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Archive for Thursday, July 26, 2007

Ex-Westar executive pushes for utility to be held in contempt

July 26, 2007

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— A former Westar Energy Inc. executive is asking a federal judge to hold the Topeka, Kan.-based utility in contempt of court for not paying his legal fees.

U.S. District Judge Julie Robinson on June 28 ordered Westar to pay more than $3 million in fees to the defense attorneys of former Chief Strategy Officer Douglas Lake, who is charged along with former Chief Executive Officer David Wittig with attempting to loot the company.

The company responded by saying Lake should be required to post a $4.2 million bond to cover losses Westar may face if Lake is convicted and unable to repay the legal fees. It also said it plans to appeal Robinson's order to pay the fees.

In documents filed with the court late Tuesday, Lake argues that Westar is trying to delay the payment of fees indefinitely, hoping to force his attorneys to drop out and leave Lake defenseless for his next trial, scheduled for January.

"Westar's motion is a sham, with no basis either procedurally or substantively, designed only to delay compliance with the court's order," Lake's attorneys wrote in the filing. "The court should hold Westar in civil contempt for disobeying the order and impose sanctions sufficient to ensure compliance and compensate Lake for his losses."

A Westar spokeswoman didn't immediately return a phone call for comment.

Under an agreement Lake signed before being forced out of Westar in late 2002, the utility promised to pay any litigation costs tied to his work, a common provision for corporate executives frequently targeted in court by unhappy shareholders or customers.

The company has paid $4.7 million of an estimated $12 million Lake's attorneys say they have charged through two trials and numerous appeals. Westar has balked at paying the remainder, saying Lake's New York City-based attorneys are charging unreasonable amounts.

In May, Lake's attorneys asked for permission to withdraw from the case, saying they can't continue to shoulder the economic burden of defending Lake for free. Last week, they said they have a Kansas City, Mo.-based law firm ready to take over, but that could be in danger if the payment of fees is still undecided.

Westar, in its filing requesting the bond, said it believed Robinson had filed a preliminary injunction, a type of order that typically includes a provision for protecting the parties from economic loss if the decision is later overturned.

Without the bond requirement, the company argues, the order is unenforceable.

Larry Irick, the company's general counsel, has said Westar tried to negotiate paying the $3 million while also pursuing an appeal, but the discussions fell through.

Lake's attorneys, in a separate filing Tuesday, argued that Robinson's order was different from an injunction, doesn't require a bond and can't be appealed.

Robinson said last week she would hold a hearing by teleconference to discuss the issue.

Lake and Wittig are set to go on trial in January on charges of conspiracy and circumvention of internal controls.

Initially they also were charged with wire fraud and money laundering. After they were convicted of those crimes in September 2005, a federal appeals court overturned the convictions and said the fraud and money laundering charges couldn't be retried.

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