Letter to Department of Justice re: Westar bribery scandal

December 28, 2004

Noel Hillman, Chief
Department of Justice
Criminal Division
Public Integrity Section
1400 New York Ave NW
Washington, D.C. 20005

RE:   Need for an investigation of possible bribery of members of Congress by Westar Energy, Inc. executives

Dear Mr. Hillman:

Public Citizen is writing to provide the Department of Justice with significant new information regarding possible violations of 18 U.S.C. §201 (“Bribery of public officials and witnesses”) by current and former Westar Energy, Inc. executives and its D.C.-based lobbyists and current and former members of the U.S. House of Representatives. This new information has recently been uncovered in an investigation by the House Committee on Standards of Official Conduct (“ethics committee”).

On June 17, 2003, Public Citizen submitted a complaint concerning possible criminal violations of anti-bribery statutes by lobbyist Richard H. Bornemann; Westar Energy (previously known as Western Resources) executives David C. Wittig, Douglas T. Lake, Douglas R. Sterbenz, Douglas R. Lawrence, Anita Jo Hunt, Caroline A. Williams, Richard A. Dixon, Kelly B. Harrison, Larry D. Irick, Peggy Lloyd, Bruce Akin, Paul R. Geist; and U.S. Representatives Tom DeLay (R-Texas), W.J. “Billy” Tauzin (R-La.) and Joe Barton (R-Texas).

The basis of the original complaint stemmed from internal communications released by Westar Energy (Westar) in May 2002. These communications explicitly detail efforts by the named Westar executives and Bornemann, their chief D.C. lobbyist, to buy “a seat at the table” in congressional dealings through a schedule of $63,000 in campaign contributions. The particular “seat” they sought was in congressional negotiations over the energy bill, where Westar was seeking the repeal of the Public Utility Holding Company Act (PUHCA) and the inclusion of a provision that would exempt the company from Securities and Exchange Commission (SEC) oversight if PUHCA were repealed. The executives planned a major financial restructuring of its operations and did not want the SEC to interfere in the plan when the executives sought to allegedly secretly enrich themselves.

The repeal was included in the House-passed energy bill that year. In the subsequent House-Senate conference negotiations on that legislation, the special exemption for Westar from SEC regulation was quietly inserted by Rep. Barton, with the support of then-Majority Whip DeLay and former Energy and Commerce Committee chairman Billy Tauzin.

But new documents, released as part of an investigation by the House ethics committee, further implicate Westar’s D.C. lobbyist Bornemann and top Westar executives in this plan to make campaign contributions for the purpose of obtaining legislative access and preferential treatment. This new evidence warrants a formal investigation into possible violations of the anti-bribery statute by the Westar executives, its lobbyist and the House congressional leaders who may have been influenced by the plan.

This additional information includes:

  • An April 2002 memorandum from Westar lobbyist Richard Bornemann to Westar Vice President Doug Lawrence recommending that the company   pursue a “Platinum Package” of campaign contributions, including a $25,000 soft money contribution to Texans for a Republican Majority (TRMPAC), a leadership PAC of DeLay’s, and $31,500 in additional “hard” money contributions to a list of candidates associated with Barton and Tauzin for the purpose of gaining access to the legislators during energy bill negotiations.

  • A May 2002 e-mail from Bornemann to Lawrence, stating that “I absolutely detest asking you for money. We all prefer to think that our powerful personalities and strategic brilliance transcend such grubbiness. Anyway, let’s sum up the needs discussed in our conversation today. They keep to the boundaries of the ‘platinum’ budget as approved.”

  • A May 2002 memo from Lawrence to Westar executives accepting the campaign contribution “budget allocation according to current needs as recommended by our Washington Lobbyist … the estimated needs (first page) summarizes the total budget for our Washington efforts regarding the Federal Energy Bill and its impact on our financial restructuring plan.” The Lawrence e-mail details the responsibilities assigned to top Westar executives to contribute money to campaigns of candidates for the House associated with Barton and Tauzin in exchange for passage of a company-specific exemption from SEC oversight.

  • A May 2002 e-mail from former DeLay staffer Drew Maloney to DeLay’s ARMPAC staffer Chris Perkins explaining Westar’s desired special exemption (“a unique problem that was addressed in the House bill”) in the energy bill. Westar executives presented their exemption request to the then-House majority whip at a DeLay golf outing; their invitation to the golf outing, and the opportunity to talk one-on-one with DeLay and his staff members, was viewed as a reward for the company’s $25,000 soft money contribution to TRMPAC.

