Former Westar Energy CEO David C. Wittig and Douglas T. Lake, ex-executive vice president, were indicted last Wednesday by a federal grand jury in Topeka, KS, on 40 counts of conspiracy, fraud and related criminal charges.

The indictment charged Wittig, 48, of Topeka and Lake, 53, of New Canaan, CT, with one count of conspiracy to defraud the Kansas-based energy company, 14 counts of skirting internal accounting controls and falsifying books and records, eight counts of wire fraud, 10 counts of submitting false statements to federal agencies and six counts of engaging in illegal money transactions. The charges carry prison terms ranging from five to as much as 20 years.

Both Wittig and Lake are due to appear on Dec. 30 before U.S. Magistrate Judge James P. O’Hara in U.S. District Court in Kansas City, KS.

The indictment charges that while Westar Energy’s stock plunged to $9 from $44 a share, Wittig and Lake reaped more than $25 million and $7 million, respectively, in salary and benefits under “false pretenses” between 1995 and 2002; sought to “systematically loot” the company’s assets and money; and flouted internal controls that were in place to ensure accountability.

It further alleged that Wittig and Lake set up a subsidiary, Westar Industries Inc., for the express purpose of looting the assets of the utility and leaving the debt behind for ratepayers, and used corporate aircraft for their personal benefit. The two men also were accused of destroying or attempting to destroy company records to hinder the grand jury investigation into their activities.

Westar Energy is the largest electric utility in Kansas, serving about 654,000 customers in the state. The company also has owned part of one of the largest natural gas distributors in the country, Tulsa, OK-based ONEOK Inc., but it reported in late November that it reached a deal to sell its remaining interest in ONEOK to reduce debt.

Additionally, the indictment calls for the forfeiture of real and personal property traced to the alleged offenses, including approximately $25 million from Wittig and more than $7 million from Lake in salary, compensation and benefits paid during their employment at Westar Energy; real estate known as the Landon Mansion in Topeka; nearly $2 million in art and interior furnishings; a $229,751 Ferrari; and all of the remaining stock held by Wittig or Lake in Western Resources (Westar Energy’s predecessor), Westar Energy or any affiliated company. They potentially could face fines and special assessments of more than $5 million as well.

The latest action comes 13 months after Wittig and his banker were indicted for falsifying bank documents to obtain a $1.5 million loan to invest in Arizona real estate (see NGI, Dec. 2, 2002). Wittig left Westar Energy soon after the indictment in November 2002. Lake, feeling the pressure of a Kansas Corporation Commission investigation into Wittig’s activities, departed in December.

Announcing the indictment last Thursday were Acting Deputy Attorney General James B. Comey Jr., U.S. Attorney Eric Melgren for the District of Kansas, and FBI Assistant Director Grant Ashley.

The case was investigated by the Federal Bureau of Investigation with the assistance of the Internal Revenue Service, Criminal Investigation, and will be prosecuted by Assistant U.S. Attorney Rich Hathaway.

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