in the united states district court for the ......to undermine the financial condition of the...

1 “Westar” will be used to refer to Westar Industries, Inc., a wholly owned subsidiary of WRIformed in 2000, which held WRI unregulated assets of Protection One, Inc. (“Protection One”) and Protection One Europe, home security companies and a 45% ownership interest in ONEOK, Inc.(“ONEOK”), a gas transmission and distribution company serving Oklahoma and Kansas.

W:\WpDocs\Westsar\AM[1]. COMP - FINAL.wpd

IN THE UNITED STATES DISTRICT COURTFOR THE DISTRICT OF KANSAS

IN RE WESTAR ENERGY, INC.SECURITIES LITIGATION

Case No.03-4003-JAR

CLASS ACTION

CONSOLIDATED AMENDEDCOMPLAINT

JURY TRIAL DEMANDED

I. INTRODUCTION

1. Plaintiffs, by and through their attorneys, allege the following upon information and belief,

except as to those allegations concerning plaintiffs which are alleged upon personal knowledge. Plaintiffs’

information and belief are based upon, among other things, the investigation of counsel, including without

limitation: (a) review and analysis of filings made by defendant Westar Energy, Inc. (“WRI” or the

“Company”)1 with the Securities and Exchange Commission (“SEC”); (b) WRI’s press releases; (c) media

reports about the Company; (d) publicly available trading data relating to the price and volume of WRI’s

common stock; (e) securities analyst reports on WRI; (f) interviews with former employees of WRI and

Protection One; (g) WRI and the Citizen Utility Rate Board (“CURB”) filings with the Kansas Corporation

Commission (“KCC”) from 1999 through 2003; and (h) the Report of the Special Committee to the Board

of Directors of WRI (the “Board”) prepared by Debevoise & Plimpton in reliance upon

Case 5:03-cv-04003-JAR-JPO Document 45 Filed 07/15/2003 of 139

2W:\WpDocs\Westsar\AM[1]. COMP - FINAL.wpd

PricewaterhouseCoopers, L.L.P. (“PwC”) (the “Debevoise Report” or the “Report”) that was filed as an

exhibit in a WRI Form 8-K filing with the SEC on or about May 15, 2003.

II. NATURE OF THE ACTION

2. This securities class action is brought on behalf of purchasers of WRI common stock

between March 29, 2000, the date WRI announced a proposed “restructuring” separating its electric utility

operations, i.e., Kansas Power and Light (“KPL”) and Kansas Gas and Electric Company (“KGE”), from

its unregulated businesses (principally its “Protection One” home security business and investment in

ONEOK) (the “Restructuring” or the “2000 Restructuring”), and November 8, 2002, the date the KCC

permanently enjoined WRI’s proposed Restructuring and reversed certain accounting transactions that had

been recorded as part of the Restructuring scheme, (the “Class Period), alleging violations of Sections

10(b), 14(a) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) [15 U.S.C. §§78j(b),

78n(a) and 78t(a)], Rule 10b-5 promulgated under Section 10(b) [17 C.F.R. §240.10b-5], and Rule 14a-

9(a) promulgated under Section 14(a) by the SEC [17 C.F.R. § 240.14a-9].

3. It is alleged that prior to and during the Class Period, defendant David C. Wittig (“Wittig”),

former chairman and chief executive officer (“CEO”), of WRI and other related entities conceived,

orchestrated and engineered a common plan and scheme to defraud the class by causing, allowing and

permitting WRI to issue material misrepresentations and omit material facts concerning, inter alia, the

financial condition of WRI, the benefits of proposed Restructuring of the Company, compensation of its

senior management and the independence and functioning of WRI's Board of Directors and its

subcommittees including its Human Resources Committee (“H.R. Committee”) -- all of which artificially

inflated the price of WRI securities from approximately $15 per share on March 29, 2000 to a high of over



$26.00 per share during the Class Period. It is further alleged that these false and misleading statements

were issued in furtherance of Wittig’s fraudulent schemes, conceived and directed for Wittig’s own

personal aggrandizement and financial gain and that of other members of the then WRI senior management

who were his cronies. Indeed, Wittig stands out in the recent era of corporate securities fraud as a chief

executive officer willing to perpetrate any fraudulent scheme or tell any lie to enhance his seemingly

insatiable desire for wealth.

4. During the Class Period, Wittig: (a) falsely told investors that the Restructuring would

strengthen WRI utilities when, in fact, it was designed to benefit himself at the expense of WRI utilities,

concealing and misrepresenting critical and essential terms of the Restructuring; (b) misrepresented the

“change of control” compensation he and senior management would receive from the Restructuring; (c)

falsified corporate records to conceal his rampant personal use of corporate aircraft and unnecessary

acquisition of corporate aircraft; (d) wrongfully imposed beneficial terms in his employment contracts not

approved by WRI's Board or its H.R. Committee; (e) without authorization directed WRI to invest in an

unrelated company, QuVis International (“QuVis”), to enhance his personal undisclosed investments in that

same company (undisclosed in WRI’s 2002 Proxy); (f) wrongfully caused WRI to issue to himself and

senior management restricted shares of Guardian International (“Guardian”), a company Wittig planned to

acquire without disclosing his acquisition plans; (g) wrongfully used his relationship with WRI's bank,

Capital City Bank (“CCB”), to engage in criminal banking activity; and (h) wrongfully implemented schemes

to oust WRI directors who were critical of his compensation and, in one instance, even falsely claimed the

director was incompetent. As the truth concerning Wittig's fraudulent statements and schemes were



unveiled, WRI's common stock declined substantially to approximately $9.17 per share on November 8,

2002, causing members of the class to lose millions of dollars.

5. Wittig came to WRI in 1995 from Wall Street and immediately began an aggressive

acquisition plan which proceeded through 1999. Wittig’s strategy and scheme principally entailed using

the profits from WRI’s utilities, KGE and KPL, to acquire unregulated businesses in the home security field

with a goal to personally profit Wittig and his cronies. The cost of this strategy and scheme was staggering.

WRI’s long-term debt ballooned from $1.39 billion as of December 31, 1995, to $3.2 billion as of

December 31, 2000. Moreover, the strategy was a financial failure -- causing WRI’s net income to

plummet from $181.6 million in 1995 to $12.45 million in 1999. Also, the unregulated security business

embodied in Protection One had ever increasing losses, including losses before income taxes of $24 million

in 1999. Further, WRI’s common stock price declined from $33.37 per share on December 29, 1995 to

$16.94 per share on December 31, 1999.

6. By 2000, Wittig’s failed financial performance caused Wittig to devise for himself a grand

“exit” strategy from WRI’s regulated business. In this scheme, Wittig placed himself as chairman and chief

executive officer of WRI’s unregulated businesses (i.e., Protection One) but without attributing to those

businesses the massive losses and debt he had incurred in acquiring and operating these unrelated assets.

Under the Restructuring scheme, the unregulated assets were separated from KGE and KPL and organized

into “Westar Industries, Inc.” The utilities KPL and KGE were to be merged as announced on November

9, 2000, with a third party utility, Public Service of New Mexico (“PNM”). Wittig concealed for as long

as possible, however, that over $1.6 billion of WRI's reported long-term debt prior to the Restructuring

had been used to acquire the unregulated businesses (Protection One and ONEOK) and that under the



Restructuring, this $1.6 billion of debt would remain with the utilities (the “Misallocation” or “$1.6 billion

Misallocation”). At the same time, Wittig, through an undisclosed transaction in January 2000 (the “January

Transaction”) effectively eliminated $1 billion in Westar accounts payable owed to WRI. This undisclosed

accounting transaction further artificially inflated the financial condition of Westar and the unregulated

companies at the expense of the regulated WRI utilities. Wittig's plan was to have the utilities service this

massive debt of $1.6 billion by increasing electricity rates. With the undisclosed cancellation of Westar

obligations to WRI, Wittig then falsely told WRI investors in each public filing describing the Restructuring

that it was warranted to grant to Westar a 17% equity stake in the remaining utilities of WRI in exchange

for $350 million of Westar “intercompany receivables” (the “Intercompany Receivables”) owed by WRI

to Westar. What was not disclosed and what rendered this description of the Restructuring materially false

was that this grant of equity to Westar was wholly improper because the Intercompany Receivables should

simply have been offset against Westar's massive $1 billion accounts payable owed to WRI.

7. Under this Restructuring scheme, Wittig also arranged in 2000 to have his employment

agreement amended so that the Restructuring would permit him to receive $35 - $65 million in “change in

control” compensation, much of which he obtained without the Board or the H.R. Committee approval.

Wittig also blatantly lied to investors at WRI's June 2000 annual shareholders meeting stating, when

questioned, that he had “total Board support” for his compensation. At the time he made the statement

however, he had not provided the Board with the true amount of his and other senior officers’ actual new

change of control compensation. When the Board was advised of these amounts in November 2000 and

February 2001, there was strong opposition by WRI outside directors Jane Dresner Sadaka (“Sadaka”)

and Owen Leonard (“Leonard”). Unable to silence them, Wittig wrongfully took steps to force them to



resign which they did in March and April of 2001. Wittig never corrected his statement to investors that

he had “total Board support” for his massive compensation.

8. The Restructuring scheme thus included numerous materially false and misleading statements

and omissions, including in the Proxy Statements WRI filed with the SEC pursuant to Section 14(a) of the

Exchange Action on May 11, 2000 (“2000 Proxy), June 12, 2001 (“2001 Proxy”) and May 6, 2002

(“2002 Proxy”), artificially inflating WRI's common stock price as follows:

(a) Wittig falsely told investors between March 29, 2000 and July 20, 2001 that theRestructuring would “maximize” and “unlock” the value of WRI utilities and provideinvestors with a clearer picture or “definition” of WRI assets when, in fact, it was designedto undermine the financial condition of the utilities for the benefit of Westar and Wittigpersonally (¶¶ 128-29, 131-32, 148-49, 152, 191);

(b) defendant Carl M. Koupal, Jr. (“Koupal”), in the minutes of July 2000 H.R. Committeemeeting, fabricated “approval” of enhancements to Koupal and Wittig's change of controlcompensation in the amount of $4.8 million for Wittig and $1.6 million for Koupal (¶ 143);

(c) the 2001 and 2002 Proxies failed to disclose the “enhancements” Koupal and Wittigfraudulently “obtained” from the July 2000 H.R. Committee meeting (Id.);

(d) the January 2001 Proxy failed to disclose that Richard Terrill (“Terrill”), WRI’s generalcounsel, withheld information sought by outside director Sadaka and Leonard concerningWittig's compensation including his compensation under the Split Dollar Insurance Program(the “Split Dollar”) (¶¶ 90-91);

(e) Wittig falsely stated on June 16, 2000 that he had “total Board support” for hiscompensation when, in fact, the Board had not approved Wittig's $5.4 million bonusdescribed in the 2000 Proxy, the Board had not been presented with anywhere near thetrue amount of Wittig's or senior management’s change of control compensation under theRestructuring. When a closer approximation was given to the Board in November 2000 --Wittig’s compensation being $35 to $65 million and all of senior management’scompensation being $93 to $174 million -- there was strong opposition which Wittigconcealed and, never corrected his earlier statement of “total board support” (¶¶ 134-41);



(f) Wittig falsely concealed the misallocation of assets and debt between Westar and theutilities in describing the Restructuring in Westar's S-1 Registration Statements filed onOctober 5, 2000 and May 18, 2001 by referring to an “Allocation and SeparationAgreement” but intentionally withholding disclosure of the actual assets and debt allocated(¶¶ 161, 206);

(g) Wittig falsely concealed in describing the Restructuring that approximately $1.6 billion ofWRI's $3.2 billion long term debt as of December 31, 2000 had been used to acquire andoperate the unregulated assets and that this $1.6 billion of WRI's debt would remain withthe utilities in the Restructuring (the “$1.6 billion Misallocation”) (¶¶ 164, 166, 186, 204);

(h) Wittig falsely concealed in describing the Restructuring the January Transaction whicheffectively eliminated $1 billion of Westar obligations to WRI (¶ 163);

(i) Wittig falsely stated in describing the Restructuring that the purported $350 million“intercompany receivables” owed Westar by WRI provided bona fide consideration forgranting Westar's a 17% equity stake (14.4 million common shares) in the remaining utilitysince it should have been offset against Westar's $1 billion account payable owed to WRI(¶ 202);

(j) Wittig falsely represented during this period that the utilities were in need of a $151 millionrate increase to operate the utilities and recover utility costs when, in fact, it was neededto permit the utilities to survive under the weight of the debt and expense incurred inconnection with the acquisition of the unregulated assets to pay for officers’ compensationand benefits (¶ 167);

(k) Wittig falsely told investors in October and December 2001 he was “cutting cost” when,in fact, through his undisclosed fraudulent schemes, he was bilking the Company's assetsand he more than made up for his purported “cut “ by receiving new additionalcompensation as a director of WRI's wholly owned subsidiary Protection One (¶¶ 240,241);

(l) the 2000, 2001 and 2002 Proxies misrepresented and failed to disclose that the Board didnot act independently of management but was controlled by Wittig and that even thoughthe H.R. Committee was composed of “non-employees,” it was not independent ofmanagement (¶¶ 134, 211);

(m) the 2000 and 2001 Proxies failed to disclose that between January 1998 and June 2001,Wittig and Koupal attended the H.R. Committee meetings where their compensation wasdiscussed and that, in fact, from January 1998 to June 2001, Koupal was the secretary of



the H.R. Committee and from October 21, 2001 through November 8, 2002, Wittigserved as secretary of the H.R. Committee (¶¶ 134, 212, 256);

(n) the 2001 and 2002 Proxies failed to disclose that outside directors Sadaka and Leonardstrongly opposed Wittig and senior management's change of control compensation andthat, as a result, Wittig, with the knowledge and participation of defendants Terrill, Nettlesand Becker wrongfully ousted them from the Board in March and April 2001 (¶¶ 218,258);

(o) the 2001 and 2002 Proxies failed to disclose that Wittig also forced out outside directorsLouis Smith in April 2001 and Russell Meyer in June 2000 who were also critical ofWittig's management of WRI (¶ 99); and

(p) the 2001 and 2002 Proxies failed to disclose that Koupal and Wittig inflated their changeof control compensation by $4.8 million and $1.6 million, respectively, authorized underan insurance plan called the Split Dollar, and that Koupal fabricated H.R. Committeeminutes to justify the enhancements (¶ 262).

9. When the partial truth concerning the Restructuring and attendant accounting transactions

came out in the detailed KCC findings and Order on July 20, 2001 rejecting the Restructuring and

disclosing the $1.6 billion Misallocation and the January Transaction, WRI’s common stock dropped from

$21.70 per share on July 20, 2001, to $18.91 per share on July 23, 2001 (the next trading day), with over

2.32 million shares trading.

10. On July 25, 2001, the KCC not only rejected the $151 million rate increase but imposed

a rate cut of $27 million finding, inter alia, numerous instances of non-regulated management expenditures

being charged to the utilities. The July 25, 2001 disclosures further drove down WRI's common stock from

$18.30 per share on July 27, 2001 to $17.00 per share on July 25, 2001 with 3.44 million shares trading.

11. In the period between October 2001 and November 8, 2002, Wittig continued his efforts

to achieve a personally profitable “exit” from WRI at the expense of WRI investors through materially false

and misleading statements. Wittig falsely claimed to have addressed the “concerns” and “fears” in a new



proposed Restructuring set forth in WRI's “Financial Plan” filed November 2001 and amended in January

2002 (the “Financial Plan”). Wittig also claimed to cut costs by cutting his own compensation -- he and

defendant Douglas T. Lake (“Lake”) purportedly cut their salaries by 20%. However, Wittig and Lake

immediately took action to ensure that this “cut” was more than made up for in the new 2002 fees and

stock options he granted himself and Lake for serving as directors of Protection One. Expert scrutiny of

the Financial Plan subsequently revealed that the Financial Plan did nothing to address the fundamental issue

of misallocation of asset and debt.

12. Wittig further engaged in numerous fraudulent schemes throughout the Class Period to

inflate his compensation which required making materially false and misleading statements and omissions

in the 2000, 2001, and 2002 Proxy Statements, including as follows:

(a) the 2001 and 2002 Proxies failed to disclose that neither the Board nor the H.R.Committee approved the Split Dollar implemented in 1998 and specifically were unaware(through the end of the Class Period ) of the highly lucrative “put”provision which allowedsix senior officers to sell death benefits to the Company for between $43 and $86 million,depending on WRI's common stock price (¶¶ 216, 262);

(b) the 2000, 2001 and 2002 Proxies falsely stated the H.R. Committee “reviewed” and/or“approved”all compensation documents when, in fact, it repeatedly did not do so, leavingmanagement unfettered discretion (¶¶ 134, 212, 256);

(c) the 2000 Proxy failed to disclose that Wittig’s $5.7 million in “All Other Compensation”was materially inflated by $3.4 million and that this compensation had not been approvedby either the Board or the H.R. Committee (¶¶ 138-39, 214, 260);

(d) the 2002 Proxy misrepresented that Wittig had “0” bonus in 2001 when, in fact, Wittig hadbeen awarded a $267,000 bonus, to avoid public criticism concerning Wittig'scompensation. This blatant misrepresentation occurred with the knowledge of Wittig and


2 According to the Debevoise Report, “[t]here was not legitimate reason for theCompany to omit it from the proxy statement. Providing an opportunity for management to leaveinformation out of the proxy statement, and apparently acquiescing to the adoption of misleadingminutes to avoid shareholder criticism, is antithetical to the federal securities reporting requirements. The shareholders have the right to know how the directors are exercising their judgment on matters ofcompensation, and the timely opportunity to object through the exercise of their franchise at theshareholder meeting.” (Report pp. 183-84) (emphasis added).


the H.R. Committee directors John C. Dicus (“Dicus”), Gene A. Budig (“Budig”) andFrank J. Becker (“Becker”) (¶¶ 25, 250, 260);2

(e) the 2001 Proxy misrepresented the bonus compensation because it failed to disclose thatall of the bonus amounts were only awarded because defendant Terrill falsely told theBoard extraordinary items could not be excluded in calculating bonus compensation (¶ 91);

(f) the 2002 Proxy failed to disclose that Wittig and Lake caused WRI to lend $400,000 toQuVis in December 2001 for the sole purpose of enhancing the value of their ownpersonal undisclosed financial interest in QuVis (¶¶ 35 ,114, 122);

(g) the 2001 and 2002 Proxies failed to disclose unnecessary $7.2 million renovation ofWittig's executive suite and jet hanger (¶¶ 101, 121);

(h) the 2001 and 2002 Proxies failed to disclose that Wittig and Lake knew that ProtectionOne was going to acquire Guardian and thus provide Wittig and Lake an enormousfinancial return on their Guardian restricted share units (“RSUs”) (¶¶ 123, 125, 264-65);

(i) the 2000, 2001 and 2002 Proxies failed to reflect officer and director compensation fromrampant personal air travel (¶¶ 115-20);

(j) the 2000, 2001 and 2002 Proxies failed to disclose managements’ unnecessary acquisitionof two jet airplanes for approximately $33 million for Wittig’s substantial non-business use(¶ 116); and

(k) the 2002 Proxy failed to disclose that in 2001 Wittig used the Company’s relationship witha Kansas Bank, CCB, to further an illegal personal real estate transaction, for which hewas found guilty (¶ 126).

