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Archive for Friday, August 20, 2010

Federal charges dismissed against two former Westar Energy executives

August 20, 2010, 5:23 p.m. Updated August 20, 2010, 8:08 p.m.

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Wittig timeline

• 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.

Surprise decision

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.

The Associated Press contributed to this story

Comments

snitty 4 years, 4 months ago

Is any one surprised? White collar crime pays so well, and the perps usually go free . . .

kernal 4 years, 4 months ago

The attorney fees must be astronomical by now. At least someone gained something from all this.

jmadison 4 years, 4 months ago

I think that Wittig's lawyers fees were paid by Westar--that is by the rate payers.

myvotecounts 4 years, 4 months ago

I was going to post a comment this morning thanking the prosecutors for staying the course on this important case. But now, just hours later, their new boss, a political appointee has exercised his prerogative to let these two accused big-time criminals escape the state with their loot. I suspect this new political appointee has just fulfilled a promise to those who supported his nomination. I hope I'm wrong and new charges will be filed in the immediate future.

outstanding 4 years, 4 months ago

Those individuals on the old Board of Directors that Wittig and Lake worked for are the ones who should have been on trial. Wittig and Lake came down from New York City and showed them Kansas Boys how big bidness is done.

weeslicket 4 years, 4 months ago

nicely stated. twice. this deserved to be said twice.

Cynthia Schott 4 years, 4 months ago

What a crock of crap. I am so tired of unequal justice.

budwhysir 4 years, 4 months ago

just goes to show that large corporate corruption is real, alive and legal

weeslicket 4 years, 4 months ago

no. this case was really about theft. apparently these two had "contractual" cover to steal.

question lg40: what is it you know about this case that you're not sharing with us?

jafs 4 years, 4 months ago

Actually, it's about corruption.

And the fact that a conservative Supreme Court is making it easier for executives to engage in activities with clear conflicts of interest without any consequences.

budwhysir 4 years, 4 months ago

yep Im jealous, I cannot figure out why these two guys have not been found guilty.

cowboy 4 years, 4 months ago

Well now the local feds can concentrate on the "largest fencing operation in history" and those evil herb growers. Is this particular fed office incompetent or what ?

yankeevet 4 years, 4 months ago

This is justice???????????????/ WTF............

weeslicket 4 years, 4 months ago

“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.

note: these statements are from the westar corporation themselves.

and this: "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."

while i'd like to see these two in prison for their behavior, even though they followed "the letter of the law/contract", so to speak: i have no problem having them defend themselves in civil court. in which their behavior can be exposed... ...against their former employer... and assessed actual damages.

and finally, perhaps corporations would be wise to write their contracts more sensibly in the future. just my opinion.

just_another_bozo_on_this_bus 4 years, 4 months ago

"perhaps corporations would be wise to write their contracts more sensibly in the future."

Corporate boards are incestuous in nature. They are primarily mutual admiration societies, and with good reason, because it allows them to justify the high salaries, benefits and perks they all give each other. Wittig was the homegrown whiz kid, and they were all hoping that some of his snake oil would rub off on them (and it probably did.)

Jimo 4 years, 4 months ago

"perhaps corporations would be wise to write their contracts more sensibly"

You're assuming there is a difference between the corporation and the beneficiary of the contract.

As I've noted before, the way that the underlying corporate statutes are written, it is nearly impossible for shareholders to police corporate management. Even in cases where incompetent management causes severe financial underperformance or even losses it takes a huge amount of effort to bring about change. Executives know that relatively minor looting of corporate treasuries for themselves isn't going to be enough to get shareholders to take on such herculean efforts to put a stop to it, especially when it is done through a rigged system that gives the image of everything being "legal."

Here, the executives at Westar couldn't even restrain their appetites within these minimal limits. That's the only unusual thing.

Given the activist judges on the Supreme Court just this last year have invented a theory that corporate bribery of politicians is unlimitable, I wouldn't hold my breath for reform.

kansasmutt 4 years, 4 months ago

Can the people who were billed an electric bill and higher rates due to this file a class action civil case ? That might be a way to get something back to everyone who had to pay higher rates due to the investment loss and make up for the investers. Just an idea.

happyrock 4 years, 4 months ago

Westar is a joke. They spent $150 million trying to convict these two and avoid paying them $15 million in severance. Now they will owe them $500 million and the company will be sold. Ludwig is a moron. He was fired once and idiot Bill Moore hired him back.

puddleglum 4 years, 4 months ago

This is awesome! Dave Wittig is my HERO! This guy ripped off the evil empire of monopolized electricity, and got away with it!
That's what those greedy board members get for hiring a guy and giving him a magic wand and a golden parachute...what did they expect? HOORAH!

hoshi 4 years, 4 months ago

The recent supreme court ruling limited the ability of federal prosecutors to charge this type of white collar crime. Before the ruling,in all probability they would have gone ahead.

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