Although overshadowed by the Enron-related criminal cases, the business fraud criminal trial of former Westar Energy, Inc. CEO David Wittig and his right hand man has been making quite a bit of news over the past few months in Kansas. U.S. District Judge Julie Robinson on Monday declared a mistrial in the case when the jury could not render a verdict on most of the 40 count indictment against the defendants. Although the prosecution can (and probably will) re-try a case that ends in a mistrial rather than an acquittal, the result of the trial was a clear victory for the defense.
The mistrial comes a year and a half after another federal jury convicted Mr. Wittig of bank fraud charges in a case not directly related to Westar. Mr. Wittig remains free on bond pending his appeal of that conviction.
Mr. Wittig and former Westar Executive Vice President Douglas T. Lake each faced charges relating to allegations they tried to loot the largest electric utility in Kansas. The pair left Westar late in 2002 amid revelations of misuse of corporate funds. Subsequently, Westar under Mr. Wittig was implicated in the scandal surrounding corporate efforts to curry favor with Houston congressman Tom DeLay, the House majority leader. A Travis County, Texas grand jury continues to investigate Westar’s contributions of funds during 2002 to the political action committee that Mr. DeLay created.
Mr. Wittig, who is a former star deal maker at Salomon Brothers, became CEO of Westar in 1998 and immediately turned the sleepy Midwestern utility into a deal machine. Mr. Wittig hired Mr. Lake, who worked with him at Salomon. Mr. Wittig was paid compensation of more than $25 million in his seven years Westar, and he had no reservations about showing it in normally conservative Topeka, where Westar is based. He bought the largest home in Topeka, which is a 17,000-square-foot mansion that former Kansas governor and one-time presidential candidate Alf Landon built, which he then outfitted in with over $2 million in art and interior decoration. Mr. Wittig also drove around Kansas in a $230,000 Ferrari 550 Maranello.
After some success, Mr. Wittig’s fast deal plan at Westar faltered and the company’s stock price fell from $44 to $9. As a result, Westar came under increasing pressure from shareholders and regulators, including the Travis County grand jury.
The trial has been particularly wild. Judge Robinson, who is a former prosecutor, and Mr. Wittig’s defense attorneys — Adam Hoffinger and Edward Little — butted heads throughout the trial as the defense accused the judge of favoring the prosecution in her rulings. At several points during the trial, Judge Robinson angrily lectured the attorneys for their courtroom demeanor, which included rolling their eyes during witness testimony. Finally, a day before closing statements, the friction between the judge and the defense attorneys boiled over as Judge Robinson took the extraordinary measure of barring one of the attorneys on Mr. Lake’s defense team from the courtroom for the remainder of the trial.
For excellent background on Westar’s involvement with Rep. DeLay, the PAC, and the Travis County investigation, check out Charles Kuffner’s comprehensive posts.