Lawyers in Westar Trial Want Off Case

By Dan Margolies, The Kansas City Star, Mo.

May 30–Saying they are owed nearly $3.3 million in legal fees and expenses, the attorneys for former Westar Energy executive Douglas Lake have moved to withdraw from his criminal case.

In a filing Tuesday in federal court in Topeka, the attorneys said the government’s efforts to freeze the assets of Lake and his co-defendant, former Westar chief executive David Wittig, had left them no choice but to bow out as Lake’s counsel.

The government’s motive in freezing the fees "must be the improper one of depriving Mr. Lake of experienced counsel capable of defending him and thus ensuring a conviction after two striking failures," their motion stated. "This baseless motion of the government to ‘refreeze the fees’ has been pending for the past three months and has had the effect of chilling Mr. Lake’s representation."

Reached Tuesday at his Connecticut home, Lake said he was evaluating all his options. He declined to comment further.

Four weeks ago the government announced it would pursue a third criminal trial against Wittig and Lake, Westar’s former chief strategic officer, on charges they looted the Topeka-based utility.

Their first trial ended in a hung jury. The men were convicted in a second trial, but in January a federal appeals court threw out the convictions.

The appeals court ruled that Wittig and Lake could not be retried on charges of wire fraud and money laundering because the evidence of their guilt on those charges was legally insufficient. It did, however, indicate that the government could pursue them on the remaining charges of conspiracy and circumventing internal controls, which the government has opted to do.

The third trial is scheduled to begin Jan. 14.

Lake has been represented throughout the proceedings by the New York law firm of Hughes Hubbard & Reed and through most of the proceedings by the Wichita firm of Hite Fanning & Honeyman. Hughes Hubbard claims to be owed more than $3.16 million in fees and expenses for its criminal representation of Lake. Hite Fanning claims to be owed about $120,000.

Both firms said that, under the terms of Westar’s articles of incorporation and Lake’s employment contract, Westar was obligated to pay those fees and expenses. Westar has already paid millions of dollars in legal fees and expenses, but it stopped after U.S. District Judge Julie Robinson entered a restraining order in May 2005 directing that the fees be put in an escrow account pending the outcome of the litigation.

Through last year, Westar had incurred nearly $10 million for the men’s legal fees and expenses, according to company filings with the Securities and Exchange Commission. The utility claims the fees are unreasonable because they are not in line with local rates. East Coast law firms typically charge much higher hourly rates than Midwestern ones.

In their motion, however, Lake’s attorneys noted that Westar "has employed three of the most prominent and most expensive law firms in the country — Debevoise & Plimpton, Davis Polk & Wardwell and Simon Thacher — and paid them many millions of dollars in proceedings involving the same facts and issues for which Mr. Lake’s attorneys were retained."

The company "also paid huge legal fees and expenses for its own ‘criminal representation’ (though it was never indicted) and that of the many officers and directors it helpfully supplied as witnesses to the government during the course of the two previous trials," the motion stated.

Karla Olsen, a spokeswoman for Westar, said that the $3.3 million in unpaid legal fees and expenses was the subject of ongoing litigation, "so we’d be unable to predict how the court will rule" on that and future obligations by Westar.

Larry Irick, Westar’s general counsel, acknowledged the company had retained East Coast lawyers but said that was a separate issue "from counsel for which Westar has an obligation to advance fees under our articles of incorporation."

If Robinson allows Lake’s attorneys to withdraw, the trial probably will be delayed as Lake seeks new attorneys.

The withdrawal motion was filed a day before a scheduled hearing in Topeka on another contentious issue: What should happen to $7 million that Wittig forfeited to the government after his conviction. The appeals court, in the course of reversing Wittig’s conviction, also threw out the forfeiture order.

While the government agreed that it could not retain the funds, Wittig agreed to have the funds paid into a trust account to fulfill bond conditions imposed by Robinson. The government recently asked Robinson to reinstate earlier restraining orders, saying it feared the funds would be dissipated, and nullify an earlier agreement with Wittig’s wife to let her keep assets that were said to belong to her.

To reach Dan Margolies, call 816-234-4481 or send e-mail to dmargolies@kcstar.com.

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