13. When Wittig’s ousting of directors, the continued misallocation of assets and debt in the

Financial Plan, unjustifiable compensation and other misconduct as chief executive officer were revealed,



WRI's common stock price began to decline further: from $16.24 per share on June 27, 2002 to $15.35

per share on June 28, 2002, upon the announcement of Wittig's compensation and that outside directors

had resigned because they objected to that compensation; from $15.45 per share on July 5, 2002 to

$14.96 per share on July 8, 2002, upon calls for Wittig's resignation by experts testifying before the KCC

that the Financial Plan perpetrated the misallocation of the original Restructuring; and from $13.70 per

share on July 16, 2002 to $11.72 per share on July 19, 2002, after Wittig had been served with grand jury

subpoenas investigating his conduct as chief executive officer. By November 8, 2002, after Wittig resigned

after being indicted on November 7, 2002 for bank fraud and after the KCC permanently rejected the

Financial Plan and reversed accounting transactions including the January Transaction, WRI's common

stock closed at $9.77 per share.

III. JURISDICTION AND VENUE

14. The claims asserted herein arise under Sections 10(b), 14(a) and 20(a) of the Exchange

Act [15 U.S.C. §§78j(b), 78n(a) and 78t(a)], Rule 10b-5 promulgated under Section 10(b) [17 C.F.R.

§240.10b-5], and Rule 14a-9(a) promulgated under Section 14(a) by the SEC [17 C.F.R. § 240.14a-9].

15. This Court has jurisdiction over the subject matter of this action pursuant to 15 U.S.C.

§78aa.

16. Venue is proper in this District pursuant to Section 27 of the Exchange Act, 15 U.S.C.

§ 78aa. Many of the acts and transactions giving rise to the violations of the federal securities laws

complained of herein, including the preparation and dissemination to the investing public of materially false

and misleading statements, occurred, in part, in this District. In addition, the Company maintains its



executive offices in this District and many of the defendants and/or witnesses transact business and/or reside

in this District.

17. In connection with the acts alleged in this complaint, defendants, directly or indirectly, used

the means and instrumentalities of interstate commerce, including, but not limited to, the mails, interstate

telephone communications and the facilities of the national securities markets.

IV. PARTIES

18. Lead Plaintiff, Local 812 IBT Pension Fund and the American Radio Association Pension

Fund -- two Taft-Hartley pension funds -- purchased WRI’s common stock at prices that were artificially

inflated by defendants' misrepresentations and omissions and suffered damages thereby during the Class

Period, as set forth in their certifications previously filed with the Court. The certifications previously filed

with the Court by other class members in connection with the original complaints on file and/or the motion

for lead plaintiff are incorporated by reference herein.

19. Defendant Westar Energy, Inc. (“WRI” or the “Company”), formerly known as Western

Resources, Inc., was incorporated in 1924. WRI’s primary business activities during the Class Period

were providing electric generation, transmission and distribution services to approximately 628,000

customers in Kansas and providing monitored services (i.e., home security) to approximately 1.6 million

customers in North America, the United Kingdom and continental Europe. Its common shares trade on

the New York Stock Exchange, an open and efficient market, under the symbol “WR.” As of April 21,

2003, there were approximately 71,938,146 shares of WRI common stock outstanding. Rate-regulated

electric service is provided by KPL, a division of the company, and KGE, a wholly-owned subsidiary.

Monitored services are provided by Protection One, a publicly-traded, and approximately 85%-owned



subsidiary. KGE owns 47% of Wolf Creek Nuclear Operating Corporation (“Wolf Creek Nuclear”), the

operating company for Wolf Creek Generating Station (“Wolf Creek”). In addition, through WRI's 45%

ownership interest in ONEOK, natural gas transmission and distribution services are provided to

approximately 1.4 million customers in Oklahoma and Kansas. WRI’s corporate headquarters are located

at 818 Kansas Avenue, Topeka, Kansas 66612.

20. Defendant David C. Wittig (“Wittig”) was chairman of the board of directors, president

and chief executive officer at all times during the Class Period until he resigned from all positions on

November 22, 2002, following the issuance of grand jury subpoenas concerning his activities as CEO of

WRI and his indictment for alleged bank fraud. On July 14, 2003, a jury found Wittig guilty of six counts

of bank fraud raised in the indictment. Wittig faces up to 135 years in prison. Throughout the Class

Period, Wittig issued and caused, allowed and permitted WRI to issue: (a) material misrepresentations and

omissions in WRI press releases and filings with the SEC concerning the Restructuring; (b) material

misrepresentations in WRI's 2000, 2001 and 2002 Proxies concerning Wittig's and senior management's

compensation; (c) systematically ousted outside directors who voiced criticism of Wittig and/or his

compensation; (d) misled WRI's Board; (e) misled administrative agencies such as the KCC; and (f)

violated federal securities and banking laws.

Wittig’s Background

21. Upon graduating from the University of Kansas (“KU”), Wittig was employed as a broker

for a Kansas firm, H.O. Peet & Co. In 1978 when H.O. Peet & Co. was acquired by Kidder Peabody

(“Kidder”), Wittig was a protege of Martin A. Siegel (“Siegel”). Siegel was a Kidder investment banker,



who in 1987 pled guilty to two felonies in connection with his dealing with the infamous Ivan Boesky and

insider trading. Siegel was subsequently sentenced to prison.

22. From the outset, Wittig became known for being driven to achieve immense personal

wealth. In 1986, Wittig appeared on the cover of Fortune magazine, holding a cigar, under the headline,

“Wall Streets’ Overpaid Young Stars,” which featured 31-year old Wittig bragging about his $500,000

salary and plans to retire by age 40. Wittig carved out a niche doing medium-size deals in the newly

deregulated utility business, fostering business ties in Mid-West utility. In 1989, Wittig joined Salomon

Brothers, and soon became co-head of mergers and acquisitions making in excess of $1 million a year.

Wittig purchased a Ferrari, a $5.5 million apartment on Fifth Avenue in Manhattan and a beach house in

New Jersey.

23. In May 1995, Wittig assumed the position of Executive Vice President in charge of

Corporate Strategy at WRI; by March 1996, he had become president and by July 1998, he assumed the

additional positions of CEO and chairman of WRI’s Board. Wittig’s reported compensation during years

1999, 2000, 2001, and 2002 were as follows:

Year Salary BonusOtherAnnualCompensation

RestrictedStockAwards

SecuritiesUnderlyingOptions

All OtherCompensation

1999 $408,683 $0 $105,909 $1,738,625 $114,000 $5,756,753(See ¶ 24, infra)

2000 $303,400 $1,171,170 $134,794 $2,155,781 $58,500 $486,969

2001 $313,026 $267,000 $163,936 $2,643,245 $0 $489,896

2002 $616,633 $0 $2,891,813 $4,218,369 $125,000 $2,030,733



24. As of December 31, 2002, Wittig had 172,499 WRI RSUs valued at $1,707,470;

475,000 Protection One RSUs valued at $950,000; and 6,337 Guardian RSUs valued at $2,793,369.

25. The “$0” bonus in 2002 was an intentional misrepresentation since, in fact, Wittig was

awarded a $267,000 bonus in 2001. This misrepresentation in the 2002 Proxy occurred at Wittig's

insistence with the knowledge of H.R. Committee directors.

26. As depicted in the chart above, of the $5,756,753 awarded in “All Other Compensation”

in 1999 (disclosed in the 2000 Proxy), $5,370,000 was obtained in violation of Wittig's employment

agreement which provided that Wittig was supposed to have been paid in ten annual payments of $537,000

beginning after fifteen years of employment. As stated in ¶ 22 above, Wittig had only become employed

by WRI in May, 1995. Moreover, the H.R. Committee and the Board never approved the $5.3 million

payment (¶¶ 138-39, 214, 260).

27. The Guardian RSUs were obtained by way of deceit. Wittig and Lake acquired them

without disclosing to the Board or investors that they planned to have Protection One acquire Guardian,

assuring themselves of enormous appreciation in the value of their Guardian RSUs. (¶¶ 123, 125, 264-65).

28. Wittig controlled virtually all decisions made by the Board and the H.R. Committee. Wittig

attended the H.R. Committee meetings where his compensation was discussed and, indeed, even assumed

(without public disclosure) the position of secretary at H.R. Committee meetings from October 2001

through his administrative leave on November 8, 2002.

29. Wittig, without the knowledge of WRI or the H.R. Committee, inflated the amounts he was

entitled to under WRI's Split Dollar so that by 2001 he was entitled to over $13 million.



30. As set forth herein, in 2000, Wittig also had his employment agreement modified so that

the Restructuring would trigger between $35 and $65 million in “change of control” compensation. The

KCC ordered WRI to release all documentation relating to Wittig’s compensation. However rather than

truthfully disclose, on September 23, 2002, recognizing Wittig’s compensation was indefensible and

unconscionable, the Board dramatically revised and cut back Wittig's employment agreement, including his

compensation under the change of control agreement. The revised change of control agreement limited

payments to Wittig to $15.3 million -- 51% reduction. (¶¶ 74, 76)

31. Wittig also obtained substantial undisclosed compensation in causing WRI to acquire two

new jet airplanes for approximately $33 million which was used substantially for his personal non-business

use (and that of other members of senior management and WRI directors). Travel reimbursements due

to the Company from Wittig and other senior officers and directors during the Class Period are

approximately $653,000, with Wittig’s share about $289,000, or 44%. (¶ 116-22).

32. Wittig's actual knowledge that he had obtained improper, unreported compensation is

reflected in the fact that in 1998, Wittig negotiated the termination of senior officer Steve Kitchen

(“Kitchen”) which included a “gross up payment to cover the tax” if the value of past personal air travel was

ever imputed as income to Kitchen.

33. Defendant Douglas T. Lake (“Lake”) was executive vice president and chief strategic

officer at all times during the Class Period, and served as a member of the Board since October 2000 until

he resigned from his positions on November 6, 2002. Lake was chairman of the board of directors for

Protection One and a director of ONEOK. In 1998, Wittig hand-picked Lake, who had been an



executive vice-president of corporate strategy at Bear Stearns, and with whom he had previously worked

with him at Salomon Brothers.

34. Lake shared in Wittig’s abusive corporate practices and logged numerous personal flights

on the Company’s aircraft with the intended purpose being “business meetings.” In the fall of 2001, Lake

assumed the responsibility of reviewing and attesting to the accuracy of the flight logs. Under his control,

entries in the flight logs regularly misrepresented personal travel as having been for business travel. Lake

intentionally misrepresented his compensation by failing to disclose in WRI's 2000 and 2001 Proxy

Statements the economic benefits he received from the use of the corporate jets.

35. Lake, along with Wittig, caused WRI to lend $400,000 in December 2001 to QuVis for

the sole purpose of enhancing the value of their own personal undisclosed financial interest in QuVis. Also,

he knew but failed to disclose that Protection One was going to acquire Guardian and that there would an

enormous appreciation in the value of their Guardian RSUs. Additionally, Lake, like Wittig, negotiated a

golden parachute “change of control” of 2.99 times his highest salary and bonus with a continuation of

benefits. No other executive shared in as high a multiple of salary and bonus. Under Lake’s original

employment agreement, he would receive approximately $19.5 million over 30 years if his employment

ended due to a change in control. Like Wittig, Lake’s compensation under the plan was later cut short,

and under the revised agreement would receive $11.9 million. Lake’s reported executive compensation

during years 1999, 2000, 2001, and 2002 were as follows:



Year Salary Bonus

OtherAnnual

Compensation

RestrictedStock

Awards



1999 $266,849 $0 $31,494 $948,219 $40,000 $429,664

2000 $224,476 $642,706 $57,417 $1,317,813 $9,000 $700,999

2001 $463,344 $178,000 $23,232 $1,546,360 $0 $5,758

2002 $446,497 $0 $1,348,876 $2,581,071 $125,000 $1,006,336

As of December 31, 2002, Lake had 91,750 WRI RSUs valued at $908,325; 308,400 Protection One

RSUs valued at $616,800; and 3,772 Guardian RSUs valued at $1,665,871.

36. Defendant Paul Geist (“Geist”) maintained the positions of senior vice president, chief

financial officer and treasurer of WRI, during the duration of the Class Period. Geist entered into an

employment agreement, similar to those of Wittig and Lake, that enabled him to receive a generous lump

sum payment of two times his highest salary and bonus should his employment be terminated due to a

change of control. Geist’s reported executive compensation during years 1999, 2000, 2001, and 2002

were as follows:

Year Salary BonusOtherAnnual

Compensation

RestrictedStock

Awards



1999 $12,962 $11,290 $0 $0 $0 $354

2000 $118,695 $31,221 $125 $93,750 $0 $1,033

2001 $167,111 $50,000 $1,014 $77,440 $0 $3,188

2002 $254,400 $150,287 $10 $413,485 $0 $4,092



37. As of December 31, 2002, Geist had 12,200 WRI RSUs valued at $120,780 and 500

Guardian RSUs valued at $279,490. Geist signed various filings with the SEC, including: (a) Westar’s

Form S-1 filed on or about October 5, 2000; (b) Westar’s Amendment No. 2 to Form S-1, filed on or

about April 13, 2001; (c) Westar’s Amendment No. 3 to Form S-1 filed on May 18, 2001; (d) WRI’s

Form 10-K for the fiscal year-ending December 31 ,2001; (e) WRI’s Form 10-Q for the quarter-ending

June 30, 2002; and (f) WRI’s Form 10-Q for the quarter-ending September 30, 2002. Geist resigned

from all of his positions with the Company on February 7, 2003. These filings included materially false and

misleading statements concerning, inter alia, the Restructuring, the Financial Plan and Protection One. Geist

also participated in the misuse of corporate aircraft during the Class Period.

38. Defendant Carl M. Koupal, Jr. (“Koupal”) was the executive vice president and chief

administrative officer of the Company from July 1995 to October 2001. Prior to that, Koupal served the

Company as executive vice president of Corporate Communications, Marketing and Economic

Development. Koupal’s reported executive compensation during years 1999, 2000 and 2001 were as

follows:



Year Salary Bonus

OtherAnnual

Compensation

RestrictedStock

Awards



1999 $307,020 $0 $13,045 $612,313 $28,000 $42,327

2000 $290,740 $427,078 $9,847 $930,000 $9,000 $48,318

2001 $273,453 $0 $16,770 $1,010,810 $0 $817,254

39. Koupal, like Wittig, was the recipient of a larger Split Dollar policy than he was otherwise

entitled to. Koupal fabricated the July 2000 H.R. Committee minutes to justify the “approval” of

enhancements to his and Wittig’s change of control compensation in the amount of $1.6 million and $4.8

million, respectively.

40. Koupal purportedly supervised the flight department and was responsible for ensuring the

accuracy of the logs of the Company aircraft until he left the Company in the fall of 2001. At least as early

as July 2000, defendant Koupal had actual knowledge that rampant personal use of WRI aircrafts was not

being lawfully reported on WRI tax returns or disclosed in WRI Proxy Statements. In July 2000, defendant

Koupal was advised by the head of WRI’s tax department, Mike Stadler (“Stadler”) that WRI was

improperly reporting on it corporate and its officers’ tax returns neglecting to disclose the rampant personal

use of corporate aircraft at WRI. Koupal also served as secretary of the H.R. Committee between January

1998 and June 2001 thus, sitting in on meetings where his own compensation was discussed.

41. Defendant Richard D. Terrill (“Terrill”) was executive vice president, general counsel and

corporate secretary of the Company since May 1999. Prior to that, Terrill served the Company as vice

president, and Law and Corporate secretary. Terrill’s executive compensation in year 2000 included a


3 One of the participants recalled Terrill “exclaiming that Mr. Stadler’s calculations of thevalue of annual personal travel for some of the officers were too high to disclose in the proxy . . . ”(Debevoise Report, p. 75) (emphasis added).


base salary of $188,846; bonus of $299,750; “Other Annual Compensation” of $8,311; Restricted Stock

Awards of $740,219; Securities Underlying Options valued at $2,700; and “All Other Compensation” of

$36,576. Terrill signed various filings with the SEC, including Westar’s 2000 Proxy Statement.

42. Defendant Terrill knew WRI was not properly reporting for income tax purposes and in

Proxy Statements the personal aircraft use by senior officers. Indeed, Terrill was the architect behind the

“gross-up” provision in Kitchen’s termination agreement. Terrill withheld information sought by outside

directors Sadaka and Leonard concerning Wittig's and his compensation under the Split Dollar and

participated in their wrongful ousting from the Board in March and April 2001. In July 2000, defendant

Terrill, along with Koupal, David Schneweis (“Schneweis”), a senior manager in the tax department, and

Lee Wages (“Wages”), the Company's controller, was advised by Stadler in a memo that WRI was

improperly reporting on corporate and officer's income taxes and rampant personal use of airplanes at

WRI.3 Also, all of the bonus amounts were only awarded because Terrill falsely told the Board

extraordinary items could not be excluded in calculating bonus compensation. As corporate secretary for

nine years, Terrill was responsible for advising the H.R. Committee of its express authority, and thus was

fully aware that management usurped the H.R. Committee authority and controlled its agenda. Terrill left

the Company in late 2001.

43. Defendant Gene A. Budig (“Budig”) was a director for WRI and Protection One at all

times during the Class Period. Budig was the chancellor and a professor at KU. WRI gave matching



contributions to the KU endowment, of which $75,000 was attributable to Budig. Budig had previously

served as a director of the Company from January 1987 through May 1998. Budig was a member of

WRI’s Board and the H.R. Committee and was responsible for reviewing the performance of corporate

officers and changes in officer compensation and benefits. In each year during the Class Period that Budig

served on the Board, he received as compensation an annual cash retainer of $25,000, an annual stock

award of $18,500, and an annual RSU award of $19,000. In addition, he was paid $1,200 for each

Board meeting and $1,000 for each committee meeting he attended. As of April 30, 2003, Budig

beneficially owned 24,066 shares of WRI common stock and 12,259 shares of Protection One common

stock. Budig and the other members of the H.R. Committee totally abandoned their purported

independence, permitting Wittig and other senior management to sit in on meetings while their compensation

was discussed, permitting Wittig to control all work done by outside compensation consultants, permitting

Wittig to draft the terms of his own compensation agreement without review, and relying on Terrill as

“counsel”when Terrill was self-interested because of his own employment agreement. Budig failed to

maintain the independence of the H.R. Committee. Budig permitted implementation of the Split Dollar and

amendments to Wittig's change of control compensation without the H.R. Committee approval. Budig

intentionally misrepresented Wittig's short-term bonus compensation as “0” in the 2002 Proxy when, in fact,

it was $267,000 and did so at Wittig's direction in order to avoid public criticism.