  • A June 2002 memorandum from Westar Vice President Doug Lawrence to company executives explaining that the Platinum Package has paid off in getting DeLay and Barton to sponsor Westar’s special exemption in the energy bill (“The contributions made in the first round were successful in opening the appropriate dialogue”).

  • An August 2002 e-mail from TRMPAC fundraiser Susan Lilly to Tauzin’s campaign committee soliciting a joint fundraiser with Tauzin, explaining that DeLay is personally involved with TRMPAC’s operations.

  • A September 2002 e-mail from Lawrence to Westar Vice President Kelly Harrison stating that, after news of a securities fraud investigation of Westar, “DeLay staff has asked us to release people from their commitment to support” Westar’s special exemption from the energy bill.

Although the House ethics committee investigation did not charge DeLay with quid pro quo corruption, the scope of the ethics committee was limited, and it did not investigate potential wrongdoing of other House members (like Barton or Tauzin) or of outside parties like Bornemann and Westar executives. Moreover, the committee concedes that it did not conduct a full investigation, and it appears that the committee was willing to accept self-serving, exculpatory statements in letters submitted by attorneys for some of the participants in the matters under investigation as the basis for its conclusion that there was no improper solicitation of contributions. By contrast to those letters, the documents released as part of the ethics committee inquiry, along with the on-going grand jury investigation of laundered corporate money into Texas state elections contain new and significant evidence suggesting that Bornemann and Westar executives may have contributed about $63,000 to campaigns associated with DeLay, Barton and Tauzin for the sole purpose of obtaining a specific legislative favor.

A.   The Platinum Package

The ethics committee issued a 38-page report documenting that executives and lobbyists for Westar were able to plead for a special legislative favor with Barton, Tauzin, DeLay and his top aides after anteing up substantial campaign contributions for Republican candidates associated with the representatives. For example, a May 14, 2002, soft money contribution of $25,000 to  TRMPAC was the price of admission for two Westar executives to attend a June 2002 DeLay golfing retreat with other energy company executives at the Homestead in West Virginia.

According to an April 23, 2002, confidential memorandum from Westar lobbyist Richard Bornemann to Westar Vice President Doug Lawrence, the company was pursuing Bornemann’s “Platinum Package” for buying influence with House Republican leaders, which included a $25,000 soft money contribution to TRMPAC and $31,500 in hard money contributions to candidates associated with Barton and Tauzin. Bornemann emphasized that the proposed schedule of contributions “is not a random wish list that simply matches titles with solicitations. We have thought this through…”

The memorandum went on to say:

“Rep. Tauzin is chairman of the full House Energy and Commerce Committee. His priority right now is using his position to help secure the re-election of some of his key allies and friends. In fact, he and Rep. Joe Barton (R-TX), who chairs the full committee’s Energy and Air Quality Subcommittee, are hosting and cooking for a series of eight ‘Tex-Cajun Cookouts’ over the next couple of months. We strongly recommend participation in all eight at the solicited $1,000 level.”

In fact, Westar executives ended up contributing to seven of the eight listed candidates associated with Tauzin and Barton: Rep. John Shimkus (Westar Vice President Douglas Lake gave $1,000); Rep. Sam Graves (Westar CEO Wittig gave $1,000); Rep. Anne Northup (Wittig gave $500 and Westar’s General Counsel, Larry Irick, gave $350); Rep. Shelley Moore Capito (Senior Vice President Richard Dixon gave $650 and Peggy Lloyd—identifying her employer as Bornemann’s lobbying firm, rather than Westar—gave $350); Rep. Bob Simmons (Vice Presidents Lawrence and Leroy Wages each gave $500); Rep. Tom Latham (Westar Vice President Bruce Akin and General Counsel Larry Irick gave $500 apiece); and Rep. Robin Hayes (Westar Vice President Caroline Williams and Peggy Lloyd’s husband, Herbert, gave $500 each).

