The NewStandard ceased publishing on April 27, 2007.

Energy Co. Bribery Scandal May Threaten Congressmen

by Christopher Getzan

Emails and memos between Westar Energy executives and their Washington lobbyist suggest the corporation paid powerful Republican lawmakers to provide their company an exemption from regulation.

Jan. 10, 2005 – A government watchdog group sent a letter to the US Justice Department last week arguing that new documentation presents sufficient cause for law enforcement officials to begin investigating embattled Republican power broker, House Majority Leader Tom DeLay of Texas, along with other lawmakers and corporate executives, on charges of breaking a federal anti-bribery statute.

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Public Citizen says new records released in the course of an ongoing House Ethics Committee inquest detail efforts by Westar Energy to obtain protection from certain federal regulations by receiving an explicit, company-specific exemption in legislation before the House of Representatives in exchange for contributing thousands of dollars to congressional election campaigns.

Before the proposed energy bill petered out in 2003, evidence suggests the requested exemption actually appeared in a draft of the law. Republican leaders later withdrew it after Westar came under investigation, according to documents reviewed by The NewStandard.

The Public Utility Holding Company Act (PUHCA) of 1935 prevents government regulated utilities from balancing unregulated "side businesses" on top of money made off captive utilities customers. Like Enron executives, Westar head David Wittig and others were looking to use revenue from Westar -- the government regulated energy concern -- to underwrite other unregulated business ventures.

In order to duck the prying eyes of SEC investigators, Westar lobbyist Richard Borneman recommended a menu of contributions to powerful Republican lawmakers.

"The main issue here was that the CEO, David Wittig, and some of his top executives had a plan to split up the company," explained Tyson Slocum, Public Citizen's Research Director on Energy Issues.

The alleged scheme involved splitting Westar into different companies that Wittig and his fellow executives would control, so that in essence, the side businesses would not own the debt they were previously responsible for, but Westar, the utility, would absorb it. In fact, explained Slocum, Wittig and others "had actually secretly issued stock in the [new] company that would give them a windfall" of millions.

This could all be allowed with a repeal of PUHCA, but even then, "Westar would come under the jurisdiction of the Investment Company Act, and make it more difficult to split up the company," Solcum said.

It was this other jurisdiction -- protection from the Investment Company Act of 1940 – from which Wittig's clatch of top Westar brass seems to have been looking to powerful legislators in hopes of buying an exemption.

The Email Trail

In order to attain the exclusion and duck the prying eyes of Securities and Exchange Commission (SEC) investigators, Westar lobbyist Richard Borneman recommended a menu of contributions to powerful Republican lawmakers in an April 2002 memo and then wrote an email to Westar Vice President Doug Lawrence, apparently requesting funds to cover the alleged bribe.

Lawrence relayed Bornemann's query to Westar executives in a May 2002 memo summarizing "the total budget for our Washington efforts regarding the Federal Energy Bill and its impact on our financial restructuring plan," writing that the contributions represent "budget allocation according to current needs as recommended by our Washington Lobbyist."

In another May 2002 email to Douglas Lake, Lawrence wrote: "Right now, we are working on getting our grandfather provision on PUHCA repeal into the senate version of the energy bill… We have a plan for participation to get a seat at the table, which has been approved by David the total package will be $31,500 in hard money (individual), and $25,000 in soft money (corporate). Right now, we have $11,500 in immediate needs for a group of candidates associated with Tom Delay, Billy Tauzin, Joe Barton and Senator Richard Shelby."

In response to an earlier request from Lake for clarification on why donations were required for which candidates, Lawrence explained: "Delay is the House Majority Leader. His agreement is necessary before the House Conferees can push the language we have in place in the House bill." Billy Tauzin and Joe Barton are key House Conferees "on our legislation," and "Shelby is a member of the Senate Energy Committee and the Banking Committee... and is the lead republican on all Senate PUHCA related matters. He is our anchor on the Senate side."

Public Citizen, which also tracks campaign contributions, says that most of the donations were made by the company, including a $25,000 contribution from Westar to the Texans for a Republican Majority Political Action Committee (TRMPAC).

In June, Lawrence wrote still another memo reporting: "The good news is that we were successful in getting language providing the appropriate relief in the House version of the bill. Now we are working to get the Senate to adopt a modified version of the House bill. Our effort is focused on getting the House members of the committee to strongly defend our provision and finding a few Senate conferees who can support it. In this second round of contributions we are targeting only one House Member. Representative Billy Tauzin of Louisiana is the Chairman of the House Energy and Commerce committee."

"Clearly it's unethical behavior, without a doubt," Holman told TNS. "Quite frankly, it appears that purchasing favor was the purpose of the campaign contributions," he added, noting that he believes the Westar documents are unique. It is rare that such agreements are put in writing or that they ever get released to the public, he said.

This is the second time Public Citizen has requested a Justice Department investigation into possible corruption involving Westar and House Republican leaders. A year ago, Holman said, the group sent a similar letter to the Department, provoking a somewhat lukewarm response.