44. Defendant Frank J. Becker (“Becker”) was a director of WRI since 1992 and served on

the Board at all times during the Class Period. Becker graduated from KU and was chairman of the

endowment fund. WRI gave a matching contribution attributable to Becker in the amount of $95,500.

Becker was the chairman of WRI’s H.R. Committee and was responsible for reviewing the performance



of corporate officers and changes in officer compensation and benefits. In each year during the Class

Period that Becker served on the Board, he received as compensation an annual cash retainer of $25,000,

an annual stock award of $18,500, and an annual RSU award of $19,000. In addition, he was paid

$1,200 for each Board meeting, $1,000 for each committee meeting he attended and received an additional

$4,000 for serving as chairman of the H.R. Committee. As of April 30, 2003, Becker beneficially owned

46,429 shares of WRI common stock and 41,800 shares of Protection One common stock. In April

2001, Becker carried out Wittig’s improper scheme to oust outside directors Leonard and Sadaka who

had openly objected to Wittig’s change of control compensation (See infra, at ¶¶ 92-99). Becker and the

other members of the H.R. Committee totally abandoned their independence, permitting Wittig and other

senior management to sit in on meetings while their compensation was considered, permitting Wittig to

control all work done by outside compensation consultants, permitting Wittig to draft the terms of his own

compensation agreement without review, and relying on Terrill as legal counsel when Terrill was self-

interested because of his own employment agreement. Becker permitted implementation of the Split Dollar

and amendments to Wittig's change of control compensation without H.R. Committee approval. Becker

intentionally misrepresented Wittig's short term bonus compensation as “0” in the 2002 Proxy when, in fact,

it was $267,000 and did so at Wittig's direction in order to avoid public criticism.

45. Defendant John C. Dicus (“Dicus”) was a director of WRI since May 1990, and served

on the Board at all times during the Class Period. Dicus was a member of WRI’s H.R. Committee and

was responsible for reviewing the performance of corporate officers and changes in officer compensation

and benefits. In each year during the Class Period that Dicus served on the Board, he received as

compensation an annual cash retainer of $25,000, an annual stock award of $18,500, and an annual RSU



award of $19,000. In addition, he was paid $1,200 for each Board meeting and $1,000 for each

committee meeting he attended. As of April 16, 2002, Dicus owned 7,335 shares of WRI common stock.

Dicus graduated from KU and was a trustee of the KU endowment fund. WRI gave a matching

contribution to the KU endowment fund attributable to Dicus in the amount of $104,500. Dicus and the

other members of the H.R. Committee totally abandoned their purported independence, permitting Wittig

to control all work done by outside compensation consultants, permitting Wittig and other senior

management to sit in on the meetings while their compensation was discussed, permitting Wittig to draft the

terms of his own compensation agreement without review, relying on Terrill as “counsel” for the H.R.

Committee when Terrill was self interested because of his own employment agreement. Dicus permitted

implementation of the Split Dollar and amendments to Wittig's change of control compensation without the

H.R. Committee approval. Dicus intentionally misrepresented Wittig's short-term bonus compensation as

“0” in the 2002 Proxy when, in fact, it was $267,000 and did so at Wittig's direction in order to avoid

public criticism.

46. Defendant John C. Nettels, Jr. (“Nettels”) served as an outside director of WRI at all

relevant times during the Class Period and was a member of the Nominating Committee, which reviewed

and recommended nominees for election to the Board. In each year during the Class Period that Nettels

served on the Board, he received as compensation an annual cash retainer of $25,000, an annual stock

award of $18,500, and an annual RSU award of $19,000. In addition, he was paid $1,200 for each

Board meeting and $1,000 for each committee meeting he attended. As of April 30, 2003, Nettels

beneficially owned 13,165 shares of WRI common stock and 15,500 shares of Protection One common

stock. In April 2001, Nettels also carried out, with Becker, Wittig’s improper scheme to oust outside



directors Leonard and Sadaka who opposed Wittig's change of control compensation (¶¶ 92-99). Nettels

was a KU graduate, was in the same fraternity house as Wittig and was Wittig’s roommate for one year.

47. All defendants enumerated in paragraphs19 - 45 will hereinafter be referred to as the

Individual Defendants. Because of the Individual Defendants’ positions with the Company, they had access

to the adverse, undisclosed information about WRI’s businesses, operations, products, operational trends,

financial statements, markets and present and future business prospects via access to internal corporate

documents (including the Company’s operating plans, budgets and forecasts and reports of actual

operations compared thereto), conversations and connections with other corporate officers and employees,

attendance at management and Board of Directors meetings and committees thereof and via reports and

other information provided to them in connection therewith.

48. It is appropriate to treat the Individual Defendants as a group for pleading purposes and

to presume that the false, misleading, and incomplete information conveyed in the Company’s public filings,

press releases and other publications as alleged herein are the collective actions of the narrowly-defined

group of defendants identified above. The Individual Defendants, as officers and/or directors of WRI, and

by virtue of their high-level positions with the Company, directly participated in the management of the

Company, were directly involved in the day-to-day operations of the Company at the highest levels, and

were privy to confidential, proprietary information concerning the Company and its business, operations,

services, growth, financial statements, and financial condition, as alleged herein. Said defendants were

involved in drafting, producing, reviewing, and/or disseminating the false and misleading statements and

information alleged herein, were aware, or recklessly disregarded, that the false and misleading statements



were being issued regarding the Company, and approved or ratified these statements, in violation of the

federal securities laws.

49. As officers and controlling persons of a publicly-held company, whose common stock was,

and is, registered with the SEC pursuant to the Exchange Act, and was traded on the NYSE and governed

by the provisions of the federal securities laws, the Individual Defendants each had a duty to disseminate

promptly accurate and truthful information with respect to the Company’s financial condition and

performance, growth, operations, financial statements, business, services, markets, management, earnings

and present and future business prospects, and to correct any previously issued statements that had become

materially misleading or untrue, so that the market prices of the Company’s publicly traded securities would

be based upon truthful and accurate information. The Individual Defendants’ Class Period

misrepresentations and omissions violated these specific requirements and obligations.

50. The Individual Defendants participated in the drafting, and/or approval of the various public,

shareholder, and investor reports and other communications complained of herein and, were aware of, or

recklessly disregarded, the misstatements contained therein and omissions therefrom, and were aware of

their materially false and misleading nature. Because of their Board membership and/or executive and

managerial positions with WRI, each of the Individual Defendants had access to the adverse, undisclosed

information about WRI’s business prospects, financial condition and performance as particularized herein

and, knew (or recklessly disregarded) that these adverse facts rendered the positive representations made

by or about Westar and its business issued or adopted by the Company materially false and misleading.

51. Each defendant is liable as a direct participant in, and a co-conspirator with respect to, the

wrongs complained of herein. In addition, the Individual Defendants, by reason of their positions, are



“controlling persons” within the meaning of Section 20 of the Exchange Act, and had the power and

influence to cause the Company to engage in the unlawful conduct complained of herein. Because of their

positions of control, the Individual Defendants were able to and did, directly or indirectly, control the

conduct of the Company’s business.

52. The Individual Defendants, because of their positions of control and authority as officers

and/or directors of the Company, were able to and did control the content of the various SEC filings, press

releases and other public statements pertaining to the Company during the Class Period. Each Individual

Defendant was provided with copies of the documents alleged herein to be misleading prior to or shortly

after their issuance and/or had the ability and/or opportunity to prevent their issuance or cause them to be

corrected. Accordingly, each of the Individual Defendants is responsible for the accuracy of the public

reports and releases detailed herein and is, therefore, primarily liable or the representations contained

therein.

53. Each defendant is liable, jointly and severally, as a participant in a fraudulent scheme and

course of business that operated as a fraud or deceit on purchasers of WRI common stock, including

making materially false and misleading statements. The scheme (a) deceived the investing public regarding

WRI; (b) artificially inflated the price of WRI’s stock; and (c) caused plaintiffs and the class to purchase

WRI’s stock at artificially inflated prices.

V. CLASS ACTION ALLEGATIONS

54. Plaintiffs bring this action as a class action pursuant to Rules 23 (a) and 23(b)(3) of the

Federal Rules of Civil Procedure on behalf of a class consisting of all persons who purchased WRI

common stock during the Class Period from March 29, 2000 through and including November 8, 2002



and who suffered damages thereby. Excluded are the defendants, members of the Individual Defendants’

families, any entity in which any defendant has a controlling interest or is a parent or subsidiary of or is

controlled by the Company, and the officers, directors, employees, affiliates, legal representatives, heirs,

predecessors, successors and assigns of any of the defendants (the “Class”).

55. The members of the Class are so numerous that joinder of all members is impracticable.

While the exact number of Class members is unknown to plaintiffs at this time and can only be ascertained

through appropriate discovery, plaintiffs believe there are, at a minimum, thousands of members of the Class

who traded during the Class Period. As of April 21, 2003, the Company had more than 71.9 million

shares of its common stock outstanding, of which there were thousands of common stockholders of record.

56. Common questions of law and fact exist as to all members of the Class and predominate

over any questions affecting solely individual members of the Class. Among the questions of law and fact

common to the Class are:

(a) whether the federal securities laws were violated by defendants’ acts as allegedherein;

(b) whether WRI issued false and misleading financial statements during the ClassPeriod;

(c) whether the Individual Defendants caused WRI to issue false and misleadingfinancial statements during the Class Period;

(d) whether defendants acted knowingly or recklessly in issuing false and misleadingfinancial statements;

(e) whether the market prices of WRI securities during the Class Period wereartificially inflated because of the defendants’ conduct complained of herein; and

(f) whether the members of the Class have sustained damages and, if so, what isthe proper measure of damages.



57. Plaintiffs’ claims are typical of the claims of the members of the Class. Plaintiffs, like other

Class members, sustained damages arising out of defendants’ wrongful conduct in violation of federal law

as complained of herein.

58. Plaintiffs will fairly and adequately protect the interests of the members of the Class and

have retained counsel competent and experienced in class actions and securities litigation. Plaintiffs have

no interests antagonistic to or in conflict with those of the Class.

59. A class action is superior to other available methods for the fair and efficient adjudication

of the controversy since joinder of all members of the Class is impracticable. Furthermore, because the

damages suffered by the individual Class members may be relatively small, the expense and burden of

individual litigation make it impossible for the Class members individually to redress the wrongs done to

them. There will be no difficulty in the management of this action as a class action.

60. Plaintiffs will rely, in part, upon the presumption of reliance established by the fraud-on-the-

market doctrine in that:

(a) defendants made public misrepresentations or failed to disclose material factsduring the Class Period;

(b) the omissions and misrepresentations were material;

(c) the securities of the Company traded in an efficient market;

(d) the misrepresentations and omissions alleged would tend to induce a reasonableinvestor to misjudge the value of the Company’s securities; and

(e) Plaintiffs and members of the Class purchased their stock relying on themisrepresentations and failure to state material facts between the timedefendants failed to disclose or misrepresented material facts and the time thetrue facts were disclosed, without knowledge of the omitted or misrepresentedfacts.



61. Based upon the following, plaintiffs and members of the Class are entitled to the

presumption of reliance upon the integrity of the market.

V. SUBSTANTIVE ALLEGATIONS

A. Background

1. Wittig Orchestrates Acquisitions of Unregulated Alarm Monitoring Businesses

62. Wittig purportedly brought to WRI financial sophistication in terms of merger and

acquisitions assuming the position in 1995 of executive vice president in charge of Strategic Planning. From

the outset, Wittig's focus was to use WRI's utility profits to acquire unregulated businesses. Wittig

concentrated his efforts on acquisitions in the home security field (sometimes referred to as “monitored

services”). On December 30, 1996, WRI purchased the assets and assumed the liabilities comprising

Westinghouse Security Systems, Inc.(“WSS”), a home security company, for approximately $358 million.

In 1996, WRI also made a failed effort to acquire ADT Limited Inc. (“ADT”), another alarm company.

In 1997, the Company acquired three home security companies. The Company acquired Network Multi-

Family Security Corporation (“Network Multi-Family”) in September 1997 for approximately $171 million

and Centennial Holdings, Inc., (“Centennial”) in November 1997 for approximately $94 million. The

Company also acquired an approximate 82.4% equity interest in Protection One, a publicly traded home

security company, in November 1997. The Company contributed all of its existing security business net

assets, other than Network Multi-Family, in exchange for its ownership interest in Protection One.

63. In February 1998, Protection One exercised its option to acquire the stock of Network

Holdings, Inc., the parent company of Network Multi-Family, from the company of approximately $180


4 As set forth more fully below (¶¶ 127-28), each time WRI claimed the 2000Restructuring was “very similar” to the KCPL restructuring, it was misleading because the 2000Restructuring -- as opposed to the KCPL restructuring -- sought to impose unregulated business debtonto the regulated entity and regulated entity assets.


million. In March 1998, Protection One acquired the home security business of Multimedia Security

Service, Inc., (“Multimedia Security”) for approximately $233 million. Multimedia Security has

approximately 140,000 subscribers concentrated primarily in California, Florida, Kansas, Oklahoma and

Texas. Protection One borrowed money from Westar Capital, a subsidiary of the Company.

2. Wittig's Failed Attempt To Separate Unregulated Businesses From The Utilities and then Merge The Utilities with Kansas City Power & Light Company

64. While Wittig directed the acquisition and rapid expansion of an unregulated home security

business, he sought a merger and then segregation of WRI utility businesses into a separate entity. In

March 1998, WRI announced a revised merger agreement with Kansas City Power & Light Company

(“KCPL”) whereby KCPL would be merged with WRI's utilities, KGE and KPL, into a new entity named

“Westar Energy” (the “KCPL transaction”). However, the KCC staff recommended approval of the

merger only with certain conditions which WRI determined to be “uneconomical” so the transaction was

never completed. Subsequently, WRI consistently referred back to the KCPL restructuring as effectively

the same restructuring WRI sought to implement in 2000 during the Class Period. However, KCPL

transaction provided that the new combined KCPL/WRI entity called “Westar Energy” would assume all

of the “electric utility related assets and liabilities of Western Resources, KCPL and KGE” (WRI form 10-

K for year ended December 31, 1998, p. 1).4



3. Wittig's Activities in 1996-2000 Cause Dramatic Financial Losses at WRI

65. By year end 1999 and early 2000, it was patently clear that Wittig's efforts to create a

profitable unregulated business through rapid acquisitions had failed and severely deteriorated the financial

condition of WRI. WRI’s reported net income had collapsed to $12.45 million and $46.80 million in 1999

and 1998, respectfully, as compared to reported net income of $177.3 million, $187.4 million and

$181.676 million in 1993, 1994, and 1995, respectively, before Wittig joined the Company and the

acquisition strategies were implemented.

66. The earnings decline between 1998 and 2001 was directly tied to losses at Protection One.

On sales of $421 million, $599 million, $537 million and $416 million in 1998, 1999, 2000 and 2001,

respectively, Protection One reported earnings before income taxes (“EBIT”) of $34.438 million in 1998

and losses before income taxes of ($20.67) million in 1999, ($91.37) million in 2000 and ($126.37) million

in 2001. The rapid acquisitions in the unregulated area as well as the operational losses at Protection One

also explained the dramatic 48% increase in long-term debt -- from $2.18 billion as of December 31, 1997

to $3.237 billion as of December 31, 2000. WRI’s total debt obligations (i.e., current and noncurrent

liabilities) also skyrocketed 416.6% -- from $1.189 billion as of December 31, 1997 to $6.143 billion as

of December 31, 2000. Between December 31, 1997 and December 31, 2000, WRI’s long-term debt

increased by $1.77 billion, and of that amount, $1.43 billion was used to acquire Westar’s unregulated

assets (i.e, Protection and ONEOK). The increased debt dramatically eroded WRI's debt to equity ratio

from 51% debt, 49% equity in 1994 to 83% debt, 17% equity in 2000. This substantial increase in the

amount of debt and percentage of debt in WRI's capital structure undermined WRI's credit rating which

then made more costly the debt financing needed to operate the utilities.



B. Individual Defendants' Fraudulent Schemes During The Class Period

1. Wittig’s Scheme To Obtain Unregulated Assets Without Debt and Trigger $31 Million Change of Control Compensation

67. Desirous of operating an unregulated non-utility business, but recognizing that WRI's

principal unregulated businesses -- namely, Protection One -- were mired in operating losses and debt and,

indeed, had only survived until 2000 by way of funding from WRI's utilities, Wittig, beginning in early 2000,

commenced his Restructuring scheme. In January 2000, Wittig had WRI change $927 million of debt on

Westar's books (recorded as a receivable to WRI from Westar) to $927 million of Westar common equity

(recorded an investment in Westar by WRI).

68. On March 29, 2000, when WRI announced that it would separate its electric utility

business (KPL and KGE) from its non-electric (Protection One and ONEOK) business “by means of a

voluntary exchange offer and it is expected to be completed by prior to year end 2000.” Wittig said the

utility as a “pure play electric company will unlock the value associated with our electric assets.” Wittig

continued to tout the Restructuring in a presentation given at an analyst conference hosted by Alex Brown

of Deutsche Bank on April 24, 2000 and then again on May 11, 2000 at the Edison Electric Institute’s

finance committee conference. The March 29, 2000 announcement did not give details as to the terms of

the Restructuring and WRI's common stock declined from $16.75 per share on March 29, 2000 to $15.75

per share on March 30, 2000. Nevertheless, in the months that followed, Wittig reiterated the purported

positive effects of the Restructuring in analyst presentations. In August 2000, WRI announced that along

with the Restructuring, WRI would seek a rate increase to further bolster the utilities' financials. These

announcements caused WRI common stock to rise from $16.77 per share on August 7, 2000 to $18.77



per share on August 10, 2000. However, these statements were materially false and misleading because

there was only a limited bona fide regulatory reason or justification for an increase in the rate of KPL

customers (i.e., by $25.5 million ); but only a regulatory reason to decrease (by $41.2 million) the rates of

KGE customers and thus instead of a $151 million rate increase a net rate decrease was warranted. (as

the KCC subsequently determined on July 25, 2001). It was needed solely for Wittig's Restructuring and

compensation schemes. By the time WRI caused Westar to file its S-1 Registration Statement, WRI's

common stock price had risen to $20.62 per share. On November 9, 2000, WRI announced that it had

found a partner, PNM, to merge with WRI’s utilities after separating from Westar as part of the

Restructuring.

2. Wittig and Koupal’s Undisclosed Fraudulent Activity to Obtain MassiveChange of Control Compensation From May through September 2000

69. Prior to 2000, WRI provided “change of control” compensation to its senior officers.

However, on May 17, 2000, the same day the Board authorized management “to explore a variety of

strategic alternatives for the utility including the separation of the utility business,” Wittig arranged for Brent

Longnecker (“Longnecker”) of Resources Connection, a consultant on compensation matters, to give a

presentation to the H.R. Committee proposing modifications to the senior officer change of control

compensation. The modifications provided for the triggering of “change of control” compensation in the

event of the “Restructuring” even though Wittig and Lake were not being terminated -- a prior precondition

to “change of control” compensation.


