for Wednesday, October 20, 2004

Federal fraud trial opens for Wittig, partner

Prosecutor says Westar chief tried to loot company

October 20, 2004


— Former Westar Energy Inc. chief executive David Wittig and his top deputy "tried to enrich themselves with every available opportunity" during their tenure leading the largest electric utility in Kansas, a prosecutor said as the pair's federal fraud trial began Tuesday.

"These individuals came into the company with the intent to loot it," Assistant U.S. Atty. Richard Hathaway said during his opening statement.

Wittig, of Topeka, and former executive vice president Douglas T. Lake, of New Canaan, Conn., each face 40 charges, including conspiracy, wire fraud and falsifying records. If convicted, the two face prison terms of at least 10 years.

Wittig's attorney countered that the former Wall Street investment banker only took up a vision already set out by company executives when he arrived at Topeka-based Westar in 1995. Adam Hoffinger ridiculed the trial as a way for Westar officials to circumvent ongoing arbitration with the two men over severance and other unpaid compensation.

"We're here because of money," he said. "Money that Westar owes David Wittig but does not want to pay back."

Hathaway said Wittig and Lake pushed through policies that improved their own salaries and benefits at the expense of the company, including convincing Westar's board to buy a series of companies, including some in which they held a personal interest.

That effort culminated in a failed attempt to merge Westar with a New Mexico utility and then spin off its affiliate businesses into a debt-free company that Wittig and Lake could control.

"Before the split, these individuals tried to enrich themselves with every available opportunity," he said.

But Hoffinger described his client as a Wall Street whiz kid who readily took up the mission of building Westar into an international conglomerate through diversification, a course started by his predecessor, former chief executive John Hayes.

He said Wittig successfully built up the company until market pressures in late 1999 hurt stock prices, the merger plan fell through and the company turned on him. Both Hoffinger and Lake's attorney, Ed Little, said all of the men's actions were approved by the board of directors or covered by corporate policy.

"If you're going to do something devious and steal money, you're going to figure out a way to keep everyone from knowing about it," Little said.

Along with the prison term, prosecutors hope to recover $25.5 million from Wittig and $7.5 million from Lake.

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