KANSAS CITY, Mo. —One of two top Westar executives accused eight years ago of trying to loot the Kansas utility has reached a settlement with the company that will give him $21 million in non-salary compensation and $5.3 million for attorney fees.
The settlement between Douglas Lake, former top strategy officer for the state's biggest electrical utility, and Westar was announced Friday. Kansas regulators issued a statement saying Westar customers won't pick up the tab for the deal, which was reached in arbitration.
Lake and former Westar CEO David Wittig were forced out of their jobs in 2002 and indicted by a federal grand jury the next year. They were charged with conspiring to inflate their compensation at the Topeka-based company and hiding their actions. They also were charged with wire fraud and money laundering.
A first trial in 2004 ended in a hung jury. The two were convicted in a second trial in 2005, but the U.S. Circuit Court of Appeals threw out the convictions, saying prosecutors didn't prove enough evidence of wire fraud and money laundering.
Lake and Wittig were awaiting a third trial on charges of conspiracy and circumvention of internal controls last August when prosecutors dropped the case.
Arbitration related to the men's employment contracts and their termination had been put on hold while the federal case worked its way through the legal system. Westar spokeswoman Gina Penzig said it resumed last fall after the case was dismissed.
Penzig confirmed Lake's $26.3 million settlement but said much of what was discussed in arbitration remains confidential.
On Friday, Westar filed documents with the Securities Exchange Commission stating that as of March 31, the company had compiled $81.4 million for compensation not yet paid to Lake and Wittig, and $8.3 million for legal fees and expenses.
As a result of arbitration, the filing said, those funds were reduced to roughly $21 million and $5.3 million, respectively.
Arbitration involving Wittig has not been completed. According to prosecutors he was paid more than $25 million in compensation and benefits during his tenure with the company.
The Kansas Corporation Commission chief sent out a news release promising that Westar customers wouldn't pay any of the compensation or legal expenses awarded in the deal.
KCC Chairman Thomas Wright assured customers that "they have not paid, and will never pay, any portion of the dollar amounts associated with the settlement." Instead, those are being paid entirely by shareholders, he said.
"The chairman thought it was important to get the message out to Westar customers and ratepayers," KCC spokeswoman Cara Sloan-Ramos said. "Chairman Wright thought it was important to get a statement out as soon as possible to assure customers they wouldn't pay in any way."
While Wittig and Lake were in charge of Westar, the company's stock plummeted from $44 per share to less than $9, and its debt grew to more than $3 trillion, the government contended.
Also, prosecutors said during the trial that as the company was laying off hundreds of employees and instituting cost-saving measures, Wittig spent more than $6.5 million to renovate its executive suites with a gourmet kitchen and dining room, including a $29,000, custom-built television wall unit.
The government also contended the two men extensively used the company's three corporate aircraft for personal benefit.