5 In June 1998, the Company entered into the “Split Dollar” agreement with six officerspaying $16 million in premiums, to replace WRI 's Supplemental Executive Retirement Program(“SERP”). The Split Dollar, however, contained a highly unusual and lucrative “put provision.” Underthe Split Dollar, a portion of the officer's short-term incentive bonus would pay for insurance. Theemployee could then obtain tax-free loans against the face surrender value of the policy with theCompany, making additional premium payments in amount equal to the officer's tax-free loans. Whenthe officer dies, benefits would be paid to the officer's beneficiaries upon death (with the Companyreceiving a tax-free benefit of the cumulative amount of the premiums paid). However, the unique “putprovision” in the WRI Split Dollar was far more generous than what had been approved by the H.R.Committee in January 1998. The implemented plan allowed the officer to sell the death benefits policyback to the Company at a price of $1.00 for every $1.50 of death benefits. This “put right” gave thetop six senior officers entitlement to between $43 million and $86 million. If all six senior officers were


70. On May 17, 2000, with no cost information -- i.e., what the Company would be obligated

to pay under these enhanced provisions -- the Board approved the proposed agreements subject to final

plans being approved by the “H.R. Committee.”

71. On July 11, 2000, defendant Koupal sent the H.R. Committee a Resources Connection

presentation dated June 29, 2000. The presentation proposed outlined change of control benefits and

indicated that, assuming 35% of the senior officers would become entitled to change in control payments,”

the cost would be $19 million; and assuming 50% would be entitled to change of control payments, the cost

would be $27 million.

72. On July 19, 2000, the H.R. Committee convened. Koupal, who during this period acted

as secretary of the H.R. Committee, misrepresented that Longnecker/ Resources Connection

recommended and the H.R. Committee approved certain specific enhancements positively affecting Koupal

and Wittig's change of control compensation. Koupal’s H.R. Committee minutes reflect that Longnecker

specifically proposed that the Company should, upon change of control, use the “base amount” under the

Split Dollar as follows: 5


terminated within six months of the policy, the amount payable by the Company would have been $57million. By 2000, Wittig’s Split Dollar benefits alone were estimated to be $13 million. No Board orH.R. Committee director approved or was even aware of the put provision under the Split Dollar.


Mr. Longnecker reviewed the impact of a change in control on the splitdollar agreements with some senior officers of Western Resources. It wasMr. Longnecker's recommendation that since the benefits under the splitdollar agreements are tied to the stock price of Western Resources andcontains no provision for a change in control, that the payments underthose agreements should vest at a change in control. The cost implicationsof that were discussed with the Committee. After review it wasdetermined that the split dollar agreements would be paid out pursuant tothe terms of the agreement but not less than at the “base amount” asdefined in those agreements upon a change in control.

(Emphasis added).

73. The minutes also reflect that the H.R. Committee accepted Longnecker's recommendations

and approved the final terms of the employment agreements “as outlined.” The “base amount” increased

the minimum exercise value of Koupal and Wittig's (who were the only two officers who had not exercised

their rights under the Split Dollar) “put rights” under the Split Dollar from 50% to 67% of the face value.

This meant an additional $4.8 million for Wittig and $1.6 million for Koupal as of September 19, 2000.

The rational for this change according to the minutes was that it was needed to clarify that the Split Dollar

would be triggered by the change in control and that the Split Dollar had no change of control provision.

This was blatantly false. The Split Dollar did have a change of control provision. Moreover, no H.R.

Committee director or Longnecker recalled proposing or approving the change of control provisions in the

Split Dollar contained in the minutes.


6 Indeed, as alleged herein, when Wittig touted to investors in December 2001 that hecut his salary, he did not disclose that i.e., it was simultaneously e-mailed to Cahill Gordon & Reindel(“Cahill Gordon”) to ensure that this “cut in salary” would trigger his massive change in controlcompensation. Nor did he disclose that he maneuvered to “make up” this compensation by obtainingadditional payments from Protection One.


74. The drafting of employment agreements was done in August/September 2000 by Wittig,

Koupal and Longnecker/Resources Connection. As alleged, one of the principal changes in the agreements

was to ensure that the Restructuring would trigger the “change of control” compensation even though Wittig

and Lake would not be “terminated” but rather only be transferred to operate Westar. However, in

drafting the actual employment agreement Wittig and Koupal went beyond what the H.R. Committee and

Board had approved allowing the trigger of “change of control” to occur even where there was a

termination “by the executive for good reason.” This opened the door for Wittig to receive massive change

of control compensation when there was a mere change in executive duties or a reduction in “Base

Salary,”6 or bonus targets. The drafting also gave Wittig and Koupal an opportunity to add benefits.

75. An additional “relocation benefit” provision was also added by Wittig and Koupal that had

not been approved by the H.R. Committee. This required the Company to buy back the residence at cost,

but plus “improvements.” This was drafted to have WRI pay for Wittig's extensive home renovations.

Wittig had purchased the house formerly owned by Governor Alf Landon in 1998, and undertook

substantial new construction and renovation of the house, including enlarging the interior space, redesigning

the garage, landscaping the grounds, and constructing a sports facility and other improvements. The costs

of Wittig's house and of all of its improvements would likely be much higher than its eventual appraised

value. The H.R. Committee was NOT made aware that this change had been made to the provision.



Throughout the entire drafting period, the H.R. Committee had no direct contact with WRI’s outside

counsel, Cahill Gordon. The employment agreements were executed on September 19, 2000 (the

“Agreements”). The H.R. Committee relied on Terrill's “review” of the Agreements as WRI's counsel,

even though, as a beneficiary under the Agreements he had a clear conflict of interest.

76. Thus, under the Agreements, entered into on or about September 19, 2000, which would

automatically be extended on each anniversary, if Wittig ceased to be employed by WRI, he was entitled

to: a lump sum payment of 2.99 times the higher of his base salary and 90% of position’s job value and

2.99 times the higher of the highest bonus paid to him for the past three years and his target bonus; three

years of health, disability and life insurance coverage for himself and his dependents; three years of financial

and legal counseling services; participation in the Company’s gift matching program, and out placement

services; retain dividend equivalents, RSUs and other stock based incentives or compensation, which will

continue to vest as if he had remained employed following termination; and acceleration of Annual Pension

Benefit from Qualified and Non-Qualified Plans -- assuming Wittig to be 65 years of age for purposes of

determining the maximum percentage of retirement benefits (calculated using Wittig’s salary and bonus) and

100% vesting of such benefits, Wittig can receive benefit payments under the plan immediately rather than

waiting until age 50 as the plan proscribes for other employees. See Westar, Schedule 14A, filed on or

about May 6, 2002. This change in control provision would have enriched Wittig by approximately $31.2

million over the next 30 years.


7 The calculation was done under two scenarios: (i) the first, where the 2000 short-termbonuses are paid out at target and (ii) second, where the short-term bonuses are paid out at three timesthe “Adjusted Base Salary.”


3. November 2000 Undisclosed DirectorOpposition to Change of Control Compensation

77. On November 7 and 8, 2000, less than two months after the 2000 employment agreements

were executed, the Board met to approve the merger agreement between the Company and PNM.

Immediately before the Board meeting on November 8, 2000, the H.R. Committee met to review

recalculated potential costs of the change in control payments under the new agreements. The projected

costs of the change in control payments were substantially higher than what Resources Connection had

estimated in its June 29, 2000 presentation.

78. The Resources Connection’s revised estimates and the change of control compensation

of senior management (substantially higher than the $27 million estimated in June 2000) were presented to

WRI's Board as follows:7

Scenario 1 Scenario 2

(a) Wittig $27 million $65 million

(b) Lake $18 million $35 million

(c) Koupal $13 million $24 million

(d) Terrill $9 million $18 million

(e) Grennan $8 million $17 million

(f) Sharpe $7 million $15 million

Totals $93 million $174 million



79. The benefits payable to the executives were found to be shocking. Sadaka and Leonard,

in particular, expressed their disapproval. Sadaka believed that the Board had not been adequately

informed of the potential costs and, on that basis, questioned whether the employment agreements had been

properly authorized. In fact, Sadaka was correct that many of the most lucrative provisions such as the

increased base amount to be used under the Split Dollar, the “Put Provision” itself, and the relocation

provision had not been approved by either the Board or the H.R. Committee. Leonard objected to the

size of the potential payments, particularly in light of the Company's poor performance.

80. The Board authorized management to proceed with the merger but resolved that the H.R.

Committee and Wittig were to review the Company's compensation plans and agreements and make

recommendations which would keep benefits within the indemnification limits agreed to by PNM. Wittig

and Lake committed to ensuring that the change in control payments were within the limits.

81. In January 2001, Sadaka and Leonard sought more information on Wittig's actual historic

and current compensation. However, rather than provide the information, Terrill sent Sadaka copies of

the Company's proxy statements dating back to 1996. Sadaka reviewed the proxies but asked again for

the Company to provide her with information in a more accessible form. In response, she was provided

with a table that was little more than a copy of the proxy statement compensation table. Leonard also

asked for more detailed financial information about the Company's performance and complained about

diminished performance, but it was never provided.

82. Moreover, despite the clear purpose of Sadaka's requests -- to figure out how much

Wittig had been compensated during his tenure -- no one disclosed Wittig's Split Dollar to her. Indeed,

the charts she received from the Company did not even disclose the existence of the Split Dollar, which



was entered into before she joined the Board. As of January 2001, Wittig's Split Dollar plan was worth

a minimum of $14 million -- representing his largest single asset.

4. Opposition to 2000 Bonuses at February 7, 2001 H.R.Committee and Board Meetings and Terrill Misinforms Directors

83. The H.R. Committee met on February 7, 2001 in advance of the Board meeting. At the

H.R. Committee meeting, Wittig proposed short-term incentive bonuses that were substantially higher than

the targets because the Company's earnings per share exceeded the budget and the stock appreciated

higher than its competitor group. For example, Wittig's 2000 target bonus was approximately $0.7 million,

but under the short-term incentive formula, his bonus was approximately $1.2 million. The H.R. Committee

unanimously voted to recommend the proposed bonuses to the Board for approval.

84. The Board met on February 8 and 9, 2001 in Scottsdale, Arizona. During the meeting,

the Board was asked to consider the 2000 short-term incentive bonuses. The discussion grew particularly

contentious and heated. Although the specific issue before the Board was approval of the short-term

incentive bonuses, the bonuses would have a substantial impact on the anticipated change in control benefits

payable upon the PNM merger, and the Board had previously directed Wittig to restructure the change

in control benefits to stay within the PNM indemnification limits. The discussion broadened to take into

account those benefits.

85. Wittig advised the Board that the current estimated total for change in control benefits was

approximately $76 million (without considering the Split Dollar benefit) and the cost to the Company (i.e.,

with the gross-up and assuming various methods of reducing the gross-up) was approximately $89.883

million (again, without the Split Dollar benefit) as follows:



86. Wittig presented to the Board in a meeting on February 8 and 9, 2001, in Scottsdale,

Arizona the following change of control compensation:

Name Severance Non-Compete

Accelerated

RSUs

(approximate)

Accelerated

SERP

(approximate)

Gross-up

(approximate)

Mr. Wittig $2,364,310 $3,546,466 $4,311,000 $14,467,000 Assumed none

Mr. Lake $1,393,201 $2,089,802 $2,596,000 $8,640,000 $6,232,000

Mr. Koupal $918,667 $1,378,000 $1,676,000 $4,837,000 Assumed none

Mr Grennan $689,776 $1,034,665 $1,067,000 $3,059,000 $2,303,000

Mr. Terrill $689,810 $1,037,714 $1,231,000 $3,382,000 $2,617,000

Ms. Sharpe $520,565 $780,847 $769,000 $2,877,000 $2,177,000

Non-EC Not included Not included Not included $11,200,000 Not included

Total $6,576,329 $9,867,494 $11,650,000 $48,462,000 $13,329,000

87. However, this excluded payments under the Split Dollar, which for Wittig alone was an

additional $13 million.

88. However, Wittig also failed to include the higher “base amount” in his presentation which

also had a material impact on the aggregate benefit calculations for him and Koupal.

89. The H.R. Committee met in executive session, which meant that all non-directors were

excused. Wittig and Lake, however, remained in the meeting, even though the directors were discussing

their personal compensation. There was a suggestion that Wittig and Lake be excused from the meeting,

but Wittig refused to leave without a lawyer present.

5. Terrill Provides Misinformation to the Board to Obtain Inflated 2000 Bonuses



90. Leonard and Sadaka objected to the bonuses largely because of their impact on the change

in control benefits. Leonard also criticized the lack of information presented to the Board relating to the

true financial performance of the Company and the calculation of the earnings per share component of the

short-term bonuses. The budgeted earnings per share for the year was $1.74. Due in large part to

extraordinary gains from the sale of capital investments such as Hanover Compression Inc. and the transfer

of debt securities to Protection One, the actual earnings per share of $1.96 exceeded the budget by $0.22.

For Wittig, whose target bonus was 90% of salary, the earnings per share component alone was $686,000.

The management could not have informed the Board (or the H.R. Committee) what the bonuses would

have been had the extraordinary gains not been included in the calculations, but they certainly would have

been lower than the proposed bonuses.

91. Leonard argued that the bonuses should not be computed based on extraordinary items.

When he questioned the propriety of including the extraordinary items, Terrill told the Board that the H.R.

Committee could not exclude extraordinary items and earning from the bonus calculation. However, in fact,

the H.R. Committee did have discretion to alter the benchmarks to reduce the bonuses in the event of

extraordinary gains. Based on this information, the Board approved the 2000 bonuses except for Sadaka

and Leonard.

6. Wittig, Terrill, Nettles and Becker Conspire to Remove Sadaka and Leonard

92. After the February 2001 Board meeting, Sadaka and Leonard voted against Wittig’s 2000

bonus and change of control benefits. Wittig put in “high gear” his plans to oust Sadaka and Leonard.

Wittig foiled all efforts of Sadaka and Leonard to obtain accurate information concerning management

compensation.



93. Earlier, in January, Wittig inquired within Cahill Gordon about the feasibility of switching

Sadaka from a Class III director whose term would not expire until 2002 with Budig, a Class II director

whose term would expire in 2001, so that she would have to leave by attrition in 2001. Cahill Gordon

responded there might be a consensual way to achieve this result though Wittig did not take this tact.

94. Instead, Cahill Gordon helped draft a script to use in asking Sadaka and Leonard to resign

from the Board. On January 25, 2001, Cahill Gordon sent Wittig, Lake and Terrill a draft of a speech to

be delivered to Sadaka and Leonard which said:

Owen and Jane -

It is probably not a good thing for either side to press too much neither theofficers to press their claim that they are not subject to the cap nor certaindirectors concerned about the contracts who were present during anapproval process that extended over a period of time and which includedthe use of independent consultants who opined on the market nature of thearrangements.

Given the importance of this to both the officers involved and theirunderstandable commitment to make sure that they receive remunerationcontractually agreed upon and to which they are entitled, and the existenceof an important transaction that is central to the Company andextraordinarily beneficial to it's [sic] shareholders, it is probably in the bestinterest of both sides to step back, and understand the record anddifficulties in pressing claims, again on both sides.

Accordingly, if you - Owen and Jane - are no longer comfortable withagreements previously approved unanimously by the full board of directorsincluding yourselves, then you may want to think about accelerating yourresigning from the Board - especially given the new direction of theCompany. The Company is now headed in a different direction. TheUtility has been successfully contracted for sale, and your departure canbe explained in the context of that transaction.

It is important to consider that if you resign, the circumstances surroundingyour resignation may have an impact on the pending sale of the Company



and perhaps, expose us all to yet another round of litigation. We shouldbe careful about how we proceed, but it appears that a resignation basedupon the change in direction coupled with a commitment by the officers tonot press their claim beyond the cap might be a middle ground thateveryone should be able to live with.

(Emphasis added).

95. While it is unclear whether this letter was actually sent, Sadaka did resign shortly thereafter.

In a letter to Wittig dated March 28, 2001, Sadaka resigned citing numerous concerns, including the level

of executive compensation and benefits and her belief that the Board was not provided with timely and

complete information. In her resignation letter, which was later made public on June 28, 2002, Sadaka

wrote to Wittig:

“Although I believe in paying managers well, I also think that huge awards that seniormanagement will receive from these golden parachutes could only be justified if thecompany had performed in a superior manner. Unfortunately, it has not,” Sadaka wrote,noting that since Wittig took command of the company in 1999, its earnings and stockprice had gone down significantly while its debt had ballooned.

96. With Sadaka’s resignation in hand, Wittig, along with Nettels and Becker, took steps to

oust Leonard. On April 24, 2001, the Company established a trading window for directors and officers

to buy and sell Company shares. On April 26, 2001, Leonard called Terrill, the Company's in-house

counsel, to advise that he intended to sell a substantial number of shares that he held.

97. The same day Terrill notified Wittig of Leonard's intentions, and Wittig used this to set in

motion a chain of events that led to Leonard's resignation. Wittig first asked Terrill to call Leonard and

thwart the sale. However, the sale had materialized and it could not be reversed. (Report p. 263.)

98. Wittig then called Cahill Gordon to discuss the impact of Leonard’s stock sale. Cahill

Gordon advised Wittig that the sale was interesting but not dispositive of anything. Wittig also called



Nettels. Nettels also shared Wittig’s concerns that Leonard's sale of shares would be construed by

investors as an indication of a lack of confidence in management and felt that a director should refrain from

selling shares as long as he or she is on the Board. Wittig had Nettels discuss the matter with Becker, who

along Wittig and Nettels comprised the Nominating Committee, which was responsible for reviewing and

recommending nominees for election to the Board. Becker also felt that Leonard's decision to sell

Company shares reflected a challenge to management. The other directors, notably more experienced, did

not share Becker and Nettels's views. Becker and Nettels, with Wittig's urging and without consulting their

fellow directors beforehand, flew to New York on the Company's plane to meet with Leonard. Nettels

and Becker told Leonard that they disapproved of his decision to sell shares, and that his decision to sell

shares was a vote of no confidence in and an embarrassment to the Company's management. They told

Leonard to speak with Wittig and to resign. Leonard initially refused to resign, but subsequently decided

to resign and called Wittig, accusing Wittig of sending his “two henchmen” to see him. Informing Wittig that

he would resign Leonard asked Wittig to send a form letter of resignation, which Leonard signed and

returned. (Report pp. 263-64.)