Furthermore, Bornemann wrote in his memo that: “Lastly with regard to Chairman Tauzin, we need to mention his own personal ‘big one.’ His leadership PAC—‘Bayou Leader PAC’—holds an annual summer event in New Orleans. The cost is $5,000…” Four Westar executives ended up contributing a total of $2,800 on July 31, 2002 to Tauzin’s leadership PAC. Tauzin later gave his proxy vote in conference committee to protect Westar’s single company exemption from SEC regulation on September 19, 2002.

Bornemann also wrote that “Rep. Barton chairs the ‘utility’ subcommittee of the full Energy and Commerce Committee: the Subcommittee on Energy and Air Quality. He has a personal campaign kitty and his own leadership PAC. We recommend supporting each at the $2,000 level.” And, as outlined, three different Westar executives gave both Barton’s campaign and his leadership PAC a total of $4,000 on or before December 19, 2002. Barton had voted in conference committee to protect Westar’s single-company exemption from SEC regulation on September 19, 2002.

While Bornemann’s memo also recommended “a $2,000 contribution” to Rep. Richard Burr, Wittig’s $1,000 contribution to Burr’s Next Century Fund leadership PAC on October 18, 2002 was the only Westar contribution to Burr. Burr gave his proxy vote in conference committee to protect Westar’s exemption from SEC regulation on September 19, 2002.

According to the memorandum:

“We believe that the most beneficial way to spend corporate dollars – as opposed to cutting personal or PAC checks – is with the House leadership. That means joining the fold, so to speak, of House Majority Leader [sic] Tom DeLay (R-TX).

“We have been looking for an effective, but relatively inexpensive way to do this because the conventional route is near-prohibitive cost.

“For example, Mr. DeLay has two leadership PACs – the reportable ‘Americans for a Republican Majority (ARM),’ and the non-reportable Texans for a Republican Majority (TRM).’ But as near as we can tell, checks in the range of $50-$100K seem the norm here….

“We may have an opportunity, later this summer, for an energy industry ‘roundtable’ golf match at the Homestead for a ‘mere’ $25,000.” [See Attachment A, “Confidential Memorandum,” April 23, 2002]

The $25,000 soft money contribution to DeLay’s TRMPAC was made in May 2002 and two Westar executives were invited to the golf outing organized by lobbyist and former DeLay energy aide Drew Maloney in coordination with ARMPAC staff. Maloney spelled out to DeLay’s staff the special interests each corporate participant was seeking from DeLay. For Westar, Maloney wrote: “It has one big concern that does not conflict with the others – it wants to repeal the Public Utility Holding Company Act.” [See Attachment B, E-Mail from Drew Maloney to Chris Perkins, May 30, 2002]

A Westar executive shared a golf cart with a DeLay aide for a round of golf on June 3, 2002, and discussed the company’s interest in the energy bill. The executive then attended a luncheon at which he “restated Westar’s position” to DeLay regarding the special exemption the company sought in the legislation.

DeLay gave his proxy vote to protect Westar’s single-company exemption from SEC regulation on September 19, 2002.

B.   Making Inroads

TRMPAC was of special concern to Rep. DeLay. As its founder, DeLay envisioned TRMPAC as playing a key role in promoting a Republican majority in the Texas state legislature in 2002 and, ultimately, paving the way for an unprecedented second congressional redistricting drive in Texas in as few as two years.

An August 2002 e-mail from Susan Lilly, a fundraiser for TRMPAC, soliciting a joint fundraising event with Rep. Billy Tauzin, described the personal significance of the soft money committee to DeLay and his involvement in the group’s operations. According to Lilly: “This election cycle represents a tremendous opportunity for Republicans to finally seize control and elect a Republican speaker of the Texas House…. To that end, Congressman DeLay is extremely committed to TRMPAC and suggested that we contact Congressman Tauzin to enlist his support for our organization.” [August 2002 e-mail from Susan Lilly, reported in the Houston Chronicle (Oct. 7, 2004)][1]

Bornemann’s Platinum Package for securing the support of Barton, Tauzin, DeLay and other House Republican members deciding the fate of the energy bill paid off. As discussed in Lawrence’s memo:

“First, I want to explain why we are involved in the federal issues and who the latest round of recipients are … and why they are important.

1. The House and Senate conference committee on the Energy Bill has been appointed. This legislation has several key elements, but most importantly for the company, it includes the repeal of PUHCA. While most of the electric utility industry is happy with this concept of repeal, this action has the potential of harming our financial restructuring efforts. Without PUHCA we will need some relief from the regulatory regime, which could make the restructuring impossible. 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.

