U.S. v. Wittig

Decision Date10 August 2009
Docket NumberNo. 08-3220.,08-3220.
Citation575 F.3d 1085
PartiesUNITED STATES of America, Plaintiff-Appellee, v. David C. WITTIG and Douglas T. Lake, Defendants-Appellants.
CourtU.S. Court of Appeals — Tenth Circuit

Zuckerman Spaeder, Washington, D.C., for Defendant-Appellant, David C. Wittig.

Richard L. Hathaway, Senior Litigation Counsel, United States Attorney's Office, Topeka, KS (Marietta Parker, Acting United States Attorney, and Christine E. Kenney, Assistant United States Attorney, with him on the brief), for Plaintiff-Appellee.

Before MURPHY, McKAY, and GORSUCH, Circuit Judges.

GORSUCH, Circuit Judge.

David Wittig and Douglas Lake continue to labor under an indictment for allegedly looting their former company, Westar Energy, Inc. Their first trial ended in a hung jury. A second trial yielded convictions, but we reversed those convictions on appeal. With respect to the substantive counts of wire fraud and money laundering, we held that the government had failed to produce sufficient evidence (actually, any evidence) of an essential element. We therefore ordered the defendants acquitted of those offenses. The government's error on the substantive wire fraud counts, we found, also implicated the adequacy of the instructions given the jury on the remaining charges against the defendants: circumvention of internal controls and conspiracy. Accordingly, we reversed the defendants' convictions on those counts as well, but because the basis of our reversal had nothing to do with the sufficiency of the evidence, we remanded the case for a possible retrial.

On remand, the defendants argued that any further trial on the conspiracy charges should be barred by the Fifth Amendment's Double Jeopardy Clause; alternatively, and at the least, they argued that the district court should restrict the government's proof at any new trial to avoid double jeopardy problems. The district court denied the defendants' requests, and they responded with this interlocutory appeal. To the extent that the defendants' appeal seeks to anticipate and restrict the evidence the government may produce at trial, however, we have no jurisdiction to hear their arguments at this stage. In an interlocutory proceeding, we can only vindicate, as a matter of law, the double jeopardy right not to be tried for a second time on the same charge; we have no power to issue orders in limine forbidding the admission of this or that piece of evidence or testimony in some potential future trial. To the extent that the defendants do seek dismissal of the conspiracy charges against them, we hold, consistent with our last ruling and the district court's judgment, that double jeopardy doesn't categorically foreclose a new trial because the conspiracy charges in the indictment are considerably broader in scope than the wire fraud charges on which defendants were acquitted. At the same time, we readily acknowledge that today's opinion may not represent the last word on double jeopardy in this case. If, as the defendants predict, the government's proof of conspiracy at trial is narrower than its indictment and seeks to rehash only matters on which the defendants have already been acquitted, more will remain to be said. But all that depends on a guess about the future, and the future must be left to the future. For the present, we are obliged to affirm.

I

The facts underlying this prosecution are set out extensively in United States v. Lake, 472 F.3d 1247 (10th Cir.2007). For our purposes in this appeal, it is necessary to rehearse only part of the story.

A

Over a decade ago, in 1995, David Wittig left a New York investment bank to join Kansas's largest public utility, Westar Energy Inc., as an executive in charge of corporate strategy. In that role, he developed a plan to diversify Westar's assets by acquiring various unregulated businesses. Westar initially attempted to acquire ADT, a national home-security company. While the acquisition ultimately didn't pan out, Westar still did well, making some $856 million trading in ADT stock. Later, Westar successfully acquired Protection One, another home-security company, and bought stock in Guardian International, a security-alarm business. At least initially, this diversification strategy was hugely successful, adding billions to Westar's net assets and driving its stock price up dramatically, as high as $48 per share in 1998. In early 1999, Mr. Wittig was elected President, CEO, and Chairman of Westar's Board. Around the same time, Douglas Lake, also a New York banker, joined the company as Executive Vice President and Chief Strategic Officer.