99. In his testimony before the KCC, when asked about Sadaka’s resignation, Wittig was

harshly critical of her preparation and performance as a director, stating, inter alia, that she had “the worst

attendance record of any of our directors.” However, in the two full years she served on the Board,

Sadaka missed only one meeting in each of those two years -- an attendance record comparable to that

of the other directors and better than some. Wittig continued to testify that if she had not resigned, the

Board likely would have removed her. However, no directors, other than Wittig and Lake, considered

seeking her removal. Indeed, other directors openly disapproved of Wittig's characterization of Sadaka's



performance as a director. Indeed, after Wittig's testimony relating to Sadaka was made public, Charles

Q. Chandler (“Chandler”), member of the Board since January 2000, berated Wittig. Wittig

misrepresented to Chandler that Cahill Gordon advised him to discredit Sadaka and to describe her in that

light. Cahill Gordon flatly contradicted that assertion and claimed to have counseled Wittig not to make

any comments about Sadaka. (Report pp. 264-65.) In addition to Sadaka and Leonard, Wittig also

forced out outside directors Louis Smith (“Smith”) in April 2001 and Russell Meyer (“Meyer”) in June

2000 who were also critical of Wittig's management of WRI. Smith was forced off the Board after

soliciting the views of some other directors to replace Wittig. Meyer, the chairman of Cessna Aircraft

Corp., was forced off the Board shortly after he voiced his frustrations would what he perceived as a lack

of management accountability. Wittig, and others, managed to keep the $33 million purchase of two new

Cessna jets a secret from WRI’s directors. Indeed, Meyer had only be apprised of these transactions

through a salesperson at Cessna (Report pp.38, 52).

8. The Statements Describing The Restructuring andRate Case Were False and Misleading in Westar's S-1 Filings

100. The stages of the Restructuring described in the S-1 filings were as follows: Westar would

sell in a “rights offering” 12.25 million of Westar common shares at $10 per share; Westar would

“advance” the net proceeds of this rights offering to its parent WRI in exchange for a intercompany

receivable (owed by WRI to Westar) which Westar could then convert into additional WRI shares (before

PNM merger). Upon completion of this rights offering, the terms of the Asset Allocation Agreement

(“Asset Allocation”) (amended on May 2, 2001), would take effect assigning certain WRI assets and

liabilities to Westar. Third, WRI would enter into the tax-free stock-for-stock merger with PNM.



Immediately prior to this merger, WRI's non-utility assets would be “split-off” from WRI. This “split-off”

would be accomplished by WRI distributing all remaining outstanding shares of Westar common stock

owned by WRI on the effective date of the PNM merger to WRI shareholders in exchange for a portion

of the shareholders’ WRI common stock. The Restructuring also provided Westar with WRI equity

because of the purported $300 million of intercompany receivables owed by WRI to Westar. The

Restructuring, as announced, however, was riddled with misrepresentations and omissions of material facts.

For example, the terms of the Asset Allocation was not released to the public and WRI concealed that it

intended to impose on the utilities $1.6 billion of WRI debt used to acquire the unregulated assets, and that

the intercompany receivables that provided Westar with a 17 - 26% equity stake in WRI was achieved

only by way of the undisclosed elimination of the $92.7 million payable owed to WRI by Westar.

101. Beginning in late April 2001, as discovery provided before the KCC in both the rate case

and Restructuring actions, the misallocation of assets and liabilities in the Restructuring and corporate waste

and unjustifiable compensation began to be disclosed -- though repeatedly denied by WRI. Westar’s

amended S-1 filed with the SEC on or about April 13, 2001 showed little debt on its balance sheet, though

WRI continued to withhold disclosure of the details of the Asset Allocation. Some indications of Wittig's

extravagant airplane use, office renovation and compensation also began to emerge and WRI repeatedly

claimed it was irrelevant to the rate increase sought. On May 8, 2001, the KCC issued an order directing

an investigation of the Restructuring triggered by concern about the misallocation of debt. On this

announcement, WRI's common stock closed at $23.41 per share. Disclosure of a financial expert's view

that the Restructuring loaded the utilities with debt related to the unregulated assets on May 10, 2001

further caused WRI stock to decline to $22.65 per share.



102. On May 18, 2001, sensing that the Restructuring might be in jeopardy, Wittig and WRI

tried an “end run” around the KCC by causing Westar to file an amended S-1 seeking to proceed with the

rights offering which would separate the assets and liabilities of Westar from WRI -- the first step of the

Restructuring. WRI claimed it was unrelated to either the KCC investigation or the rate case. On May

23, 2001, the KCC blocked the rights offering pending the completion of its investigation noting its concern

about the possible misallocation of debt. This caused WRI's common stock to decline further to close at

$20.64 on May 23, 2001.

103. On or about July 20, 2001, the KCC issued an order (the “July 2001 KCC Order”), with

detailed factual findings, directing that the Restructuring not go forward, and WRI submitted a financial plan

of restructuring the company to financial health. The July 2001 KCC Order disclosed for the first time the

unjustifiable elimination of $975 million payable owed WRI by Westar and thus the improper basis for

granting Westar equity in WRI in exchange for $350 million intercompany receivables, and that WRI was

being allocated $1.6 billion of debt used to acquire Protection One and ONEOK assets, thus revealing

that Westar was obtaining these assets for virtually no consideration.

104. The July 2001 KCC Order findings caused WRI's common stock to plummet from $21.70

per share on July 20, 2001 to $18.91 on July 23, 2001. Five days later, the KCC rejected WRI's request

for a $151 million rate increase, finding misallocation of non-regulated expenses and fees. By including

non-regulated expenses in the rate case, Wittig and WRI intended this manipulation to cause ratepayers

of the regulated utility to subsidize the unprofitable unregulated operations. This order caused WRI's

common stock price to further decline to $18.30 per share.



9. WRI’s False Statements Post July 2001 Regarding its“Financial Plan” and Debt Reduction

105. WRI purported to comply with the July 20, 2001 KCC Order by filing a financial plan on

November 6, 2001 (the “Financial Plan”) which it then amended on January 29, 2002. The Financial Plan

was positively described in a press release dated November 5, 2001, 2001Annual Report and Form 10-Q

in 2002, as providing “substantial debt reduction” with the separation of unregulated assets. Wittig also

made statements that the Financial Plan “addressed the KCC fears” articulated in its July 2001 KCC

Order. The Financial Plan envisioned a number of stages.

106. Under the first stage of the Financial Plan, WRI would offer each WRI shareholder the right

to purchase one share of Westar Industries' common stock for every three shares of WRI's stock held on

the date of the rights offering. The shares to be sold would range from a minimum of 4.14 million

(approximately 5.1 percent of outstanding Westar Industries shares) to a maximum of 9.1 million shares

(approximately 19.9 percent of outstanding Westar Industries shares).

107. In the second stage, WRI would use its best efforts to sell the Westar industries shares it

owned, shares of WRI itself, or a combination, in order to reduce WRI*s short and long-term debt to $1.8

billion. The requirement to sell equities would be triggered if Westar Industries' shares closed for 45

consecutive trading days at a price that is 15% above the price necessary to reduce the debt to an amount

less than $1.8 billion based on the debt reported in the most recent SEC Form 10-K or 10-Q. This

obligation would not occur prior to February 2003.


8 In its January 29, 2002 amendment, WRI made several changes to its Financial Plan. Specifically, it changed the number of shares that each WRI shareholder could purchase and eliminatedan over-subscription privilege. WRI reduced the minimum size of the offering to 4.14 million shares, or5.1% of the shares outstanding. Pursuant to the amendment, shareholders will be issued a warrant thatcan be exercised to purchase two additional shares of Westar stock at the exercise price in the offering. Finally, the Company modified the Westar Industries valuation and applied a single 10 %, discount. The Company also revised its trigger that requires an attempt to issue additional equity from 25%above the price necessary to reduce debt 15% to $1.8 billion. Westar also included the right to rescindthe rights offering through December 31, 2002.


108. In addition, WRI proposed that: (a) the level by which WRI's debt would need to be

reduced to trigger the second stage would be increased by $100 million on each anniversary date of the

rights offering; and (b) WRI commit to reduce its debt by $100 million provided by cash flow each year.8

109. Under the Financial Plan and the January Transaction described above (¶¶ 105-08),

Westar would also own approximately 23% of WRI, and that amount could increase even further in the

future.

110. As would be subsequently revealed, the Financial Plan did not adjust the asset and liability

misallocation. Westar’s Protection One assets and ONEOK stock were transferred without consideration.

Third, the vast majority of the consolidated debt remained with the utility. These three actions were

intended to maximize the value of Westar at the expense of WRI.

111. Thus, the net result of the Financial Plan remained effectively the same as in the original

restructuring scheme: to keep the non-regulated entities alive in the face of mounting losses, to provide a

safe haven for the current utility management, and to transfer a considerable ownership interest in WRI to

Westar. When it was scrutinized by the KCC staff and the KCC itself, it was soundly rejected for



precisely these reasons. The KCC staff rejected the Financial Plan on September 25, 2002 while the KCC

rejected it on November 8, 2002.

112. Beginning in October 2001, it was reported that defendants Wittig and Lake had begun

to implement “cost cutting measures” in response to the KCC's criticism about WRI debt and Protection

One losses. In fact, what occurred was to reduce senior management in only three months from six

positions to two -- Wittig and Lake. General Counsel Terrill, Chief Administrative Officer Koupal,

Executive Vice President of Electric Operations Thomas Grennan (“Grennan”) and Vice President James

Martin were all dismissed. In the same period, the executive vice president of Shared Services retired.

On December 6, 2001, WRI announced that Wittig and Lake would take a “voluntary 20 percent

reduction in their base salaries.” However, this reduction of senior management led to more bilking of

corporate assets by Wittig and Lake. A series of e-mails to Cahill Gordon from Wittig and Lake after his

announcement showed Wittig and Lake maneuvering to be “kept whole” despite the 20% reduction by

using the reduction as good cause for termination (and thus compensation) and obtaining additional

compensation from Protection One:

- On December 3, 2001, Lake sent an e-mail message to Michael Macris(“Macris”) of Cahill Gordon asking for a draft letter that would ensure that Wittigand Lake would be kept whole for compensation payouts if they volunteered fora reduction in salary;

- On January 29, 2002, Wittig sent an e-mail to Friedman (who forwarded the e-mail to Wolf and Macris) in which Wittig asked if the Board cuts theircompensation and they do not acknowledge acceptance, do they waive their rightsto terminate for “good reason” under their employment agreements;

- On January 29, 2002, Friedman responded to Wittig and Lake (forwarded toMacris and Wolf) in which Friedman advised, after talking with Macris, that



cutting base compensation is “good reason” for leaving under the employmentagreements;

- On June 8, 2002, Wittig sent an e-mail to Lake (perhaps to Friedman also) thatFriedman forwarded to Mark, Macris, and Januszewski. Wittig noted that Beckerwas forgetting that Wittig and Lake had employment agreements that provided thatcompensation could not be reduced without their approval. Wittig suggested thathe and Lake begin drawing compensation from Protection One (and perhaps othersubsidiaries); and

- On June 14, 2002, Friedman e-mailed Mark and Macris attaching a message from Laketo Friedman, which stated that Lake and Wittig wanted a letter stating that they were notwaiving anything under their employment agreements other than the salary cut. Friedmanasked whether the letter should indicate that Wittig and Lake did not deem the salary cutas voluntary [and thus constituted “good reason” to resign].

(Report pp. 185-85) (emphasis added). In fact, in 2002, Wittig and Lake were paid for first time directors

fees of $20,000 retainers and payments for attendance at meetings. Further, in February 2002, Wittig and

Lake received 125,000 Protection One options each -- which dwarfed the 10,000 options received by

other Protection One directors.

113. On June 26, 2002, the H.R. Committee recommended to the Board, and the Board

approved, the form of the amendment to the employment agreement (as presented to the meeting) that was

eventually executed and dated “as of” April 2002. Pursuant to these April 2002 amendments, Wittig and

Lake agreed to a 20% reduction in their base salaries. However, the amendments provide “the benefits

to which Executive is entitled under the Employment Agreement and under the Company*s other employee

benefit plans, programs, arrangements, and agreements, including without limitation the annual incentive

bonus and the Company*s Executive Salary Continuation Plan, shall be computed as if Executive*s base

salary had not been reduced.” Indeed, despite the “alleged” 20% cut in base salaries for 2002, Wittig’s

base salary actually increased from $313,026 in 2001 to $616,633 in 2002. (See 2003 WRI Proxy filing,



dated April 30, 2003). Most provocatively, Wittig’s total compensation package actually increased in

value by 154% from 2001 to 2002 -- so it is clear that the statements regarding a 20% “salary” cut were

false and misleading. Wittig’s 2001 compensation value was approximately $3.9 million, and it increased

to approximately $9.9 million in 2002.

10. Additional Fraudulent Schemes, Statements and Material Omission in WRI's2000, 2001 and 2002 Proxy Filings

114. The three proxy statements issued during the Class Period were “chock full” of blatant

misrepresentations, and many were unrelated to the Restructuring. The proxies purported to describe

independent “non-employee” directors scrutinizing all compensation benefits and related documentation

and fairly awarding short-term and as well as long-term compensation. In fact, there was no independent

Board under Wittig. Wittig either made decisions without the Board review or documented any decision

the Board had to make. This was particularly true with respect to the H.R. Committee. Wittig and other

senior management attended all meetings regarding their own compensation, drafted their own

compensation documents, and controlled all work done by compensation experts who were purportedly

working for the H.R. Committee. Further, without the H.R. Committee and Board review and approval,

there was misrepresentation and failure to disclose of the “other compensation” Wittig, Lake and other

members received through unneeded acquisitions, three jets, personal use of these three corporate jets,

personal investment gains from WRI's investment in QuVis, and personal financial gains from WRI's

investment in Guardian and from the Split Dollar.



(a) 2000, 2001 and 2002 Proxies Failed to DiscloseAirplane Purchases and Their Rampant Personal Use

115. Under the tax code, air travel that is not primarily for a business purpose is deemed

personal travel. See 26 C.F.R. § 1.61-21(b)(1) (1992). For example, family vacations and trips to

sporting events, likely would not be deemed primarily for business purposes, and therefore, absent

reimbursement by the employee, the value of those trips would be imputed as personal income. Under the

tax code, the value of the guest’s air travel must be imputed to the employee unless at least half of the

airplane’s capacity is occupied by business travelers or the employee reimburses the company for the

guest’s travel. See 26 C.F.R. § 1.16-21(g)(12).

116. Wittig was an egregious abuser of the Company’s corporate aircraft. The annual budget

for airplane use was $5 million in 2002. However, in 2000, WRI, at Wittig’s direction, traded in its first

Citation VII airplane for a Citation X at a cost of $17,324,800 -- the largest plane Cessna makes without

the knowledge of any WRI directors. In late 2000, Wittig also acquired an additional Citation X for

$18,039,475 without Board approval. Wittig had unnecessary video screens installed at each seat so his

children could be occupied by movies and video games during trips to and from New York. The

Company’s jets were all acquired through leases held WRI’s wholly-owned subsidiaries, so as to minimize

any attention that would have been directed at it by the KCC or the public. Neither of the aircraft

purchases by Wittig (without the Board’s consent) were publicly disclosed in the proxy statements of the

same period of the purchase, or in the 2000, 2001, or 2002 Proxy Statements when the Board became

aware of these purchases and the inherent personal use of the aircraft. Use of the aircraft for personal trips

“ran amuck” at the Company, not merely by Wittig and Lake but with other senior officers including



Koupal, who purportedly supervised the flight department and the accuracy of the flight logs, and Terrill,

its chief legal officer. Koupal and Terrill even used the planes for personal use after they were advised the

Company was violating tax laws in failing to report personal use of corporate aircraft. For the Class

Period, in addition to Wittig, travel reimbursements for personal use of the corporate aircraft are due from

Becker, Chandler, Budig, Dicus, Nettles and Edwards, and executive officers Lake, Terrill and Koupal.

Some examples of unreimbursed personal travel, falsely reported as having been for business, include:

- In July 2002, Wittig used the Citation X to take his family on a ten-day familyvacation in France and England. They were accompanied by the two-pilot crew,whose hotels, meals and other expenses were paid by the Company. Wittig hadscheduled only two business meetings during that period. The first was overbreakfast on July 12 in London, and we do not know the subject of the meeting.The second was a Protection One Europe board meeting on July 18 in Marseillesthat lasted about an hour; Lake and Geist participated by telephone from Topeka.The rest of Wittig*s itinerary consisted of personal dinners, the theater andsightseeing. Lake and Geist declined Wittig*s invitation to join him on this trip;

- Wittig used the Company airplanes to vacation with family and friends in theHamptons, New York;

- Wittig used the Company airplanes to transport his children*s nanny and herdaughter to and from New York;

- Wittig used the airplanes to take his children to summer camp in Minnesota;

- Wittig used an airplane to take his family, friends and furniture to Baltimore for ahistory fair;

- Wittig used the Company airplanes to travel to sporting events such as the NCAAFinal Four basketball games in 1999, 2000, 2001 and 2002;

- On the morning of Saturday, October 14, 2000, Wittig and Koupal took theCompany plane from Topeka to Columbia, Missouri to attend a KU footballgame. Accompanying them on the plane were CCB President Clinton OdellWeidner II (“Weidner”), Arthur Andersen LLP (“Arthur Anderson”) partner John



Lathrop, and three personal friends of Wittig*s. All of these individuals returnedto Topeka on the Company plane that same evening;

- In February 2001, Wittig flew with seven unidentified family members and friendsfrom Topeka to West Palm Beach on a Friday afternoon. He stayed in WestPalm Beach until Sunday morning, whereupon he and his seven guests flew toDaytona Beach to attend the Daytona 500. The same evening, they returned toWest Palm Beach, from which they left for Topeka in the late afternoon of thefollowing day. The purpose of the trip was listed on the flight logs as “Meeting w/Guardian Int*l.” Wittig*s calendar indicates that such a meeting took place on thelast day of the trip, at noon at the Beach Club Restaurant, with Lake and RichardGinsburg of Guardian in attendance;

- Wittig had friends aboard the planes on at least 18 occasions;

- Lake regularly commuted to and from New York, and often was accompanied byhis wife. Although his employment agreement provided that he would establishpermanent residency in Topeka, he maintained his permanent residence in NewYork and used the Company airplanes to commute;

- In the winter and early spring, Lake often used the Company*s airplanes tocommute to his home in West Palm Beach, Florida, again often accompanied byhis wife. As a result of the frequency of these trips, the plane traveling back andforth between Topeka and West Palm Beach was nicknamed the “Florida Shuttle”by employees;

- Lake used the Company airplanes for vacations and to attend social events withfamily, occasionally including his son-in-law and his wife*s parents, to destinationssuch as New York, New Hampshire, Florida and Colorado;

- In late December 2001, Lake and his family, his son-in-law and a friend of one hischildren boarded a Company plane with the intent to go on a trip from New Yorkto Charleston, South Carolina for a social function. The plane had engine troublein mid-air, however, and had to turn back to New York;

- Returning from a security conference in Florida in February 2001, the airplane,with Lake and his wife, as well as Geist and his wife on board, went toWestchester County, New York solely for the purpose of dropping off Mrs. Lake.The airplane then immediately headed to Topeka with the rest of the passengers.The airplane logs* “comments” field for this flight specifically says “(drop S.Lake)”;



- In the summer of 1999, Wittig and his family took a trip from Topeka toWesthampton Beach with Lake on board. The Wittigs were dropped off, andLake went to Westchester to pick up his wife and children, his wife*s parents andson-in-law, and take them to New Hampshire for his daughter*s engagementparty. The purpose of the Lake family trip was reported as “Meeting with Tyco,”which is headquartered in New Hampshire, but Lake acknowledged in ourinterview that the trip was personal and that he did not have a meeting with Tyco(though he spoke in a social setting with an outside director of Tyco). Lake toldus that the reported purpose was untrue, that he had to have been the source, butthat he otherwise was unable to “connect the dots.” The plane returned toWestchester with the same passengers two days later and dropped off everyonebut Lake. Lake returned to Westhampton Beach to pick up Wittig and one of hissons and transport them to Minnesota to drop Wittig*s son at summer camp.Wittig and Lake then headed to Aspen, Colorado for a legislative gathering;

- Some of the Company*s current and former directors Dicus in 1997, Becker in2000, and Nettels in 2001 accompanied Wittig on the planes to attend sportingevents, such as the Final Four;

- A number of Westar executives, past and present, used the plane for personalreasons, most notably Koupal and Terrill, who had their spouses and children onthe planes on multiple occasions. Other officers whose spouses or children flewon the planes for personal travel include, but are not limited to Geist, former chieffinancial officer, and current chief operating officer Bill Moore, former executivevice-president of electric operations Grennan and general counsel Larry Trick; and

- The Wing plane sometimes was used for personal travel as well. Hayes, Wittigand former chief financial officer Kitchen, along with their spouses, used the planeto fly to the Final Four basketball games in Indianapolis in March 1997. Hayes,Wittig, Kitchen and Koupal also used the plane in March 1998 to fly to the FinalFour games in San Antonio. The Wing plane was likewise used to fly Hayes andKitchen to the Super Bowl in California in January 1998, with a Protection Oneboard meeting in Los Angeles scheduled for the next day.

