Archive for Wednesday, August 24, 2005

Westar trial nears end with closing arguments

August 24, 2005


— Federal prosecutors urged jurors to convict two former Westar Energy Inc. executives Tuesday, saying that instead of protecting the interests of thousands of company shareholders, the duo had manipulated the system for themselves.

A defense attorney for former chief executive David Wittig disagreed, saying the government had manufactured the case to punish a rich, sometimes abrasive corporate executive. If Wittig was guilty, attorney Adam Hoffinger said, so were dozens of other executives.

Assistant U.S. Atty. Richard Hathaway used a PowerPoint demonstration to run through three months of testimony and boxloads of documents, trying to show how Wittig and former chief strategy officer Douglas Lake had wrung extravagant compensation from the company through a myriad of schemes, even when stock prices were falling.

From abusing a corporate relocation policy to having Westar put money in companies in which they had private investments to planning a windfall from a proposed merger of Westar with a New Mexico utility, Hathaway said the two men constantly looked for ways to manipulate what they saw as a weak system of internal controls and Westar's board of directors.

He said Wittig began laying the foundation for his crimes from the moment he joined the Topeka-based company in 1995. Hathaway said Wittig, brought in by then-CEO John Hayes to diversify the utility, began eyeing companies that he could acquire and later spin off.

Wittig later brought Lake, an acquaintance from Wall Street, into the conspiracy, first appointing him to help run a small home security company he wanted to buy, and later as Westar's chief strategy officer.

Hathaway said the two kept the company's board in the dark about some of their compensation and left out key information from reports filed with regulators.

Hoffinger, however, said Wittig got written approval from the board for everything he was legally required to. He said prosecutors had yet to show an instance where information that needed to be disclosed to regulators hadn't been.

"What kind of systematic looting includes systematic approval by directors, systematic filings with (regulators), systematic memorialization through e-mails and memos and board notes?" he said.

In particular, prosecutors have focused on the use of company airplanes for vacations and other personal trips. One prosecution witness, using the price of charter flights, estimated Wittig took trips worth almost $964,000 on Westar planes during his tenure but didn't declare any of it as income.

Hoffinger said those numbers were arbitrary and based on flights that had some business purpose. He said the company had never developed an internal policy for how executives should account for personal use of the planes on their taxes, noting that 35 other Westar officials had used the planes outside of business.

Closing arguments continue today with Lake's attorney, Edward Little, making his final presentation before Hathaway gets a final word.

The case will then be turned over to the jury of 10 women and two men who have sat through three months of sometimes dense and complex testimony.


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