I'm surprised that they still have 12,000 employees.
I'm also shocked that two former investment bankers would loot a public company. I'm sure that they felt that it was just business as usual:
2 Accused of Theft From Kansas Utility
Wittig and Lake Allegedly Stole $32 Million
By Carrie Johnson
Washington Post Staff Writer
Friday, December 5, 2003; Page E01
washingtonpost.com
After a string of charges of looting by corporate executives -- $600 million at Tyco, $278 million at HealthSouth -- $32 million looks small by comparison.
But the money that two former Westar Energy Inc. executives are charged with taking for personal profit drove the Topeka, Kan., utility to the brink of bankruptcy and left it $3 billion in debt, federal prosecutors said.
Prosecutors charged former chief executive David C. Wittig, 48, and former Westar vice president Douglas T. Lake, 53, with personally profiting at the company's expense, pushing out "troublesome" board members and monitoring employee telephone calls to ensure the alleged scheme was not uncovered. The 40-count indictment also charges the two with circumventing financial controls and making false statements. The men are scheduled to surrender to authorities and face an initial court appearance in Topeka later this month.
In all, prosecutors are seeking the return of $25 million in salary and bonuses from Wittig and $7 million from Lake. They also have asked a judge to force Wittig to forfeit his landmark mansion built by former Kansas governor Alf Landon, his 2001 Ferrari and nearly $2 million in art and furnishings.
"Through theft, fraud, and outright intimidation, Wittig and Lake concocted a scheme to loot the company of tens of millions of dollars," said Acting Deputy Attorney General Jim Comey at a Washington press conference yesterday. "Publicly traded companies are not piggybanks. Top executives hold a company in trust for the people who really own the company -- shareholders."
The charges leveled against Wittig and Lake are similar to those filed against former Tyco International Ltd.'s chief executive L. Dennis Kozlowski and former chief financial officer Mark H. Swartz and former HealthSouth Corp. chief executive Richard M. Scrushy, all of whom are fighting the charges.
Prosecutors said Wittig and Lake, who had previously worked together as investment bankers at Salomon Brothers Inc. in New York, allegedly launched a program called "Project X" in May 2001. The purpose of the program was to hire lawyers and private detectives to review employees' e-mail messages and phone calls and to probe the backgrounds of reporters and regulators "in an effort to squelch the truth about what was occurring within the company," the indictment said. Project X cost the company about $100,000, according to court papers.
Wittig was convicted in July, in a separate case, of money laundering, conspiracy, and making false filings with a bank. He allegedly borrowed money from a local bank, then secretly turned it back to an executive at the bank in connection with a real estate deal. Prosecutors contend the transaction was part of a broader plan by Wittig to borrow additional funds from the bank to merge Westar with another utility. Wittig's employment contract included provisions that would have paid him more in the event of a merger. He has been released on bail and awaits sentencing on those charges. Lawyers for Wittig and Lake did not return calls yesterday.
Under Wittig's leadership, Westar's stock price plunged from $44 to $9 per share, prosecutors said. At the same time the company was dismissing workers to help cut costs, Wittig "exploited" his authority over capital expenditures to approve a $6.5 million renovation of the Westar headquarters in Topeka, which included building a gourmet kitchen and installing a $29,000 television wall unit, according to court papers.
The men also allegedly caused Westar to falsify records related to their use of the corporate jet, saving them thousands of dollars in personal income taxes because they did not reimburse the company nor report the use of the planes as compensation for tax purposes.
On one occasion in July 2002, Wittig used the company plane to fly his family to France and England, without reimbursing Westar. He forbade an internal auditor from inspecting the aircraft records, the indictment said.
The former Westar executives also allegedly abused the company's relocation program, which encouraged officials to give up their out-of-state residences and to move to Kansas, prosecutors said. Wittig accepted $825,000 from Westar as compensation for selling his Fifth Avenue condominium in Manhattan. But Wittig allegedly never sold the apartment, and later he submitted bills to Westar for lodging even though he stayed in the New York residence he said he would forsake, court papers said.
Lake accepted $262,000 from Westar as part of the same relocation program, but he too "had no intention of selling his residence," according to the indictment. In fact, government lawyers said, Lake frequently borrowed Westar's corporate jet to shuttle back and forth between New York and Topeka.
An investigation into Westar's financial troubles is ongoing, Justice Department officials said. Consumer groups have called for a probe into corporate donations and other efforts made by a top Westar lobbyist to lawmakers, allegedly in exchange for favorable treatment in energy legislation.
Westar Energy's stock closed yesterday at $19.76 a share, down 4 cents.
© 2003 The Washington Post Company |