(Report pp. 61-63).

117. At Wittig and other officers’ direction, Wittig’s secretary repeatedly fraudulently recorded

the purpose of these trips as “business meeting” in the flight logs. Wittig, his family, friends, employees and



their spouses, politicians, and family pets flew hundreds of flights to various destinations for non-business

related purposes. As set forth herein (¶¶ 139, 216, 262), these trips were never disclosed in the proxy

statements purportedly detailing Wittig's compensation. Wittig also disregarded that the improper

designation of these flights violated the Internal Revenue Code. He also knowingly disregarded the advice

of numerous consultants, including Arthur Andersen and Resources Connection, the Company’s

compensation consultant, dating back to December 1989, and internal memoranda in 1997, which

continued regularly up until the exposure of WRI and Wittig’s corporate abuses, informing Wittig that the

value of his costly personal travel on a corporate aircraft was taxable and should be disclosed in the proxy

filings. Additionally, in the fall of 2001, when approached by Jenny Tryon (“Tryon”), then director of

internal audits of WRI, acting upon Arthur Andersen’s recommendation of an audit of the Company’s

planes, Wittig singlehandedly thwarted any such investigation or audit and told Tryon she was not allowed

to perform an audit.

118. Wittig and Lake’s abuses of the Company’s airplanes were not confined to personal travel.

There were instances of extravagant uses of the airplanes in connection with business travel. For example,

from June 1, 2000 through June 9, 2002, Wittig and Lake had scheduled business meetings in five cities

throughout Western Europe. At that time, the Company did not have a Citation X and, although the

Citation VII was capable of transatlantic flights, it needed to stop to refuel along the way. Nevertheless,

Wittig and Lake used the Company airplane to fly to New York. From there, they flew first-class on a

commercial airline to Paris and then flew on to Marseilles -- but had two pilots fly the Citation VII

“passengerless” to France and meet them -- having the Citation VII stop to refuel in Newfoundland and

Iceland. Wittig and Lake then used the Company airplane for four flights within Europe, from Marseilles



to Brussels, from Brussels to Dusseldorf, from Dusseldorf to Geneva, and from Geneva to London. On

their return from London, they again flew first-class on a commercial airline to New York. The two pilots

flew the empty Citation VII to Topeka by way of Iceland, Newfoundland and Milwaukee. Meanwhile,

the second Citation VII flew to New York for the purpose of meeting Wittig to bring him to Topeka. Lake

stayed behind in New York for a few days for meetings until he was picked up by the same Citation VII

and brought to Topeka.

119. There were also instances when unnecessary business meetings were scheduled in order

to justify trips that were primarily personal. For example, on December 30, 2001, Wittig and Lake, along

with their spouses and Wittig*s children, flew from Topeka to West Palm Beach, Florida, where they spent

the New Year*s holiday. A few days later, the same jet made another flight from Topeka to West Palm

Beach, this time transporting Geist, along with his spouse and two children. The purpose of the trips was

listed as Protection One business on the flight logs, and Wittig, Lake and Geist had scheduled a single

meeting with Richard Ginsburg (“Ginsberg”), the chief executive officer of Protection One, and Darius

Nevin (“Nevin”), the chief financial officer, during their time in Florida. Ginsburg and Nevin arranged for

a conference room at the Four Seasons hotel in West Palm Beach and prepared a presentation. During

the meeting, the three Company executives reportedly teased Ginsburg and Nevin for taking the meeting

seriously. In the interview, Geist acknowledged that the trip was primarily a vacation for the Company

executives and their families. The Wittigs flew back to Topeka on January 4th. The Geists and Lake

stayed until January 6th and then flew on the Company plane to Topeka. Mrs. Lake remained in West

Palm Beach.


9 Lake admitted to the Special Committee that he was “obviously negligent” in failing toreport his personal travel. (Debevoise Report, p. 65, n. 27).


120. Besides Wittig and Lake’s misrepresentations, the Company’s remaining officers also

falsely represented in the annual directors’ and officers’ questionnaires that they had not received noncash

employment benefits -- including, specifically, personal travel on corporate aircraft. These falsified

questionnaires were signed by each respondent to affirm the accuracy of the response and used to confirm

the accuracy of the Company’s public filings.9

121. Wittig also embarked upon a $7.2 million renovation of Westar’s executive suite and jet

hanger, which began in late 1998 when the Company was suffering through a period of struggling financial

performance, cost reductions and employee layoffs. The renovated suite spanned 25,000 square feet and

comprised a grand entryway, eight offices, a board room and a gourmet kitchen. Wittig’s office was

sprawled out over 1,000 square feet and included a large bathroom, shower and dressing area, a $29,000

custom built television wall unit, antique lamps and a private conference room with a $51,000 double wall

unit. The excessive cost of these renovations were material omissions in the year 2000 Proxy Statement

(¶¶ 135-145). While engaged in renovating Wittig’s office, the same interior decorator was concurrently

renovating Wittig’s personal residence, the Landon mansion. These payments were materially omitted from

the 2000 Proxy Statement. On two occasions in mid-1999, the Company received invoices from

Charbonnet relating to work done at Wittig’s Landon mansion. Defendant Lake and some other officers

had openly objected to the extravagance of the offices, and Lake had even presented his objections to

defendant Budig.



(b) 2002 Proxy Failed to Disclose Wittig and Lake’s Investments in QuVis

122. Wittig and Lake implemented a scheme to direct certain corporate investment for

undisclosed personal financial gain. In December 2001, Wittig and Lake caused the Company to lend

$400,000 to QuVis, a start-up technology firm involved in the area of digital compression. QuVis was

based in Topeka. The loan was made without Board approval and was not connected to any aspect of

WRI’s business plan. The loan was also made despite the fact that Wittig and Lake both had undisclosed

personal financial interests. Wittig had personally invested $1 million and Lake had personally invested

$125,000 in QuVis. QuVis is in default on the WRI loan.

(c) 2002 Proxy Failed to Disclose Wittig and Lake’s Interests In Guardian

123. In the two meetings held on November 16, 2001 and December 5, 2001, Wittig misled

the H.R. Committee into awarding senior officers RSUs in the Company's investment in Guardian -- without

disclosing that Wittig and Lake intended to have Protection One acquire Guardian. This acquisition would

trigger a substantial premium on their interests. In general, RSUs, considered to be a long-term incentive

award, generally do not vest for a fixed period of years and would not vest unless the company’s trading

prices appreciated above a predetermined threshold. These awards are intended to align the interests of

employees and the shareholders by incentivizing employees to work to increase the value of the company’s

stock. However, despite the assurances made to the Board that he was committed to reducing executive

compensation, Wittig sought to “unalign” the interests of employees and the Company and re-align the RSU

program with his personal financial interests.

124. In April 2002, Wittig misled the H.R. Committee to authorize an offer to employees to

exchange their unvested Company RSUs for either actual shares of Company stock or shares of Guardian



stock -- blatantly contrary to the RSU program’s intended purpose -- under the guise that the exchange

would reduce the Company's expenses and save $500,000 in cash paid on dividends each year. Lake, the

only other beneficiary from Wittig’s misrepresentations, did nothing to correct Wittig's misstatements to the

H.R. Committee.

125. The Board and the H.R. Committee were not given the benefit of advice or counseling from

an independent compensation consultant, nor did they request any advice or consultation. Although a

majority of the members of the H.R. Committee claim to have understood that the proposed amendments

to WRI’s RSU program would only yield WRI common stock and that such an understanding was assured

by Wittig, Wittig nevertheless was able to “pull the wool over their eyes” and arrange the program so that

only he and Lake would be able to receive undervalued Guardian RSUs in exchange for previously

awarded overvalued WRI RSUs. Wittig and Lake did not disclose that the exchange would be deemed

a private offering under the Securities Act of 1933 and thus only accredited investors could partake in the

exchange and only they would qualify for the Guardian shares or that the Guardian stock transferred to

Wittig and Lake paid more in dividends than the Company would save from the exchange. Wittig and

Lake's personal financial interests in Guardian were also material omissions in the 2002 Proxy Statement.

(d) 2002 Proxy Failed to Disclose Wittig’s Bank Fraud

126. Wittig also used his position as CEO of WRI to engage in banking fraud. Wittig was

negotiating with CCB for a $20 million loan to WRI officers to participate in the Westar Restructuring

(providing CCB with a potential commitment fee of $50,000) Wittig used this to engage in an unlawful

personal real estate transaction at CCB with CCB bank officer Weidner. Upon their mutual agreement,

on or about April 30, 2001, Weidner, Wittig’s loan officer at CCB, prepared a loan proposal to increase



Wittig’s line of credit at the bank by $1,500,000, from $3.5 million to $5 million. In the proposal Weidner

stated:

“David is President and CEO of Western Resources, Inc. He utilizes the line of credit topurchase stock and make business investments. He is also using the line to complete thefinal renovation costs of the Landon mansion as well as their personal funds.”

This statement was a known falsity because, in fact, the $1.5 million was wired to Weidner’s account the

very same day in exchange for a promissory note so that Weidner could purchase a 50% interest in an

Arizona real estate development project “Eagle Ridge.” On May 1, 2001, Wittig and Weidner signed

a promissory note reflecting Wittig's $1.5 million loan to Weidner. The note provided for an annual interest

rate of 7% and quarterly payments with the loan to be repaid by May 1, 2002. The debt was secured by

Weidner's interests in Eagle Ridge in a financial statement that Wittig submitted to CCB in January 2002.

Wittig did not include his interest in the loan to Weidner as an asset. On November 7, 2002, Wittig was

indicted on bank-fraud, conspiracy, and money-laundering charges for allegedly covering up the fraudulent

loan scheme. Wittig faces a potential maximum sentence 165 years in prison. On the news of Wittig’s

indictment, the Company’s common stock plunged 22% and the NYSE had to halt trading.

127. On July 1, 2003, Weidner pleaded guilty to two felony charges of making a false bank

entry, report and transaction. On July 14, 2003, a jury convicted Wittig of six counts of conspiracy, money

laundering, and falsifying bank entries and convicted Weidner of conspiracy, and three counts of falsifying

bank entries. Wittig and Weidner each face a maximum of 135 years in prison.



C. Materially False and Misleading Statements

March 29, 2000 Press Release:

128. On or about March 29, 2000, WRI announced that it would separate its electric utility

business, from its non-electric business by means of a voluntary exchange offer, expected to be completed

prior to year-end 2000. Wittig stated that the transaction would “unlock” WRI's electric assets:

“We believe that Westar Energy, as a pure-play electric company, will unlock the valueassociated with our electric assets by providing shareholders an investment opportunityexclusively in our electric utility operations.”

129. Wittig further stated in the same press release that the Restructuring would provide “greater

definition” to its business and give “the financial community a clearer understanding of where the company's

value lies.”

“While the businesses of the total company are strong, they have different growth, financial,and business profiles and are evaluated differently by investors,” said Wittig. “Many of ourshareholders have wanted greater definition to the business, specifically a desire to havethe company return to its core business as strictly an electric utility. This strategy gives ourshareholders a choice of which business they wish to own, and gives the financialcommunity a clearer understanding of where the company's value lies. In fact, this is verysimilar to the structure we would have built had the KCPL transaction been completed.”

* * *“For the investor seeking the profile and income of a utility investment, and the opportunityfor a growing dividend, Westar Energy will have two solidly performing electric utilitieslocated in solid markets,” said Wittig. “Investors in the non-electric business, WestarCapital, will be able to evaluate and realize a different risk/ reward potential under thisstructure, one more focused on growth and capital appreciation. The new corporatestructure will allow the management team of each business to focus its energies and abilitieson maximizing the potential and value of its assets.

(Emphasis added).



130. These statements were materially false and misleading because the Restructuring was not

intended to “unlock electric assets” or “maximize the value of its assets” but rather impair them with (1) the

$1.6 billion massive debt used to acquire the unregulated assets; (2) the undisclosed January Transaction

in 2000, which was in effect a forgiveness of the $927 million loan owed by Protection One to WRI; and

(3) transfer to Westar valuable ONEOK stock without consideration. Further, this Restructuring was not

“very similar” to the KCPL deal which did not contain this misallocation of debt and assets.

131. In the same release Wittig was positive about Protection One's current and future

performance”:

... Wittig said that Protection One announced today that customer attrition for the fourthquarter 1999 had improved and Protection One expects attrition to be lower in the firstquarter 2000 than the fourth quarter 1999. Protection One also has made significantprogress in the last six months to enhance customer service, retain customers and reducedebt.

132. In an analyst conference call on the same day, Wittig was more specific about positive

developments at Protection One.

Moving to our monitored services investment - Protection One:On an earning per share basis, Protection One did not achieve their goals in 1999.Changes in the Customer Account amortization rates required it to record larger losses forProtection One on Western's statements despite the fact that those charges have no cashimpact on Western.

Protection One continues to move aggressively to turn its results around. Protection Onehas enhanced customer service and retention of customers. Attrition for the fourth quarter1999 improved to 14.7% on an annualized basis and Protection One expects attrition tobe lower in the first quarter 2000.

Earlier this month, Western Resources purchased the Continental European (CNT) andUnited Kingdom. operations, collectively the “European operations,” and certain otherassets of Protection One for $244 million.



Under the agreement, Western Resources paid approximately $183 million in cash andtransferred to Protection One debt securities with a market value of approximately $61million. Cash proceeds from the transaction were used to reduce the outstanding balanceowed to Western Resources on Protection One's revolving credit facility.

133. The preceding statements in paragraphs 130-31 concerning “improved attrition rates” and

reduction of debt owed to WRI by Western were materially false and misleading because there had been

no improvement -- only worsening -- of attrition; and WRI had eliminated $927 million of Protection One

debt in January 2000. Indeed, at the time this statement was made Protection One had already

aggressively implemented a radical change refusing to renew dealer agreements for Protection One’s

monitored services -- cutting off its means of acquiring customers. In addition, Protection One drastically

decreased the amount it paid per customer for an acquisition, which prompted dealers selling a competitor’s

monitored services to Protection One’s customers accelerating the attrition rate.

Proxy Statement Filed May 11, 2000

134. On or about May 11, 2000, WRI filed its 2000 Proxy with the SEC. The 2000 Proxy

contained a “Human Resources Report,” the opening paragraph of which provided as follows:

The Company's executive compensation programs are administered by Human ResourcesCommittee of the Board of Directors (the “Committee”) which is composed of three non-employee directors. The Committee reviews and approves all issues pertaining toexecutive compensation. The objective of the Company's three compensation programs(base salary, short term incentive, and long term incentive) is to provide compensationwhich enable the Company to attract, motivate and retain talented and dedicatedexecutives, foster a team orientation toward the achievement of business objectives, anddirectly link the success of the Company's executives with that of the Company'sshareholders.

(2000 Proxy p.12)



135. The preceding statement was false and misleading because the H.R. Committee was not

independent, despite the fact that it was composed of all “non-employee” directors, because the H.R.

Committee relied entirely on management to structure and draft all compensation agreements, never seeking

outside counsel independent of management (as set forth herein, ¶¶ 69-76). For example, the plan the H.R.

Committee approved in January 1998 was dramatically different from the plan implemented in June 1998,

and, in effect, thereafter, the Split Dollar had a “put right” provision which permitted six senior officers to

sell their death benefits for approximately $57 million.

136. The 2000 Proxy also provided:

A base salary range is established for each executive position to reflect the potentialcontribution of each position to the achievement of the Company’s business objectives andto be competitive with the base salaries paid for comparable positions in the nationalmarket by diversified consumer services companies, with emphasis on electric energy andmonitored security services with annual total revenues comparable to those of theCompany. . . . In addition, the Company considers information of other companies withwhich the Committee believes it competes for executives, and is therefore relevant, but isnot part of such industry information.

* * *

Chief Executive Officer

Wittig has been the Chief Executive Officer of the Company since July 1998. Wittig's basesalary and his annual short term incentive compensation are established annually. Whilenot utilizing any specific performance formula and without ranking the relative importanceof each factor in reviewing Wittig's base salary for 1999, the Committee took into accountrelevant salary information in the national market and the Committee's subjective evaluationof Wittig's overall management effectiveness in his position as Chairman of the Board,President, and Chief Executive Officer of the Company and his achievement of individualgoals. Factors considered included his continuing leadership of the Company and hiscontribution to strategic direction, management of change in an increasingly competitiveenvironment, control of expenses, management of operations, and the overall productivityof the Company. The Committee also took into account the recommendations made by



an independent compensation consultant following a review of the Company'scompensation plans.

(2000 Proxy, pp. 12,14) (emphasis added).

137. In addition to the reasons set forth above (¶¶ 69-76), these statements were false and

misleading because WRI’s executive compensation was not linked “to the achievement of the Company’s

business objectives.” In fact, during the Class Period, while executives’ salaries continued to rise, WRI,

under Wittig’s control, entered into several unavailing acquisitions and its common stock declined in excess

of 70%, and its debt ballooned to $3.6 billion. Moreover, in addition to participating in the H.R.

Committee meetings where his compensation was discussed, Wittig knowingly or recklessly withheld

information that was critical in the computation of his salary.