“2. In this second round of contributions we are targeting only one House member. Representative Billy Tauzin of Louisiana is Chairman of the House Energy and Commerce Committee. Right now, we have made significant progress with House Majority Whip Tom DeLay, and Energy subcommittee chairman Joe Barton. The contributions made in the first round were successful in opening the appropriate dialogue. Now, as the conference committee begins meeting, Representative Tauzin will play a key role. Beyond serving on the conference committee, Representative Tauzin as Chairman of the full committee, is extremely influential in the decision to maintain the House position on our provision.” [See Attachment C, Memorandum from Doug Lawrence to officers, June 25, 2002]

Westar had now entered round two of campaign contributions to seal the deal.

C.   The Westar Exemption Delivered

Between June and the end of September 2002, Westar officials met privately at least once with DeLay and Barton and twice with DeLay’s energy specialist.[2]Barton had included the Westar exemption in earlier drafts of the energy bill beginning in 2001. The Westar provision was slipped into the House energy conference language in early September 2002, and on September 19, Barton (and, by proxy, DeLay and Tauzin and five other House Republican conferees) opposed a Democratic move to delete it from a House-Senate compromise version of the energy legislation. Barton defended the Westar exemption even in the face of vociferous attacks from the Kansas Corporation Commission (KCC) and at least one member of the conference committee, who pointed out that it served no positive policy purpose, other than to give Westar a special break.

As Rep. Edward Markey (D-Mass.) stated in the conference committee:

“Now we are told that this is only a special interest provision that is aimed at benefiting a single company, a Kansas-based company known as Westar Energy … If this company has a legitimate case to make as to why they are only incidentally or temporarily an investment company or why they should be exempted from the act, why aren’t they successful making that case today at the Securities and Exchange Commission? … They should not be wasting our time with a legislative fix.

“The fact that they are doing so raises some alarm bells for me as to what their real motives are….

“I would like to remind my colleagues that we went down this path before of considering legislative exemptions from the 1940 act and pressuring the Securities and Exchange Commission to grant administrative exemptions in 1996. Enron came to Congress when we were working on the National Securities Markets Improvement Act, and they sought an exemption from the Investment Company Act, the same act.” [See Attachment D, Transcripts of the House-Senate Joint Conference on H.R. 4, Sept. 19, 2002]

Republican support for the exemption was only withdrawn in early October 2002 after John Wine of the KCC informed the committee that Westar was under investigation for securities fraud. The investigation by KCC quickly branched into a broader securities fraud investigation by the Department of Justice and the SEC as well.

Barton, Tauzin, DeLay and other Republican House members now wanted to rescind their votes for the Westar exemption. As noted in an e-mail by Westar Vice President Doug Lawrence:

“Things are grim in D.C. The DeLay staff has asked us to release people from their commitment to support our provision. The Wine letter has killed us, it has been circulated along with last week’s 8k [a company filing with the SEC]. We only had a one vote margin to hold this, even if we tell them to hold tight [we] will certainly lose two. At this point my recommendation is to release them, with a request to assist on the SEC effort…. I also want to deliver a message to Moline that we are pulling the amendment, but insist that the commission understand that it is expected to help us get the exemption that John Wine screwed up.” [See Attachment E, e-mail from Doug Lawrence, Sept. 30, 2002]

DeLay, Barton, Tauzin and others were no longer expected to promote the Westar exemption, and it was dropped from the energy bill conference committee.

D.   Conclusion: The Westar Scandal Warrants Investigations of Election, as Well as Corporate, Fraud

The Department of Justice has already pursued an investigation, and is now seeking criminal convictions, against two former Westar executives for corporate fraud. Westar executives David Wittig and David Lakeare now on trial for 40 charges of securities violations and corporate fraud in what has become known as the “Enron of Kansas.”[3]

But the possible political corruption has not yet been adequately addressed. On October 6, 2004, the House ethics committee issued its third admonishment of Rep. DeLay for improper ethical behavior, the second in a week. The committee’s chair and ranking member, Rep. Joel Hefley (R-Colo.) and Alan Mollohan (D-W.V.) wrote to DeLay that “in view of the number of instances to date in which the Committee has found it necessary to comment on conduct in which you have engaged, it is clearly necessary for you to temper your future actions to assure that you are in full compliance at all times with the applicable House rules and standards of conduct.” [See Attachment F, Joel Hefley and Alan Mollohan, Letter to Tom DeLay (Oct. 6, 2004)]

