Advertisement

Opinion

Opinion

Painful chapter

Westar Energy now is being forced to negotiate huge compensation packages for the former leaders that drove the company into financial ruin.

May 17, 2011

Advertisement

We share Westar’s pain.

Westar Energy has repeatedly said that none of its financial dealings with former CEO David Wittig and his cronies will impact the company’s utility customers. Nonetheless, we can only imagine the company’s pain at having to pay huge salary benefits and legal fees to the men who escaped conviction on charges related to looting millions of dollars from the state’s largest utility.

On Friday, it was announced that Westar had reached a settlement to pay former top strategy officer Douglas Lake $21 million in unpaid compensation and $5.3 million for attorney fees. The company still is in arbitration concerning a similar payment to Wittig.

What a bitter end to this Westar chapter. Lake and Wittig were forced out of their jobs in 2002 and indicted by a federal grand jury in 2003 for conspiring to inflate their compensation at Westar, along with wire fraud and money laundering. The first trial ended in a hung jury and their convictions in a second trial were thrown out by the U.S. Circuit Court of Appeals, which said prosecutors didn’t adequately prove the charges. The two were awaiting a third trial when federal prosecutors decided last August to drop the case.

So, despite the fact that Westar stock plummeted from about $44 per share to less that $9 per share and its debt grew to more than $3 billion under the leadership of Wittig and Lake, it’s now come down to how much Westar owes Wittig and Lake rather than the other way around. During the trial, prosecutors showed that while Westar was laying off hundreds of employees, Wittig spent more than $6.5 million to renovate the company’s executive suites, including $29,000 for a custom-built television wall unit. At the same time, Wittig was spending millions of dollars to renovate his own home grand style.

The news of Lake’s settlement came to light Friday when the Kansas Corporation Commission sent out a news release promising that Westar customers wouldn’t pay any of the compensation or legal expenses called for in Lake’s settlement. That amount will be paid entirely by Westar shareholders, according to the KCC.

Westar officials have continued to assure their customers of that fact throughout the Wittig scandal. It’s difficult to imagine how the damage done to Westar won’t trickle down in some way to its customers, but those of us paying our monthly bills have little choice but to take state regulators and company officials at their word.

Even if it doesn’t affect our personal pocketbooks, this case certainly leaves a sour taste in all of our mouths. The idea of the former Westar executives now claiming tens of millions of dollars in restitution is the ultimate insult.

Comments

billybob1 2 years, 11 months ago

I agree with Kam. I do not understand why the directors aren't paying for this out of their own pocket. Where were Budig, Dicus and Becker? They were the ones who approved their compensation.

0

KamFongAsChinHo 2 years, 11 months ago

Wittig spent time in prison for an entirely different case. He was convicted along with his golfing buddy Clinton Odell Weidner, former president of Capital City Bank, for a fradulent loan scheme to buy property in Arizona. Both Wittig and Weidner went to jail for their scheme. So, Wittig spent time on and off the job in pursuit of illegal activities. I completely agree that the Westar Board of Directors are worthless and derelict in their duties. R.A. Edwards and Charles Chandler (President of the Board) are still on the board despite their pitiful oversight during the Wittig and Lake era.

0

kansasredlegs 2 years, 11 months ago

Good thing public opinion is not the basis of our legal system. Let's see... Federal Government can't prove it's case according to the 10th Circuit Court of Appeals, Federal Government decides it can't prove its case and dismisses the indictment.

While Lake and Wittig may not be sympathetic figures, it apparently wasn't illegal and the real "criminals" are those on the Board of Directors who allowed them to do these legal shenanigans in the first place. BOD simply want to make Lake & Wittig the scapegoats for its own lackluster performance.

If I remember correctly, Wittig spent almost 2 years in federal detention while the FEDS didn't /couldn't make its case. While I don't condone their activities, the payout is simply compensation for 'unnecessary incarceration' by an overreaching Federal Government which never acknowledges its mistakes.

0

beatrice 2 years, 11 months ago

I feel badly for Witting and Lake. They deserve a big tax break.

0

overplayedhistory 2 years, 11 months ago

That is the the way of the day. A ridiculous salary is not the only cost of bringing in so called talent, or rainmakers in a dying economic empire sucking every last dollar of worth left from the hard work done long ago, there is the cost of risk which they pass off.

0

happyrock 2 years, 11 months ago

Dolph does not need facts. He writes whatever he wants.

0

billybob1 2 years, 11 months ago

Does anything in this article actually resemble a fact?

0

Ron Holzwarth 2 years, 11 months ago

It's just fine to be a criminal, just as long as you don't use a gun, right?

0

KamFongAsChinHo 2 years, 11 months ago

Why is it OK for the cost to be borne by the shareholders and not the customers? In most cases, they are one in the same. Many shareholders are like my elderly mother-in-law. She bought utility stocks to provide a relatively stable dividend income. She took the hit of the share price plummeting from $44 to $9 per share...and now she is taking the hit of compensating these incompetent "executives". Shame on them and shame on the board of directors who sat back and let them run the company into the ground. Saying that customers will not pay for this debacle in no way lessens the crimes perpetrated by these scoundrels.

Speaking of shameful, how about KU's support of David Wittig? He remained on various boards and committees for months following the disclosure of his wrong doing. He was publically supported by a KU business professor: http://www2.ljworld.com/news/2003/may... KU accepted, and has kept, the ill gotten gains of Wittig's contributions. The KU professor noted that Wittig's contributions were from his personal pocket, not Westar's. Where do you think he gained his personal wealth? He bought for himself the public admiration and "behind the bench" basketball tickets with his "selfless" contributions.

The professor also notes that plenty of other corporate heads have spent money on "lavish offices". She must subscribe to the notion that "everybody else is doing it so it's OK for Wittig, too".

This chapter is not only painful for Westar customers and shareholders but shameful for Wittig and those who supported him. Just because he escaped the legal consequences of his actions in no way reduces his culpability in the court of ethics, morality, and competency. There is a special place in the afterlife for him.

0

mscynners 2 years, 11 months ago

WRONG....WRONG...Oh so WRONG............... where is the justice?

0

Commenting has been disabled for this item.