138. The 2000 Proxy Statement further provided that the executive compensation paid to

defendants Wittig, Lake and other members of Westar’s senior management was as follows:



Annual Compensation Long Term Compensation --------------------------------- ----------------------------- Awards Payouts --------------------- ------- Other Restricted Securities All Annual Stock Underlying LTIP Other Name and Salary Bonus Compensation Awards Options Payouts Compensation Principal Position Year $ $ $(1) $(2) SARs# $ $(3)------------------------ ---- ------- ------- ------------ ---------- ---------- ------- ------------David C. Wittig 1999 408,683 -- 105,909 1,738,625 114,000 -- 5,756,753Chairman of the Board, 1998 635,542 114,400 31,312 1,622,250 113,000 -- 79,217 Presidentand Chief Executive 1997 503,094 376,431 12,339 -- 50,000 46,141 43,096 OfficerDouglas T. Lake 1999 266,849 -- 31,494 948,219 40,000 -- 429,664Executive Vice President 1998 108,333 15,080 3,348 521,438 30,000 -- 354,839and Chief Strategic Officer 1997 -- -- -- -- -- -- --Carl M. Koupal, Jr. 1999 307,020 -- 13,045 612,313 28,000 -- 42,327Executive Vice President 1998 250,125 36,720 4,258 502,125 28,000 -- 31,610and Chief Administrative Officer 1997 206,833 349,107 2,418 -- 17,000 23,533 17,063Thomas L. Grennan 1999 187,708 -- 35,965 445,000 20,000 -- 64,292Executive Vice President, 1998 163,000 47,481 31,840 -- 12,000 -- 17,761Electric Operations 1997 141,850 355,436 6,650 -- 3,750 19,213 12,991Richard D. Terrill 1999 180,000 28,400 12,448 361,563 16,000 -- 36,224Executive Vice President, General 1998 130,667 17,160 3,919 -- 9,000 -- 17,177Counsel and Corporate Secretary 1997 118,633 181,411 1,873 -- 3,000 17,564 11,434

(2000 Proxy, p. 8) (emphasis added).

139. The calculations used to reach the numbers represented in the columns titled “Other Annual

Compensation” and “All Other Compensation” were knowingly erroneous because they failed to include

the value of personal, rampant non-business related travel on the corporate aircraft as income to the

employee, and as such, the numbers represented there were false.

140. The Company’s disclosure of “All Other Compensation” paid to Wittig included as follows:

(3) All Other Compensation for 1999 includes the following items: . . . (f) a payment toWittig of $5,370,000 representing the value of a life insurance policy on Wittig’s lifeacquired to compensate him for lost benefits from his prior employer (the proceeds of thelife insurance policy on Wittig’s life will be paid to the Company and is anticipated toreimburse the Company for this payment) . . . .


10The net present value of cash flow under the original payment schedule, assuming an interestrate of 6% is approximately $1,964,205.


(2000 Proxy, p. 8-9) (emphasis added).

141. The preceding statement regarding WRI’s payment to Wittig of $5.37 million was false and

misleading because neither the Board nor the H.R. Committee ever reviewed or approved this lump sum

payment. Further, the amount of the payment was materially inflated by $3.4 million because it was an

acceleration of payments to be made over 10 years without discounting for the time value of money.10

142. The same 2000 Proxy Statement also included the following regarding the Split Dollar:

The Company established a split dollar life insurance program for the benefit of theCompany and certain of its officers, including executive officers. Under the split dollar lifeinsurance program, the Company has purchased a life insurance policy on the insured's lifeand, upon termination of the policy or the insured's death, the insured's beneficiary isentitled to a death benefit in an amount equal to the face amount of the policy reduced bythe greater of (i) all premiums paid by the Company and, (ii) the cash surrender value ofthe policy, which amount, at the death of the employee or termination of the policy, as thecase may be, will be returned to the Company. The Company retains an equity interestin the death benefit and cash value of the policy to secure this repayment obligation.

Subject to certain conditions, beginning on the earlier of (i) 3 years from the date of thepolicy or (ii) the first day of the calendar year next following the date of the insured'sretirement, the insured is allowed to transfer to the Company from time to time, in wholeor in part, his interest in the death benefit under the policy at a discount equal to $1 foreach $1.50 of the portion of the death benefit for which the insured may designate thebeneficiary, subject to adjustment if the participant does not retire within six months of thedate of agreement based on the total return to shareholders from the date of the policy.Any adjustment would result in an exchange of no more than one dollar for each dollar ofdeath benefit nor less than one dollar for each two dollars of death benefit. At March 31,2000, the Company's liability under this program was $19 million. The program has beendesigned such that upon the insured's death the Company will recover its premiumpayments from the policy and any amounts paid by the Company to the insured for thetransfer of his interest in the death benefit.

(2000 Proxy p. 11) (emphasis added).



143. WRI’s disclosure regarding the Split Dollar was materially misleading because it failed to

disclose:

(a) that the Split Dollar, including the highly unusual “put provision” had not been

reviewed or approved by either the Board or the H.R. Committee; and

(b) that Wittig and Koupal had received enhanced benefits. Pursuant to the Program,

each officer’s Split Dollar policy premium would be funded by an amount allocated from the short-term

bonus and the net present value of sacrificed SERP benefits. SERP provides for a minimum of six year

vesting period, after which the officers would only be 10% vested in his total SERP benefits, with the

remaining portion to vest ratably over the next nine years - at an additional 10% for each year of service.

However, when the Split Dollar policies were executed in 1998, Wittig had only been with the Company

for three years and had not vested in the SERP at all, and would only be 10% vested by 2000. Moreover,

the SERP agreement provided that a participant who retires before age 50 is entitled to only 50% of his

average salary and bonus for the prior three years -- Wittig was only 44 years-old in 2000, and thus would

have been entitled to only 10% of 50%, or 5% of his average salary and bonus for the prior three years.

Had WRI and Wittig waited any longer to include Wittig in the Split Dollar, his 1997 incentive bonus would

not have been included in the calculation of SERP benefits and his sacrificed benefit would have been zero.

WRI permitted Wittig to prematurely participate in the Split Dollar enabling him to include $1,488,435 of

forgone 1997 short-term incentive bonus in the calculation of the funding for his Split Dollar premium.

Based on Wittig’s six years of service, the annual vested SERP benefits sacrificed to his foregone bonus

was only $24,807 -- yielding a net present value of the benefit of approximately $200,000. However, the

Company paid a premium of $3,445,733 -- more than double the amount of Wittig’s foregone 1997 bonus


11 WRI’s Split Dollar contained excessively generous “put rights,” a feature that has beendescribed as unique by several people familiar with the Split Dollar, such as Cahill Gordon lawyers,Arthur Andersen personnel, and the insurance broker who helped design it. At the current time, noother company has included such excessively generous put rights in its executive compensationpackage.


and the present value of his SERP benefit. Additionally, the Split Dollar policy for Koupal, age 46 in 2000

with eight years of service entitled to 15% of his average salary and bonus for the past three years, was

funded with a premium of $1,091,365 -- also in excess of double his short-term incentive bonus and net

present value of his sacrificed SERP benefits. The H.R. Committee, authorized to award compensation

in excess of the stated formulas, was not consulted with nor had it approved the enhanced awards.11

144. The 2000 Proxy also sought to get shareholder approval of the election of three directors

to Class I of the Company’s Board of Directors:

Messrs. Charles Q. Chandler, IV, John C. Dicus, and Owen F. Leonard have beennominated for election as directors at the Annual Meeting of Shareholders as Class Idirectors. . . . Directors to be elected at the meeting will be elected by the affirmative voteof the holders of a plurality of the shares entitled to vote represented at the meeting inperson or by proxy. . . . While it is not expected that any of the nominees will be unableto qualify or accept office, if for any reason one or more are unable to do so, the proxieswill be voted for substitute nominees selected by the Board of Directors.

(2000 Proxy, p. 2).

145. These statements were false and misleading because they failed to disclose that the Board

was non-functioning; that there was no independent Board under Wittig; that Wittig either made decisions

without the Board review or documented any decision the Board had to make; that Wittig and other senior

management attended all meetings regarding their own compensation and drafted their own compensation

documents, and controlled all work done by compensation experts who were purportedly working for the



H.R. Committee, they would have never approved the Board nominations. But for the alleged

misrepresentations in the preceding paragraph, shareholders never would have elected them and the Board

would not have been configured.

146. On May 16, 2000, an article in The Topeka Kansas Journal entitled “CEO got $8 million”

reported some of Wittig's compensation, that he received no “short term bonus,” and that he received $5.4

million as compensation for “lost benefits and income from previous employment.”

147. These statements were materially false and misleading because the $5.4 million was inflated

under the terms of the agreement and was not approved by either the Board or the H.R. Committee.

Moreover, the KCC general counsel indicated in the same article that the appropriateness of the $5.4

million payment would be considered if the Company asked to include it in future rates.

148. As reported on May 19, 2000 in The Topeka Capital Journal, WRI announced it hired two

New York investment banking firms to help it find a merger partner or a company to purchase

its KPL and KGE divisions:

“We didn't make this decision lightly,” David Wittig, Western's chairman, president andchief executive officer, said in an interview with The Topeka Capital-Journal. “The seniormanagement of this company, including the utility management, is in unanimous agreementthat this is the right thing to do.”

149. This statement was materially false and misleading because the transaction was the right

thing to do for Wittig personally, not for WRI shareholders.

150. On May 19, 2000, Standard & Poors raised WRI's rating from “negative” to “developing.”

151. WRI's common stock price closed at $15.87 per share on May 19, 2000.



152. As reported in Electricity Utility Week on May 22, 2000, Wittig described the separation

of the utility business as part of a plan for its “financial growth.”

David C. Wittig, Western chairman, president and CEO, called today's action “the nextlogical step in our strategy to separate the regulated and unregulated assets of WesternResources.” He said “the utility operations must grow substantially to remain competitive.”

“We understand that growth is essential to be successful in a deregulated electricenvironment. That has been our view for some time-and remains our view today. Ourelectric operations, while solid, are becoming comparatively smaller as the industryconsolidates. We look forward to partnering with another energy company that offerscompatibility, growth and opportunity for our shareholders, customers and employees,”Wittig added.

153. These statements were false since the Restructuring was designed to undermine the financial

strength of the utilities in order to benefit Westar, Wittig and his cronies.

June 16, 2000: Wittig's Misrepresents “Total Board Support for His Compensation

154. As reported on June 16, 2000 in The Topeka Capital Journal, Wittig responded to criticism

at WRI's 2000 annual meeting about his compensation stating he had the total “support of the Board”:

A few in the crowd of mostly senior citizens called for his resignation.

But standing on the stage of The Topeka Performing Arts Center, Wittig, who also servesas president and chief executive officer, said he “enjoyed the total support” of the boardof directors. And he calmly insisted the company was in solid financial shape despite anearly 60 percent drop in the value of its stock since Spring 1996.

In addition, Wittig said a new leadership team installed a year ago at Protection One,Western's monitored security subsidiary, had engineered a “terrific turnaround” at theonce-troubled company.

(Emphasis added.)

155. The statements in the preceding paragraph that the Board totally supported Wittig were

false since the Board was not independent from Wittig. Wittig's 1999 compensation was largely inflated



and not approved by the Board or the H.R. Committee. Moreover, the Board had not been given accurate

information regarding Wittig's change of control compensation which was still materially understated.

Further the strength of the utility business was intertwined by the elimination of $927 million debt and there

had been no “turnaround” at Protection One.

156. On August 8, 2000, WRI announced it had reached an agreement with the KCC on

preliminary matters in connection with WRI's application to increase rates to be made on or before

November 25, 2000. As part of the agreement, the parties agreed to the following:

- The test year for the rate case will be October 1, 1999 through September 30, 2000.

- Western Resources' utilities will include in the rate filing the new generation it isplacing in service in 2000 and 2001.

- KCC staff will retain the right to review various issues relating to the newgeneration.

- As a result, the parties will file a motion to approve the agreement and request thatthe Commission issue an order disposing of Kansas Industrial Consumers' (KIC)complaint.

- “We are extremely pleased we have been able to reach this agreement with theKCC staff which reflects a relationship based upon open communication andcooperation,” said David C. Wittig.

(Emphasis added).

157. These statements were materially false and misleading since the Restructuring and rate case

were a part of Wittig's fraudulent scheme to “dupe” the KCC into believing both the Restructuring and the

rate case would be beneficial for the utilities, when, in fact, they were designed to have ratepayers pay for

the cost of Wittig's losses in operating the unregulated assets.



158. This announcement positively impacted WRI's common stock price. On August 8, 2000,

WRI's common stock prices closed at $17.00 per share, up from $16.77 per share on the prior day. By

August 10, 2000, WRI's common stock price reached $18.77 per share.

159. On August 14, 2000, WRI announced positive second quarter results touting exploration

of means to “grow” electric business:

Monitored services investments of the company lowered total Western Resources earningsby $0.12 per Western share compared to a negative $0.09 a year ago. Increased non-cash expenses reflecting changes in amortization policies were offset, in part, byextraordinary gains on early debt extinguishment at Protection One.

* * *“We have now divested more of our investment portfolio to concentrate on our coreelectric business, monitored services and ONEOK investments,” said Wittig, ProtectionOne continues to turn its operations around by de-leveraging its balance sheet, reducingthe cost of growth and improving customer service. As announced in May WesternResources is continuing to explore strategic options for its electric operations, including apossible merger, sale or partnership to grow the electric business to a more competitivesize.

(Emphasis added).

160. The statements in the preceding paragraph were materially false and misleading because

Wittig had taken and devised steps to weaken the utilities.

October 5, 2000 Westar Industries, Inc. Form S-1 Registration Statement

161. On or about October 5, 2000, WRI's wholly owned subsidiary Westar filed an S-1

Registration Statement describing, in part, the Restructuring scheme, including the purported Asset

Allocation:

In April 2000, Western Resources announced that its board of directors had authorizedthe separation of its electric utilities from us and our subsidiaries. The rights offering is theinitial step in the separation. The rights offering will result in the creation of a public market



for our common stock and in that respect is essentially an initial public offering of ourcommon stock. Western Resources believes the public market will better and moredirectly value our assets, which are presently valued together with largely unrelated assetsof Western Resources.

* * *Allocation AgreementWe have entered into an allocation and separation agreement, called the allocationagreement, with Western Resources. The primary purposes of the allocation agreementare to provide for the terms of Western Resources' ultimate distribution of the shares of ourcommon stock not sold in the rights offering to its common stockholders and the allocationof liabilities between Western Resources and us.The allocation agreement also provides the terms for repayment of an intercompanyreceivable in the amount of approximately $225 million at June 30, 2000 owed to us byWestern Resources. Under that agreement Western Resources will issue us a note for $. million of the intercompany receivable, which will bear interest at a rate designed to mirrorthe pre-tax average cost of capital of Western Resources and which will be repaid no laterthan the closing of a strategic transaction involving Western Resources' electric utilities.The remaining balance of the receivable will be repaid by our election to receive either (1)convertible preferred stock of Western Resources, (2) shares of our common stockcurrently held by Western Resources, (3) shares of common stock of Western Resources,or (4) a note convertible no later than the closing of a strategic transaction involvingWestern Resources' electric utilities into one of the types of equity securities mentionedabove.

(Oct. 5, 2000 Form S-1, pp. 15, 66) (emphasis added).


the effect of the transaction was not to better value Westar but rather to artificially inflate the value of

Westar for the benefit principally of defendant Wittig. The description of the Allocation Agreement was

false because it failed to disclose the shifting of Westar's obligations to the utilities and WRI's assets to

Westar for no consideration. Further, the $225 million of “intercompany receivables” should have merely

been against the $927 million Westar owed to WRI and thus provided no basis for granting Westar equity.



163. On October 5, 2000, WRI's common stock price closed at $20.62 per share. On

October 26, 2000, the Company announced Lake's election to the company's Board of Directors. On

October 26, 2000, WRI's common stock price closed at $21.25.

November 9, 2000 Press Release

164. On November 9, 2000, WRI and Public Service Company of New Mexico (“PNM”)

issued a joint press release announcing that the Boards of both companies had approved PNM's acquisition

of WRI electric utility operation in the tax-free stock for stock transaction. The transaction was described

as follows:

Under the terms of the agreement, PNM and Western Resources, whose utilityoperations consist of its KPL division and KGE subsidiary, will both become subsidiariesof a new holding company to be named at a future date. Prior to the consummation of thiscombination, Western Resources will reorganize all of its non-utility assets, including its 85percent stake in Protection One and its 45 percent investment in ONEOK, into WestarIndustries which will be spun off to its shareholders.

The new holding company will issue 55 million of its shares, subject to adjustment,to Western Resources' shareholders and Westar Industries. Before any adjustments, thenew company will have approximately 95 million shares outstanding, of whichapproximately 42.1 percent will be owned by former PNM shareholders and 57.9 percentwill be owned by former Western Resources shareholders and Westar Industries. WestarIndustries will receive a portion of such shares in repayment of a $234 million obligationcurrently owed by Western Resources to Westar Industries.

165. The aforementioned statements regarding the $234 million obligation owed Westar by WRI

and the equity to be received by Westar in consideration for that obligation were materially false and

misleading in light of the undisclosed January Transaction (¶¶ 6, 105-112).

166. The release also described how the combined utility entity would assume $2.93 billion of

WRI's debt (though not the portion of the debt used to acquire the unregulated assets) as follows:



Based on PNM's average closing price over the last ten days of $27.325 per share, theindicated equity value of the transaction is approximately $1.503 billion, includingconversion of the Westar Industries obligation. In addition, the new holding company willassume approximately $2.939 billion of existing Western Resources' debt, giving thetransaction an aggregate enterprise value of approximately $4.442 billion. The new holdingcompany will have a total enterprise value of approximately $6.5 billion ($2.6 billion inequity; $3.9 billion in debt and preferred stock).

*****

The creation of a separately traded Westar Industries allows the potential of WesternResources' unregulated ownership in Protection On, Protection One Europe, ONEOKand other investments to be more directly realized by shareholders.”

*****In the transaction, each PNM share will be exchanged on a one-for one basis for sharesin the new holding company. Each Western Resources share will be exchanged for afraction of a share of the new company. This exchange ratio will be finalized at closing,depending on the impact of certain adjustments to the transaction consideration. SinceWestern Resources and Westar Industries remain committed to reducing WesternResources' net debt balance prior to consummation of the transaction, they have agreedwith PNM on a mechanism to adjust the transaction consideration based on additionalequity contributions. Under this mechanism, Western Resources could undertake certainactivities not affecting the utility operations to reduce the net debt balance. The effect ofsuch activities would be to increase the number of new holding company shares to beissued to all Western Resources shareholders (including Westar Industries) in thetransaction. In addition, Westar Industries has the option of making additional equityinfusions into Western Resources that will be used to reduce its net debt balance prior toclosing. Up to $407 million of such equity infusions may be used to purchase additionalnew holding company common and convertible preferred stock.

(Emphasis added).