Then Westar's health took a turn for the worse. Westar's new subsidiary, Protection One, suffered accounting irregularities and became the subject of an SEC investigation. Its stock price, along with that of its parent Westar, fell sharply. In an effort to staunch the bleeding, Westar split off its public utility from its unregulated businesses and attempted to merge it with another entity (the "Split-Merge Transaction"). But in 2001, the Kansas Corporation Commission blocked the merger and (rather than approving Westar's pending request for a rate increase) ordered Westar to cut utility rates by $20 million. As a result, Westar's share price plummeted to $9 a share by the end of 2002, around the time Messrs. Wittig and Lake left the company.

In 2004, the United States Attorney for the District of Kansas obtained a forty-count indictment against the defendants. The indictment alleges that the defendants were not just unskilled or unlucky corporate managers, but criminals. According to the government, Mr. Wittig and Mr. Lake conceived and executed a wide-ranging scheme to loot Westar for their own benefit. In particular, the government alleges that the defendants' real motivation behind the Split-Merge Transaction was to collect millions in compensation that it says would be owed them under change-in-control provisions in their contracts had the merger gone through. Other components of the alleged scheme include profiting from complicated transactions in shares of Guardian International that resulted in a $4.2 million loss to Westar, as well as:

acceleration of a $5.37 million signing bonus to Mr. Wittig that was to have been paid over a 10-year period beginning in 2010; improper payment of relocation expenses; improper loans from Westar; acquisition of a split-dollar life-insurance contract at far greater cost to Westar than the bonus it was ostensibly to replace; and personal use of Westar aircraft. To accomplish this looting, the defendants misled the Board of Directors and connived to remove two Board members who asked challenging questions (the two resigned voluntarily). Lake, 472 F.3d at 1252. The indictment charges seven counts of wire fraud, 18 U.S.C. § 1343; seventeen counts of laundering the proceeds of the wire fraud; 18 U.S.C. § 1957, fourteen counts of circumvention of internal controls (by failing to disclose use of corporate aircraft on internal Westar reports and obstructing company investigations of aircraft use), 15 U.S.C. §§ 78m(b)(5) & 78ff; and one count of conspiracy to commit the three substantive offenses of wire fraud, money laundering, and circumvention, 18 U.S.C. § 371. The fortieth count seeks forfeiture of all assets acquired through the conspiracy, wire fraud, and money laundering. 18 U.S.C § 981(a)(1)(C); 28 U.S.C. § 2461(c); see also Appendix (Indictment).

The defendants' first trial on this indictment ended in a hung jury. See United States v. Wittig, 425 F.Supp.2d 1196, 1204 (D.Kan.2006). Six months later, the government retried the defendants. This time, the jury convicted Mr. Wittig on all counts and Mr. Lake on thirty counts. It also found that some, but not all, of the assets listed in count 40 should be forfeited. The defendants then appealed to us, seeking a judgment of acquittal on the substantive offenses (but not on the conspiracy charge, Lake, 472 F.3d at 1263-64) because, they alleged, insufficient evidence supported the jury's verdict.

B

We reversed. With respect to the wire fraud and money laundering charges, we concluded that the government failed to produce sufficient evidence to sustain the convictions. As we explained, the difficulty for the government was that defrauding one's employer does not itself violate federal law. Wire fraud requires the government to establish three elements beyond a reasonable doubt: "(1) a scheme to defraud; (2) an interstate wire communication; and (3) a purpose to use the wire communication to execute the scheme." Lake, 472 F.3d at 1255; United States v. Janusz, 135 F.3d 1319, 1323 (10th Cir. 1998). This last element the government failed to prove. The only interstate wires charged in the wire fraud counts of the indictment were four 10-K Annual Reports and three 14A Proxy Statements submitted by Westar to the Securities and Exchange Commission during the defendants' tenure (the "SEC Reports"). The government's sole allegation concerning these reports was that the defendants failed to disclose, as compensation, the value of their personal use of corporate aircraft.

But under the rule in Parr v. United States, 363 U.S. 370, 80 S.Ct. 1171, 4 L.Ed.2d 1277 (1960), mailings (or, in this case, wires) cannot be for the purpose of executing a fraud when they are made only in response to an "imperative command of duty imposed by ... law," unless they are also false or fraudulent. Id. at 391, 80 S.Ct. 1171; accord Lake, 472 F.3d at 1256. It was undisputed that the SEC Reports are just that kind of wire: filings that federal law commands must be sent to the SEC. Lake, 472 F.3d...

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