Federal Prosecutors Drop Charges Against Former Westar Executives
On August 20, 2010, U.S. District Court Judge Julie Robinson for the District of Kansas granted the United States Department of Justices motion to dismiss the charges against former Westar executives David Wittig and Douglas Lake. The charges were dismissed without prejudice, meaning they could be filed again.
Wittig and Lake were charged with conspiracy and circumvention of internal controls. The former executives were accused of manipulating a proposed merger for personal benefit and using Westars legal counsel to remove other directors who challenged their actions. Authorities also alleged that Wittig and Lake submitted false reports to the Securities and Exchange Commission (“SEC”) about their personal use of corporate aircraft. The SEC requires such reports if the added cost to the corporation for air travel exceeds $50,000. Prosecutors alleged that Wittig and Lake conspired to inflate their compensation from the company and took steps to hide their actions.
This case was the third attempt by the U.S. Department of Justice to try Wittig and Lake. The first case ended in a hung jury in December 2004. The government retried the case in early 2005 and in that second trial a jury found Wittig and Lake guilty of wire fraud, money laundering, circumvention of internal controls and conspiracy. The court also ordered millions of dollars in restitution. However, the U.S. Court of Appeals for the 10th Circuit reversed the convictions in January of 2007. The 10th Circuit threw out the money laundering and wire fraud convictions because of a lack of evidence and found that jury instructions for the circumvention and conspiracy charges were flawed.
After the 10th Circuit had ruled, prosecutors announced they would seek a third trial for the charges of conspiracy and circumvention. However, prior to trial, the Supreme Court announced its decision in Skilling v United States. Defense attorneys believe that the dismissal of this most recent case is byproduct of the recent Supreme Court decision that changed the landscape of the “honest services” fraud statute.
The decision of prosecutors to drop the charges comes less than two months after the Supreme Courts landmark decision in Skilling v United States. In Skilling, the Court severely narrowed the scope of the “theft of honest services” fraud statue, 18 U.S.C. Sec. 3146, by ruling that it is unconstitutionally vague except in cases involving bribery and kickback schemes. The Court ruled that federal prosecutors can no longer rely on the “theft of honest services” charge in cases involving private sector employees charged with self-dealing or undisclosed conflicts of interest without a bribery or kickback scheme. As a result of the Skilling decision, a once flexible tool in the arsenal of the federal prosecutors office has been sharply limited.
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