Source: http://openjurist.org/472/f3d/1247/united-states-v-t-lake
Timestamp: 2015-07-28 04:03:14
Document Index: 324703121

Matched Legal Cases: ['§ 249', '§ 240', '§ 240', '§ 229', '§ 229', '§ 232', '§ 1343', '§ 1957', '§ 78', '§ 981', '§ 2461']

472 F3d 1247 United States v. T Lake | OpenJurist
472 F. 3d 1247 - United States v. T Lake Home
472 F3d 1247 United States v. T Lake 472 F.3d 1247
UNITED STATES of America, Plaintiff-Appellee,v.Douglas T. LAKE, Defendant-Appellant,United States of America, Plaintiff-Appellee,v.David C. Wittig, Defendant-Appellant.
No. 06-3140.
No. 06-3141.
Seth P. Waxman, Wilmer, Cutler, Pickering, Hale & Dorr, LLP, Washington, DC, for Defendant-Appellant Douglas T. Lake, Steven Alan Reiss, Weil, Gotshal & Manges LLP, New York, New York, for Defendant-Appellant David C. Wittig, (Edward C. DuMont, Theodore D. Chuang, Demian S. Ahn, Michael P. Spence, Daniel S. Volchok, Wilmer, Cutler, Pickering, Hale & Dorr, Washington, DC, on the brief for Defendant-Appellant Douglas T. Lake, and Gregory S. Coleman, Lisa R. Eskow, and Edward C. Dawson, Weil, Gotshal & Manges LLP, Austin, Texas, on the brief for Defendant-Appellant David C. Wittig).
Richard L. Hathaway, Assistant United States Attorney (Eric F. Melgren, United States Attorney, Christine E. Kenney, Assistant United States Attorney, with him on the brief), Topeka, Kansas, for Plaintiff-Appellee.
We summarize the evidence at trial in the light most favorable to the jury's verdict. See United States v. Espinoza, 338 F.3d 1140, 1146-47 (10th Cir.2003). In 1995 John Hayes, the Chief Executive Officer (CEO) of Westar (then known as Western Resources, Inc.), recruited Mr. Wittig (a New York investment banker who had performed services for Westar) to join Westar as Executive Vice President of Corporate Strategy to develop and implement a diversification plan for the utility. Mr. Wittig's original compensation included a salary of $425,000, a relocation benefit, stock, various short- and long-term incentives, and other benefits. By early 1999 Mr. Hayes had left Westar, the Board of Directors had appointed Mr. Wittig as President, CEO, and Chairman of the Board, and Mr. Lake, also a New York investment banker, had joined Westar as Executive Vice President and Chief Strategic Officer.
Federal law required Westar to submit annually to the SEC a 10-K Annual Report, see 17 C.F.R. § 249.310 (2002) and a 14A Proxy Statement, see id. § 240.14a-3 (2002).1 The 10-K presents information about the company's finances, business activities, and management. See Form 10-K available at http://www.sec.gov/about/ forms/form10-k.pdf (last visited Dec. 9, 2006). The 14A presents, among other things, information about the compensation for the CEO and the next four most highly compensated officers of the company. See id. § 240.14a-101 Item 8 (requiring information set forth in 17 C.F.R. § 229.402); id. § 229.402(a)(3) (persons for whom disclosure is required). Westar electronically submitted these reports to the SEC; they are available to the public. See 17 C.F.R. § 232.101(a)(iii) (2002). To assist him in preparing these annual filings, Westar's general counsel distributed to its directors and officers annual Director and Officer (D & O) questionnaires that requested the recipients to disclose all compensation they had received that year, including any personal benefits. Each questionnaire provided a nonexhaustive list of examples of "possible personal benefits," including home repairs and improvements, personal travel expenses, and personal use of Westar property, such as cars, planes, apartments, or vacation homes.
