CURB counsel says 'nothing really new' shown in indictments 'Nothing

By Amy Bauer

THE CAPITAL-JOURNAL

Several of the issues outlined in a federal grand jury indictment Thursday of two former Westar executives were among those that arose during a Westar Energy utility rate case in 2000 and the company's own internal audit earlier this year.

The 40-count indictment against former Westar chairman, president and chief executive officer David C. Wittig and former executive vice president and chief strategic officer Douglas T. Lake alleged that the pair conspired to personally profit from the company by failing to properly report personal use of company aircraft, structuring a Westar subsidiary, Westar Industries, to "loot assets from the utility" and creating employment agreements that let the pair dictate some of their compensation.

"There's nothing really new in what was issued today that really we have not been talking about for quite some time," said David Springe, consumer counsel for the Citizens Utility Ratepayers Board, which represents residential and small commercial utility consumers in Kansas.

Critics raised issues of compensation and use of corporate aircraft while the Kansas Corporation Commission conducted hearings on the company's rates and finances.

A federal grand jury issued a subpoena Sept. 17, 2002, for Westar documents related to corporate aircraft use. That subpoena was followed by others that culminated in Thursday's announcement of indictments against Wittig and Lake.

"For the people that I represent, this perhaps is in a sense some sort of vindication of the things we argued about in the last several years," Springe said.

Utility customers --- Westar Energy serves about 640,000 customers in Kansas --- won't be affected by Thursday's news, Springe said.

Jim Zakoura, counsel for the Kansas Industrial Consumers, a group of large power users, agreed.

"Number 1, the company Westar has made substantial management changes," he said. "Number 2, they have had some new directors and maybe have a fresh perspective. And Number 3, and most importantly, is that we are so fortunate to have the Kansas Corporation Commission really exercising close supervisory control over Westar because the Kansas Corporation Commission is going to make sure that the company is managed and operated in a manner that is in the best interest of ratepayers."

The indictment said that while Wittig and Lake were presiding over the company, its utility rates "soared."

But Springe objected to that characterization of rates. In July 2001, the KCC actually reduced rates by $15 million.

Zakoura noted that the indictment was wide-ranging in its charges, covering issues that spanned Wittig's tenure from 1995 to 2002 tenure and Lake's employment from 1998 to 2002.

While the categories in which wrongdoing was alleged weren't new, Zakoura said, the federal grand jury's subpoena power had allowed new information to be collected that will become public as the case moves forward.

"I see it as rather a beginning, where all of the facts surrounding these various actions and categories of actions, will now be forthcoming probably over the next year," Zakoura said.

"We really haven't heard from Mr. Lake or Mr. Wittig as to their version of these facts or what they believe the facts are related to these cases, and they will certainly now get their chance to do that," Zakoura said. "I would expect them to mount a vigorous defense and that the government will mount a vigorous prosecution. I think that so much of what has not come forward will come forward in the next year."

In a statement Thursday, KCC Commission Chairman Brian Moline said: "I am hopeful that neither the public nor the investment community overreact to this news. It is essentially a personal matter and does not affect the company as currently structured or its ability to provide electric service."

Shareholders didn't seem skittish after the news. Westar Energy (NYSE: WR) shares closed Thursday at $19.76, down 4 cents.

Amy Bauer can be reached

at (785) 295-1231

or amy.bauer@cjonline.com.

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