Was David Wittig’s conviction truth or consequences?

Kathleen Davis, Associate Editor

In July, David Wittig, former Westar Energy CEO, was convicted of one count of conspiracy, one count of money-laundering and four counts of submitting false bank documents by a federal court in Kansas City, Kan. Clinton O’Dell Weidner II, former president of Capital City Bank in Topeka, Kan., was also found guilty of related charges.

According to prosecutors, Weidner and Wittig had set up a convoluted scheme: Weidner upped Wittig’s credit at the bank by $1.5 million. Wittig then turned around and loaned that same amount of money to Weidner to invest in a real estate deal in the Southwest. This was done—again, according to prosecutors—to help secure Weidner’s assistance in getting future financing for Wittig and other Westar executives to the tune of approximately $20 million.

From CEO to money-launderer

Wittig, a native of Prairie Village, Kan., graduated from KU in 1977 with a degree in business administration and economics. He spent almost two decades in New York City, working for Kidder, Peabody & Co. Inc., as well as serving as managing director of Salomon Brothers Inc. He returned to Kansas in 1995 to join Western Resources Inc., the state’s largest utility, which is now known as Westar. Wittig served as chairman, CEO and president of the utility.

Wittig’s original indictment in the fall of 2002 sent shares of Westar Energy plummeting. Trading of the stock was finally halted by the New York Stock Exchange after it fell more than 21 percent. Wittig resigned from Westar Energy in November 2002 amid the controversy.

The conspiracy charge against Wittig carries a possible five-year sentence; the false bank documents charge could bring 30 years. And money-laundering has a maximum 10-year penalty. According to regional media sources, however, it is expected that neither man will serve more than five years.

Additionally, Wittig has asked for a new trial, alleging mistakes by the prosecution and judge in the case. In court documents filed in August, Wittig also contends that there was insufficient evidence to convict him.

Wittig complained that the prosecution was allowed to introduce “inflammatory” evidence about his compensation as Westar’s CEO, along with the value of his house and other financial transactions. The motion stated that these submissions of evidence had “nothing to do with the government’s case, but were made to prejudice Mr. Wittig and, quite clearly, the government was successful in prejudicing Mr. Wittig by the introduction of this evidence.”

While to some such statements may sound like legal mumbo jumbo or sour grapes, Wittig’s attorneys are not exactly alone in this belief.

In an article titled “In Wittig verdict, jurors saw smoke, assumed it was fire” with The Business Journal of Kansas City, staff writer David Twiddy commented that Wittig’s trial was an example that “a little doubt may have gone a long way.”

He went on to state that “the verdicts [of Wittig and Weidner] came as a surprise because prosecutors had presented almost no direct evidence of the two men jointly mapping out a plan to conceal a $1.5 million loan from bank officials.”

Twiddy went on to quote associate dean and law professor from the University of Missouri-Kansas City Law School, Ellen Suni, who said, “Sometimes the government presents something that looks fishy—not criminal, but fishy. It puts the pressure on the defense to explain its story. The reality is, unless the defense gives an explanation that the jury is satisfied with, if the situation is fishy, who knows what the jury’s decision is going to be?”

The average consumer, however, may not agree with the assertion that customer anger or “fishy” evidence led to Wittig’s downfall. In fact, some just thought the prosecution proved his guilt.

“I think Wittig was convicted on the strength of the case,” stated one Wichita city employee who preferred to remain anonymous. She told EL&P in September that the idea that Wittig was convicted because the average consumer was misinformed or angry was a misconception. In fact, she told us that such assumptions were really fanned by extensive local media coverage.

“I never had a single conversation about [Wittig’s case] with coworkers, family or friends until [EL&P made inquiries],” she said. “Of course, I am cynical, but it seemed that the local media was interested in the Wittig case primarily to show, ‘Look! We’ve got corruption, too! We’re important!”

Impact on Westar

Wittig is not alone in feeling the impact of a jury’s decision. As he continues to fight his conviction, Westar attempts to move forward as a separate entity, out of Wittig’s shadow. However, even though the federal case against Wittig rested on a personal transaction, sources say it has been difficult to keep the utility from feeling the effects of Wittig’s negative publicity.

In a Lawrence Journal-World article discussing Wittig’s indictment last year, journalist Scott Rothschild spoke with Walker Hendrix, chief lawyer of a state consumer agency.

“[The case] has had a dramatic impact on how the investment community perceives the company,” Hendrix stated in the article. “It is hard to separate the company from the CEO, especially in this day and age when there are so many CEOs under investigation.”

While Westar declined to comment on EL&P’s article on David Wittig and his conviction, stating that it is “unrelated to Westar Energy business matters,” spokeswoman Karla Olsen did note that the company is “successfully implementing [its] debt reduction and restructuring plan as filed with and approved by the Kansas Corporation Commission.” She went on to add that the company wishes to “return to being a pure play electric utility” and that Westar has reduced their debt “by approximately $600 million” since the first of the year.

Indeed, according to the utility’s second quarter financial results, the company reported earnings of $151.6 million for the first six months of 2003, compared to a loss of $737.1 million for the first six months of 2002. But, that doesn’t mean that the average consumer has forgiven—whether or not the fine line is drawn between Wittig and Westar.

“I think, like many people in Kansas, I’m angry,” stated Shelby Stacy, a Westar consumer from the Topeka area. “[Westar’s] reputation has taken a beating, and it will be a long time before consumers forget.”

“I’m really upset,” said Lael Ewy, another Westar consumer from Wichita. “When you hold a virtual monopoly on power delivery, you’ve got a responsibility to your customers. Wittig put energy services in Kansas in jeopardy through his bad business deals, and then had the audacity to bleed the company for personal purposes as well.”

Ewy added that he’d like to just remove himself from the grid but couldn’t afford to at this point. When asked if Wittig’s conviction has colored his view of Westar, Ewy replied, “I trust them even less than I did, but slightly more than SBC.”

“And, at least, I’d like to see more power companies run as public utilities,” he lamented, adding that it seemed to him that deregulation and the concept of “the free market” wasn’t “mature enough” to handle important social duties like power generation, with Wittig’s conviction being just one in a long line of examples.

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