While the House ethics committee deserves praise for not ignoring DeLay’s ethical lapses, it has chosen to chastise DeLay in extraordinarily soft terms. Admonishment is not even listed in the House ethics manual as an official sanction. While the letter of admonishment charges DeLay with “creating the appearance” that Westar lobbyists were gaining special favors through campaign contributions, the committee did not find sufficient evidence to charge DeLay with quid pro quo corruption.

The House ethics committee investigation, however, was limited in means as well as scope. The committee did not employ the same type of investigative resources available to the Department of Justice, particularly the use of an independent investigator equipped with the authority of subpoena.   The committee reached the conclusion that there was no quid pro quo corruption largely on the basis of unsworn, self-serving statements in letters from attorneys for persons involved in the investigation, which the committee itself noted were in tension with inferences that the documents would otherwise suggest.

Furthermore, committee members function within the hierarchy of congressional politics as colleagues of the House leadership and their own party caucuses, making their role of enforcing ethics rules against other members of Congress extremely difficult and problematic. In fact, following the recent admonishments of DeLay, ethics committee chair Hefley complained that he was “threatened” by fellow Republican members of Congress.[4] 

More importantly, the House ethics committee investigation stopped short of investigating the role of others intimately involved in the scandal. The committee investigated only the role of DeLay in the Westar scandal. It did not investigate whether Westar lobbyists or executives attempted to bribe government officials, or whether Reps. Barton and Tauzin were unduly influenced by campaign contributions.

In light of the new evidence that money appears to have been exchanged for preferential legislative treatment for Westar, along with the evidence submitted earlier in Public Citizen’s original complaint, we request once again that the Department of Justice conduct a formal investigation of possible violations of federal anti-bribery statutes. [See Attachment G for a timeline of events in the Westar scandal]

Westar’s lobbyists – particularly, Richard Bornemann – and its executives who may have participated in the Platinum Package scheme, and Reps. DeLay, Barton and Tauzin who were the recipients of Westar’s campaign contributions or directed such contributions to targeted members, and who promoted the special interest legislation sought by Westar, should be the subject of a thorough investigation by the Department of Justice.

Current and former Westar lobbyists named above – Richard Bornemann and William Kenworthy, as well as Westar executives David C. Wittig, Douglas Lawrence, Douglas T. Lake, Douglas R. Sterbenz, Anita Jo Hunt, Caroline A. Williams, Richard A. Dixon, Kelly B. Harrison, Larry D. Irick, Peggy Lloyd, Bruce Akin and Paul R. Geist appear to have violated 18 U.S.C. § 201(b)(1) by offering or promising something of value to a member of Congress in exchange for a favor.

In addition, 18 U.S.C. 201(b)(2) provides that whoever “being a public official [including Members of Congress] or person selected to be a public official, directly or indirectly, corruptly demands, seeks, receives, accepts, or agrees to receive or accept anything of value personally or for any other person or entity, in return for being influenced in the performance of any official act” has violated the statute. The evidence warrants an investigation by the Department of Justice as to whether Reps. Barton, Tauzin and DeLay violated this section of the code and provided legislative favors in exchange for campaign contributions.

Please keep us informed of any decision by the Department of Justice whether to investigate these allegations of impropriety.

Sincerely,

Joan Claybrook, President
Public Citizen
1600 20th St., NW
Washington, D.C. 20009


[1] TRMPAC’s role in allegedly funneling soft money into Texas state elections, which is illegal under Texas law, is currently the subject of several criminal indictments and an on-going grand jury investigation, two civil lawsuits, and a complaint filed with the House ethics committee.

[2] Joel Hefley, Chair, and Alan Mollohan, Ranking Minority Member, Committee on Standards of Official Conduct, Memorandum to the Members of the Committee (Oct. 6, 2004).

[3] Carrie Johnson, “’Enron of Kansas’ Trial Begins,” Washington Post (Oct. 12, 2004).

[4] Alexander Bolton, “Hefley: I Was Threatened,” The Hill (Oct. 13, 2004).