• A look at the history of the Westar scandal.
It was Kansas’ Enron: Two high-flying executives accused of looting what had been a financially solid electric utility.
On Friday, it appeared the case against former Westar Energy executives David Wittig and Douglas Lake was over.
Federal prosecutors filed a motion to dismiss indictments against the two, just hours after a new U.S. attorney for Kansas, Barry Grissom, was sworn in.
U.S. District Judge Julie Robinson dismissed all charges without prejudice, meaning they could be filed again.
There was no explanation from the government on the reason for the move.
Wittig, 55, was chief executive officer of Westar and Lake, 60, was his top strategy officer. They were charged with conspiring to inflate their compensation from the company and taking steps to hide their actions.
Their first trial ended in a hung jury. They were convicted in a second trial but that decision was overturned on appeal.
On Friday, the dismissal of charges stunned players in the seven-year-old drama.
Topeka-based Westar, the state’s largest electric utility, said it was “extremely disappointed” in the federal government’s decision not to prosecute Wittig and Lake.
“We believe our investors still deserved an opportunity, after this long ordeal, to see whether a jury would hold them accountable for their actions,” said Jim Ludwig, Westar Energy executive vice president.
“Our investors, who have borne the damages and expenses from this process, have not received any restitution,” Ludwig said.
He said Westar will continue to pursue civil claims against Wittig and Lake in an arbitration hearing, which was on hold during the criminal proceedings.
David Springe, consumer counsel of the Citizens’ Utility Ratepayer Board, which had battled Westar, said, “I guess I’m a little disappointed to see the process end like this.”
Springe said the reversal of convictions in the appellate court may have “trimmed down what federal prosecutors could do.” And he noted that prosectors on Friday dismissed the case “without prejudice,” which means charges could be refiled.
Even defense attorneys were taken by surprise.
“I credit the Justice Department for recognizing how flawed this case was,” said Patrick McInerney, an attorney for Lake.
McInerney said a recent U.S. Supreme Court ruling narrowing the scope of the “honest services” law — which made it a crime to “deprive another of the intangible right to honest services” — crippled the government’s case against Wittig and Lake. The high court’s ruling in the case against former Enron CEO Jeffrey Skilling found that theft of honest services is only relevant in cases involving bribes and kickbacks.
McInerney said Lake and his family have been living with the charges for more than seven years.
“It was an immense relief,” McInerney said of the motion to dismiss. “It vindicates him and what he has said since the very beginning of this that he is innocent. He committed no crime and at long last it has been recognized.”
A message seeking comment was left with a defense attorney for Wittig, but was not returned.
Ties to KU
Wittig had deep connections to Kansas and Kansas University.
He graduated with honors in 1977 with a business degree from KU and then rocketed to fame on Wall Street as an investment banker, making the cover of Fortune magazine.
In 1995 he returned to Kansas to join Westar, rising to the top position in a few years.
He surrounded himself with fellow Jayhawks on Westar’s board of directors and enjoyed a big salary and a lavish lifestyle.
But Westar’s finances started going downhill fast under Wittig’s leadership. In 2002, the Kansas Corporation Commission signaled it would order a restructuring of the company. In November 2002, Wittig and his personal banker were indicted on bank fraud charges; Wittig resigned from Westar later that month.
Later that year, an internal Westar report said that Wittig spied on his own employees, muscled out boardroom opponents and used company jets for personal travel. The report also indicated political contributions made to federal candidates by former Westar executives may have been illegal.
After Wittig’s original indictment in 2003 in relation to Westar, consumer advocates said the cozy relationships on the board failed to check Wittig’s actions.
Westar conducted its own investigation and found that there were too many inter-related KU interests on the board.