"We cannot confirm or deny an investigation is occurring" is the message Tyson Slocum says DOJ wrote back.

With Westar caught up in a separate Department of Justice investigation for securities fraud, Holman said the company decided to "put everything out there, make everything available to the public." He said that by doing so, Westar was attempting to lay blame for any wrong doing at the feet of Wittig and others, as opposed to the company as a whole or even on the board of directors.

Wittig has since been convicted of bank fraud, conspiracy and money laundering, following a spectacular fall that was even recounted by Thomas Frank in his book, What's The Matter With Kansas?

"This guy ran a once proud utility into the ground," said Slocum.

A September 2002 email from Lawrence to another Westar official appears to show that after a fraud investigation of the company began in 2002, DeLay’s office asked Westar to relieve the congressmen from their commitment to supporting the Energy Bill measure exempting Westar from SEC investigation. Lawrence wrote: "Things are grim in DC. The Delay staff has asked us to release people from their commitment to support our provision."

Then, in what Holman interprets as an insinuation that Westar should shift gears and focus on direct lobbying of the SEC, Lawrence’s email continued: "At this point my recommendation is to release them, with a request to assist on the SEC effort. (they’ll be happy to help there)."

The Congressional Connection

It remains to be discovered what exactly -- if anything at all -- DeLay, Barton, and Tauzin could be guilty of. Slocum says that Public Citizen has "been wondering for a while" what might happen if federal prosecutors approached the estranged Westar executives already in the hot seat for various corporate crimes.

"At this point, [the documents are] just hearsay" where DeLay, Barton, and others are concerned, says Slocum, since the emails and memos appear to refer to bribes but are not smoking gun evidence that any of the congressmen actually solicited contributions in exchange for favors. "At a minimum, it's clear to us, these Westar executives implicate themselves."

However, if federal prosecutors now looking at former Westar officials for related crimes follow the trail back through the company documents, or if people under pressure in related cases "knew any dirt on any members of Congress, "they would probably squeal," he said.

"Even giving [Representatives] Joe Barton or Billy Tauzin the benefit of the doubt," said Slocum, "they erred in ignoring the experts at the SEC."

Brooks Landgraf, a spokesperson for Rep. Barton, told TNS the congressman's office had not yet received a copy of the new letter Public Citizen sent the Justice Department. "We don't have anything to say about it right now until it becomes official correspondence," Landgraf said.

In an email reply to The NewStandard, DeLay spokesperson Shannon Flaherty cited a Fall 2004 House Ethics Committee report that found DeLay had not "improperly solicited contributions from Westar," or taken "action with regard to Westar that would constitute an impermissible special favor."

However, in that same report, the committee members did say that they "also obtained information indicating that Representative DeLay’s participation in and facilitation of an energy company fundraiser in June 2002 is objectionable in that his actions, at a minimum, created the appearance that donors were being provided with special access to Representative DeLay."

"Again, I think that the ethics committee did not look at [whether] Westar executives did anything illegal," said Slocum.

Will ‘The Hammer’ Swing?

The second Public Citizen letter comes at a time when progressive groups are pressing for DeLay to step down for allegedly committing a slew of ethical violations in the Congress -- among them improperly influencing a vote in order to pass the controversial Medicare drug bill in 2003 -- and back home, a Texas grand jury is in the process of examining his possible role in a campaign money-laundering scheme.

Last week, DeLay partisans attempted to revise House standards to deflect accusations of unethical behavior by the majority leader, but backed down when it was revealed that by doing so, they would also be rewriting disciplinary measures for members who have sex with House pages or attempt to bribe their way out of parking tickets.

Then, in the kind of twist that seems to increasingly becoming the norm for the majority party, congressmen friendly to DeLay backtracked yet again, and this time moved to "tighten" the rules -- rather than overhauling them -- so that a majority vote would be needed to prompt an ethics investigation.

Nicknamed "The Hammer" for the often arbitrary manner in which he wields his power against both progressive legislation and Democrats, DeLay is considered by many political analysts to be the real power in the House of Representatives.

Holman explained that powerful congressional leaders overextending the power of their offices is not new. But however poorly past politicians may have fared battling ethics violations, "They start forgetting," he said. "It tends to go in cycles."

Cycles of scandal aside, "This should be a clear lesson to Congress not to bend the rules for a specific entity," said Tyson Slocum. "You get in trouble. This is not a way to run a democracy. This is a clear lesson on how not to make public policy."

When asked if he thought the current House soap opera involving DeLay, Barton, and others might be rooted in the Republican Party's overwhelming dominance in national politics today, Tyson Slocum said it indicates a larger problem in Congress. "A vast majority of the seats [in the House] are uncontested," he said. "You've got a situation now where Senate seats are far more competitive than House seats, and that's something the founding fathers never intended. That clearly leads to a culture of unaccountability, in each party."

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The NewStandard ceased publishing on April 27, 2007.

Christopher Getzan is a contributing journalist.

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