Mr. Wittig and Mr. Lake both failed to list their personal use of corporate aircraft as compensation on the D & O questionnaires. In this failure they had company. Between 1995 and 2002, out of all the directors and officers to whom a D & O questionnaire was distributed, only Westar general counsel John Rosenberg in 1998 and Westar director R.A. Edwards in 2002 disclosed personal use of corporate aircraft. Among those who failed to disclose personal use were Westar general counsel Rick Terrill and his assistant, and later successor, Larry Irick. Westar did not disclose any personal use of corporate aircraft in its SEC filings, even for Mr. Rosenberg and Mr. Edwards.
A central issue at trial was whether Mr. Wittig and Mr. Lake acted with wrongful intent in failing to report on the D & O questionnaires their personal use of company planes. Highly pertinent to the assessment of that intent is whether the personal use had to be reported to the SEC. The defendants asserted that SEC regulations governing the 10-K and 14A forms required disclosure of personal airplane use only if the "aggregate incremental cost" exceeded a certain threshold—the lesser of $50,000 and 10% of annual salary plus bonuses—and that their use did not meet this threshold. The government argued that all compensation had to be disclosed, cash and noncash, regardless of the amount. But the government made no effort to inform the jury of what was specifically required by SEC regulations, contending that the regulations were irrelevant. Rather, it focused on the extremely high value of the personal trips. Accountant Meara testified to the "charter value" of the trips, informing the jury of the cost per hour of renting on the open market a similar plane for the trips. In calculating the charter value of the trips, he included the cost of "dead head" flights in which an empty plane returned to its base after delivering passengers or flew from its base to pick up passengers. He computed a total charter value for the period 1998 to 2002 of approximately $1 million each for Mr. Wittig and Mr. Lake.
Mr. Wittig and Mr. Lake were indicted in December 2003 in the United States District Court for the District of Kansas. In the superseding indictment seven counts charged both men with wire fraud. See 18 U.S.C. § 1343. Each count alleged the above-described scheme to loot Westar; the counts differed only in that each alleged a different wire transmission: four 10-K Annual Reports (one for each year from 1998 through 2001) and three 14A Proxy Statements (one for each year from 2000 through 2002). Seventeen money-laundering counts charged the defendants with having engaged in monetary transactions in criminally derived property. See id. § 1957. Seven of these counts were based on transactions of Mr. Wittig at Capital City Bank—namely, increases in his line of credit and subsequent draws on that line of credit secured by property obtained through the wire fraud. The other 10 money-laundering counts alleged sales of Westar stock obtained through the wire fraud. Fourteen counts charged the defendants with having circumvented internal financial controls. See 15 U.S.C. §§ 78m(b)(5) & 78ff. Thirteen of these alleged that the defendants had circumvented internal controls by failing to report personal use of corporate aircraft on 13 different annual D & O questionnaires for Westar, Westar Industries (a subsidiary of Westar), and Protection One. (Mr. Wittig did not fill out anything in the 2002 D & O reports for the three corporations.) The remaining circumvention count alleged that Mr. Wittig had circumvented internal controls by prohibiting Westar's internal auditor from performing an audit of corporate aircraft use. The conspiracy count charged the defendants with having conspired to commit wire fraud, money laundering, and circumvention. Finally, the fortieth count of the indictment sought forfeiture of everything each had acquired as a result of the conspiracy, wire-fraud scheme, and money laundering. See 18 U.S.C. § 981(a)(1)(C) and 28 U.S.C. § 2461(c).
The defendants' first trial ended in a mistrial on December 20, 2004, because the jury failed to agree on a verdict. See United States v. Wittig, 425 F.Supp.2d 1196, 1204 (D.Kan.2006). They were retried six months later. See id. At the close of the government's evidence, Mr. Wittig and Mr. Lake moved under Fed. R.Crim.P. 29(a) for a judgment of acquittal. The district court reserved its ruling; and the jury found Mr. Wittig guilty on all counts and Mr. Lake guilty on 30. The jury decided that many, but not all, of the assets listed in the forfeiture count should be forfeited. After the verdict Mr. Wittig and Mr. Lake renewed their motions for acquittal and alternatively sought a new trial. The district court denied both motions.