A federal jury in Kansas City yesterday found former Westar Energy Inc. Chief Executive Officer David Wittig and chief strategy officer Douglas Lake guilty of looting the electric utility of millions of dollars. Previous posts on the hotly-contested case — which included a previous trial that ended in a hung jury — are here and here.
The prosecution against the two former Westar executives was similar to the prosecution of former Tyco executives Dennis Kozlowski and Mark Swartz in that the prosecution alleged that Messrs. Wittig and Lake engineered extravagant salaries and benefits for themselves at the expense of Westar shareholders while hiding their actions from the company’s board and federal regulators. As in the Tyco trial, Messrs. Wittig and Lake denied the charges and contended that all of their actions were legal, approved by the company’s directors and disclosed in the company’s regulatory filings. The jury found Messrs. Wittig and Lake guilty of conspiracy, wire fraud, circumventing internal controls and money laundering.
Mr. Wittig became CEO of Westar in 1998 and hired Mr. Lake, a former colleague at Salomon Brothers, to become his chief aide. After some initial success, Mr. Wittig’s quick-deal strategy faltered and Westar’s stock price fell from $44 to $9 as the company came under pressure from shareholders and regulators. As in the Tyco case, an outside law firm hired by Westar’s board eventually uncovered many of the actions of Messrs. Wittig and Lake that led to the indictment against the former executives.

Over four years after Enron’s descent into bankruptcy, 2006 is shaping up as the year of the Enron criminal trials.
First, in mid-January, the trial of the Enron Task Force’s legacy Enron case — i.e., the trial that everyone will remember — cranks up against former Enron chairman Ken Lay, former CEO Jeff Skilling, and former chief accountant, Richard Causey.
Then, in May, the first retrial of defendants in this year’s mistrial in the Enron Broadband case will take place against Kevin Howard, former chief financial officer of EBS, and Michael Krautz, former senior accounting director at EBS.
Following that trial, the second retrial of one of the Enron Broadband defendants will proceed in June against Scott Yeager, the former senior vice president of business development. Finally, the final two of the five Broadband defendants — Joe Hirko, former co-CEO of Enron Broadband Services, and Rex Shelby, former senior vice president of engineering and operations at EBS, will be retried in September. Mary Flood’s article on the Enron Broadband retrials is here.
Thus, 2006 is shaping up as quite a season for Enron-related criminal trials. And you thought the NFL season lasted a long time?

Peter Henning over at the White Collar Criminal Prof Blog is skeptical that U.S. District Judge Sim Lake’s letter-writing campaign is going to induce any of the recalcitrant witnesses in the criminal case against former Enron executives Ken Lay, Jeff Skilling and Richard Causey to come forward in the face of the prosecution’s intimidation tactics and confer with the defendants and their counsel. Professor Henning concludes as follows:

It’s a little bit like the old Woody Hayes view of passing: only three things can happen if you meet with the defense lawyers, and two of them can be bad, so why take the risk? I will be surprised if many of the 38 letter recipients agree to meet with the defense team.

Many folks down here in Texas believe that former Texas coach Darrell Royal popularized that pithy quote about passing in football, but I believe that Professor Henning is correct that Coach Royal picked it up from Coach Hayes.

My sense is that the New York Times editors need a little psychiatric help in letting their “Enron-thing” go.
In this article, the Times reports on a working paper by a couple of East Coast economists who propose the rather unsurprising hypothesis that accounting scandals are one of many factors that tend to have a negative effect on job growth. Thus, the Times translates that working paper into the headline: “The Crime: Slow Job Growth. A Suspect: Enron.”
Of course, the Times didn’t bother to call the longstanding the expert on Houston’s employment market to find out the effect that Enron’s demise has had on Houston’s employment market (it’s not had much long-term effect). Nor does the Times bother to note that governmental regulation through criminalization of business — particularly the Arthur Andersen case — has likely had a far larger negative effect on jobs than the accounting scandal at Enron or other companies.
By the way, this is not the first time that the Times editors have used a questionable headline relating to Enron. Is there a medical term for an unhealthy preoccupation with Enron? Enronpsychosis?