167. The statements in the preceding paragraphs were materially false and misleading because

they failed to disclose that WRI debt of $1.6 billion was incurred in acquiring Westar assets and far from

being “committed to reducing WRI net debt balance” and the Restructuring was designed to inflate WRI

debt for the benefit of Westar and Wittig. Further, Westar's additional equity infusion of 14.4 million



common shares of the utility was achieved only by recognizing “intercompany WRI receivables” and

ignoring $1 billion of Westar accounts payable.

168. In the weeks following the November 9, 2000 announcement, WRI's common stock price

traded in the $21.00 range even after the announcement of the third quarter results.

169. However, on November 27, 2000, WRI announced it had filed separate requests before

the KCC -- $93 million of KPL rate increase and $58 million of KGE rate increase purporting to recover

“investments in new, state-of-the-art power plants and higher operating maintenance costs.” In the press

release, Wittig gave detailed justifications for the rate increases as follows:

(a) KPL seeks to “recover its costs in adding approximately $230 million innew, efficient, gas-fired power plaints;”

(b) “KPL customers have not had a rate increase in 17 years. KPL's rateswere last increased in 1983 following the start of commercial operationsof the third power plant unit at Jeffery Energy Center;”

(c) “The last rate increase for KGE customers, implemented in 1989, was forthe final phase of a multi-year recovery of the investment in the WolfCreek power plant. Since 1992, KGE customers have received morethan $65 million in rate reductions and rebates of $23 million. TodayKGE retail customers pay an average of $0.0646 per kilowatt-hour;”

(d) Wittig said “the peak energy demand on the KPL and KGE systems hasincreased almost every year. In fact during the last 10 years, it has grownby more than 22 percent;”

(e) Wittig also noted that the new power plants for KPL have enabled thecompany to meet the growth in power demanded by its customers;

(f) Wittig stated: “We are always sensitive to the rates our customers pay.We strive to balance their desire for the lowest possible prices and ourcommitment to provide safe, reliable electric service;”



“At various times in the wholesale market, we*ve seen costs as high as $6per kilowatt hour as compared to the average $0.0517 rate currentlycharged to a KPL customer,” said Wittig. “From time to time wepurchase power at these prices to avoid inconvenience for our customers.If instead we were allowed to pass on those costs, it could cost acustomer about $930 a month just to run a refrigerator. Although we*renot asking for that right, we feel that we should be allowed to earn a fairrate of return in order to compensate for the changing risk profiles of thebusinesses;”

Wittig said that the company has worked aggressively to control costs.KPL and KGE have also saved millions of dollars through consolidationof back-office functions and have implemented other efficiency measuresto minimize costs;

“Our efforts enabled us to stave off rate increase requests as long as wehave, but these measures aren't enough to offset more than a 100 percentrise in natural gas fuel prices that has occurred this year and generalinflationary costs the companies have incurred since their last rate review,”Wittig said;

(g) “Very few companies offer products and services at the same prices todayas they did in 1983 or 1989,” he continued; and

(h) “Wittig noted that in 1983, KPL had approximately 282,000 customersand KGE had 237,000 customers. Today, the two electric companiesserve more than 635,000 customers, an increase of more than 20 percentduring the last 17 years.”

(Emphasis added).

170. The statements offered by Wittig purportedly justifying the rate increase were materially

false and misleading because WRI's application for a rate increase was principally to have rate payers pay

for losses in the unregulated business. Further, Wittig was not “controlling costs” but rather bilking the

Company's coffers with undisclosed and unauthorized compensation schemes.



171. These seemingly detailed justifications for the $151 million rate increase had a dramatic

positive effect on WRI's common stock price rising to $22.825 per share on November 27, 2000 and

$23.00 per share on November 28, 2000 as compared to $21.44 per share on November 24, 2000.

2000 Annual Report - Wittig’s Letter to Shareholders

172. WRI filed its 2000 Annual Report with the SEC on or about April 2, 2001, which

contained the following statements:

[Rate Increase Application]This year, 2001, poses several pivotal challenges for the company. We're asking theKansas Corporation Commission to grant rate increases for KPL and KGE so we canrecover our investment in new power plants and higher operating and maintenance, costs,including natural gas fuel costs. The companies were last granted rate increases in 1983and 1989, respectively. The rate cases are necessary to ensure our continued ability toprovide safe reliable electricity to meet customer demand that has grown by more than 22percent in the last decade.

The rate requests encompass new generation and depreciation costs, retiree medicalbenefits, tax and interest adjustments, operating and maintenance expenses, environmentalexpenses and fuel costs. Few companies, if any, can provide products and services at thesame prices they did in 1983 or 1989. We believe our rate relief requests are fair andreasonable.

[Protection One]A second vital area is Protection One. Business operations have improved significantly.Protection One has decreased debt and achieved positive cash flow in 2000.Management at Protection One and Protection One Europe is continuing to find ways toenhance operating and financial performance.

[KCC Rate Case]On November 27, 2000, we and KGE filed applications with the KCC for a change inretail rates which included a cost allocation study and separate cost of service studies forour KPL division and KGE. We and KGE also provided revenue requirements on acombined company basis on December 28, 2000. If approved as proposed, the impactof these rate requests will be an annual increase of $93.0 million for our KPL division and$58.0 million for KGE for a total of $15.10 million. The proposal also contains amechanism for adjusting these rates requests up or down if projected natural gas fuel prices



are different from the prices utilized in the November 27, 2000, filings. We anticipate aruling by the KCC in July 2001 but are unable to predict its outcome. We can give noassurance that these rate requests will be approved as proposed.

(2000 Annual Report p. 3) (emphasis added).

173. The statements in the preceding paragraph are materially false and misleading because the

rate relief was principally not warranted for operating of the utilities, but rather to sustain Wittig’s fraudulent

restructuring scheme.

March 30, 2001 Press Release

174. On or about March 30, 2001, WRI announced its 2000 earnings and stated that its 2000

plans to combine the electric businesses with PNM and request for rate increases were “progressing” and

that the Westar Industries’ rights offering would “take place”:

“Our three major strategic initiatives announced in 2000 - plans to combine our electricbusinesses with Public Service Company of New Mexico (PNM), requests for electricrate increases in Kansas in the spin-off of Westar Industries - are progressing,” said DavidC. Wittig, chairman of the board, president and chief executive officer of WesternResources.

* * *

The rights offering of Westar Industries is expected to take place this spring. This offeringwill provide shareholders with the opportunity to purchase shares of Westar Industries, anew, publicly traded entity which holds the company's investments in Protection One,Protection One Europe, ONEOK and other unregulated interests, as well as an investmentin Western Resources.

175. These statements in the preceding paragraph were false and misleading because the “three

initiatives” were actually fraudulent schemes to benefit Wittig financially.

176. On March 30, 2001, WRI common stock closed at $23.85 per share.



April 24, 2001 Press Release

177. On or about April 24, 2001, WRI announced that it had taken the unusual step of issuing

a press release stating that the proposed opinion justifying the rate reductions were “unfounded” and

inconsistent with long accepted principles and then quoted Wittig as stating the rate increase was “fair and

reasonable”:

The utilities cited accounting methodologies, depreciation and cost of capital as the majorpoints of disagreement among the parties intervening in the rate case.

In rebuttal testimony, James A. Martin, Western Resources senior vice president, financeand treasurer, said that the parties' rate reduction recommendations included “adjustmentswhich are unfounded in regulatory precedent both in Kansas and throughout the UnitedStates” and are inconsistent with long-accepted principles of accounting and depreciation.”

He said rate reductions would impede future power plant construction in the state. KPLseeks to recover its costs in adding approximately $230 million in new, efficient gas-firedpower plants, as well as recognition of the additional funds that the utilities spend on capitalimprovements to the electric systems. Both companies are seeking recovery of risingoperating and maintenance expenditures, including increased natural gas costs, incurredsince the 1980s, when the utility companies were last granted rate increases.

David C. Wittig, chairman, president and chief executive officer of Western Resources,said, “The rebuttal testimony is just one step in a lengthy process. We remain hopeful thatonce the commissioners have heard the expert witnesses and reviewed all the evidencepresented in the rate cases that they will understand the rationale for our rate requests. Theamounts we are seeking to recover for our investments and higher operating andmaintenance expenses which provide our customers with safe, reliable electric services arefair and reasonable.”


the amount seeking to be recovered were principally not “for investment and expenses” but to further the

fraudulent Restructuring scheme and force Kansas ratepayers to pay for Protection One's losses and

Wittig’s personal extravagant expenses.



April 27, 2001 Press Release

179. On April 27, 2001, it was disclosed in The Topeka Capital-Journal that Walker Hendrix

(“Hendrix”), the chief attorney for CURB, had written to the SEC (the “CURB letter”) stating that the

Restructuring threatened the Kansas utilities’ financial viability and failed to disclose in Westar’s S-1

Registration Statements the extent of the misallocation of assets and liabilities between the utilities and the

unregulated businesses and the magnitude of the impact of the Restructuring on the capital structure of the

utilities. In the letter to the SEC, Hendrix wrote that as a result of Protection One losses, the ratio of equity

to debt had collapsed and that the Restructuring scheme would only worsen that situation:

Due to operating losses in its unregulated operations (Westar Industries), whichare currently the subject of discovery requests in a proceeding pending before the KansasCorporation Commission (Docket 01-WSRE-436-RTS), the equity/debt ratio of WesternResources on a consolidated basis has dropped in the past few years from roughly 45/55to 20/80. This shift in financial structure is alarming in and of itself because of theimplications it holds for the utility regulator*s ability to impute capita1 structure forratemaking purposes. Moreover, following the spin-off of Westar Industries and issuanceof shares to the public, the capital structure of Western Resources is expected to be 0%common equity, 7% preferred equity and 93% debt3. The fact that the shifting of commonequity out of the utility operations (Western Resources) and into the unregulated operations(Westar Industries) has already begun is evidenced on page 27 of the above-referencedS-1 filing, which shows Westar Industries at year-end 2000 -- a company with continuousoperating losses -- with an amount of equity capital of $2.2 billion, or approximately 80%of parent Western Resources consolidated capital structure. Importantly, the capitalstructure of Western Resources is never shown to shareholders.

180. The CURB letter also explained that the capital structure undermined WRI's ability to issue

bonds cheaply. The letter also explained that if WRI used its actual capital structure and not the

hypothetical capital structure of 50% equity and 50% debt it proposed to be used in the rate case, WRI

would actually collect $172 million less from the rate case.



181. Finally, the CURB letter explained that as of April 24, 2001, WRI contained the actual

capital structure of the utilities after the Restructuring scheme:

The registration statement does not, in the opinion of CURB, disclose the actual magnitudeof the change in capital structure of Western Resources following the spin-off, nor does itreveal the rather extraordinary consequence of that change. . . .

When our consultant sought to secure the supporting schedules and exhibits referenced inthe asset allocation and separation agreement identified in the above quote, he learned thatthose documents are not available on EDGAR, nor was Disclosure, the private companywhich provides hard copies of the documentation for public review, able to provide thesedocuments.

182. In response, a WRI spokesperson, on April 27, 2001, dismissed the CURB letter as “full

of mistakes and inaccuracies.”

183. On April 27, 2001, WRI's common stock price closed at $24.95 per share.

184. On April 28, 2001, it was reported in The Topeka Capital-Journal that Wittig's

extravagant personal expenditures arose in the context of the rate case including his use of corporate jets

for personal trips, his $1.5 million renovation of his executive offices, the raise of Wittig's salary to $8 million

in 1999 and WRI guarantee to buy back Wittig's Topeka mansion at a 17% premium if Wittig moved.

WRI responded, as reported in that same article, that none of the costs of the office renovation or the

airplanes were included in the rate case.

185. As set forth above in paragraphs 113-120, the statements in the preceding paragraph were

materially false and misleading because the rate case primarily arose as part of the fraudulent Restructuring

scheme to force Kansas ratepayers to pay for Wittig’s personal extravagant expenses.



May 1, 2001 Press Release

186. On or about May 1, 2001, Wittig denied that the Westar separation would be detrimental

to the operations of the utilities, stating the rights offering would, in fact, reduce debt as follows:

“It has been misrepresented that the Westar Industries rights offering will be detrimentalto the utilities when in fact the cash raised through the rights offering will be directly appliedtoward reducing the debt at the utilities.”

“Western Resources has been working with Kansas Corporation Commission staff toaddress these issues, taking into consideration the staff's concerns about the utilities' debt.”

“We've recognized for some time that the debt needs to be addressed and resolved,” saidWittig. “Westar Industries provides a structure to reduce utility third-party debt throughthe rights offering while simultaneously establishing a market value for Westar.”

. . . . This agreement formally demonstrates our ongoing commitment to reduce the utilities'debt in a manner that benefits both Westar Industries and Western Resources, neither ofwhich can prosper at the other's expense.”

187. These statements, in the preceding paragraph were materially false and misleading because,

in fact, the formation of Westar would be severely detrimental to the utilities because the plan allocated to

WRI all WRI liabilities but only electric utility assets -- even through profits from the utilities paid for such

valuable non-regulated assets such as the ONEOK stock. It was also false to state that Wittig had been

working with the KCC taking into consideration the staffs’ concerns when only seven days later the KCC

was so disturbed by the transaction and its failure to address the KCC issues that it ordered an independent

investigation. It was further false to state WRI had a “commitment” that neither Westar nor WRI should

benefit at the expense of the other.

Wittig also stated: “This agreement formally demonstrates our ongoing commitment toreduce the utilities' debt in a manner that benefits both Westar Industries and WesternResources, neither of which can prosper at the other's expense.”



Wittig noted that the remaining ownership (more than 85 percent) of Westar Industries'stock after the rights offering would remain with Western Resources until after the mergerwith Public Service Company of New Mexico or the utilities' secured credit ratings areinvestment grade.

188. In May 1, 2001, WRI common stock price closed at $25.65 per share up to 3.5% from

the day's closing price of $24.77 per share.

189. On Saturday May 5, 2001, however, Hendrix, the chief attorney for CURB alleged as

reported in The Topeka Capital-Journal, that WRI had weakened its utilities by transferring approximately

$2 billion in equity from them to Westar Industries. It was also reported that WRI was seeking to

commence the rights offering on May 9, 2001.

190. Following these disclosures, WRI's common stock price declined to $24.26 per share on

May 7, 2001.

May 8, 2001 KCC Order

191. On May 8, 2001, the KCC issued an order initiating an investigation of WRI's

Restructuring (i.e., the separation of “its jurisdictional electric public utility business from its unregulated

businesses”) to determine “if it would impair WRI's ability to provide efficient and sufficient electric service

at just and reasonable rates” (the “May 8, 2001 KCC Order”). The May 8, 2001 KCC Order questioned

the truthfulness of WRI's statements to investors that 2001 Restructuring would allow investors to “more

accurately value Westar's assets” because, in fact, KPL and KGE may be “substantially diminished” by

the Restructuring scheme:

WRI has stated that the separation of Westar from WRI should allow the investmentcommunity to more accurately value Westar's assets. In effecting the separation of Westarfrom WRI, WRI must distribute certain of its assets, liabilities and equity between itself andWestar. This distribution is embodied in the Asset Allocation Agreement, and Amendment



No. 1 thereto, as referenced in the Registration Statement. WRI's decisions inimplementing the separation of assets, liabilities and equity effectively establish separatebalance sheets for Westar and WRI. If WRI implements its plan to separate Westar fromWRI, the financial condition of WRI, which will be left with only electric utility assets andsubstantially all of WRI's liabilities (excluding those issued by Protection One), may besignificantly diminished.

(May 8, 2001 KCC Order, p. 2) (emphasis added).

192. Significantly, as of May 8, 2001, WRI still had not released to the public the details of the

“Asset Allocation Agreement, or Amendment No. 1” thereto so that investors could know how assets and

liabilities were being separated between WRI and Westar.

193. WRI immediately responded, as reported in The Topeka Capital-Journal on May 8, 2001,

to the May 8, 2001 KCC Order claiming the Restructuring “will not impact” WRI’s ability to provide safe

and reliable electric service.”

194. In that same article, CURB counsel claimed the Restructuring would “drain the life blood

from the utilities”:

Walker Hendrix, chief attorney for the Citizens Utility Ratepayers Board, a small stateconsumer agency, has repeatedly charged that Western's management has systematicallyweakened the utilities by transferring approximately $2 billion in equity from the electricdivisions to Westar Industries, the unregulated subsidiary that contained Protection One.

“They have drained the lifeblood out of the utilities,” Hendrix said. “And they are tryingto engineer a situation where the ratepayers will have to restore the financial health of theutilities.”

195. Further, the testimony before the KCC of a financial consultant indicated that the

Restructuring undermined the case for a rate increase as follows:

Stephen Hill, a financial consultant hired by CURB to provide testimony in the rate case,issued a strong warning in testimony filed last week.



“The long-term impact on Kansas ratepayers of all the other issues at play in this rateproceeding pales in comparison to the very long-term financial damage to Western's utilityoperations which will ensure if the company is able to out-navigate its regulators and moveall the utility equity capital to its unregulated operations” Hill wrote.

196. On May 8, 2001, WRI's common stock price declined to $23.41 -- from $24.26 at the

close of the prior trading day -- with over 508,300 shares trading on that day.


197. In an effort to minimize the KCC order, WRI claimed the order would not affect the rights

offering:

Western Resources today responded to the Kansas Corporation Commission'sannouncement last night that it has established a docket to investigate the company'sproposed corporate restructuring and other aspects of its unregulated businesses.

Spokesperson Kim Gronniger said, “While we will continue to cooperate with theCommission, Westar Industries does not expect the opening of this docket to affect itsplans for its proposed rights offering, which we believe is in the best interests of thecompany and its customers.”

Gronniger said the rights offering is expected to raise approximately $100 million, whichwill be used to pay down third-party utility debt.

Following the rights offering, the company will own in excess of 80 percent of WestarIndustries, which will continue to be consolidated in Western Resources' financialstatements until split-off to shareholders in connection with the proposed merger withPublic Service Company of New Mexico.

The rights offering will not impact the utilities' ability to provide safe and reliable electricservice to its customers. The company and Westar recently entered into an agreement thatthey believe addresses many of the issues outlined in yesterday's order. The company hasalso recently invested more than $230 million for new power plants to meet the growingneeds of its customers.



198. The statements in the preceding paragraph were materially false and misleading since the

May 8, 2001 KCC Order asserted jurisdiction over the rights offering, indicated its potential adverse

impact on the utilities, thus clearly intending for WRI not to proceed with the rights offerings.

199. On May 10, 2001, Stephen Hill's (“Hill”) testimony before the KCC was again quoted in

The Topeka Capital-Journal as follows:

In testimony filed last week, CURB consultant Stephen Hill said if the KCC allows Westarto keep the $2 billion in equity, the financially weakened utilities will struggle to serve theircustomers after the spinoff.

“This action could create a California-like situation in Kansas,” Hill said. “The commissionwould for many years be faced with the situation of either raising rates to cover anyoperating expense fluctuations or force the company into receivership (bankruptcy).”

200. On May 10, 2001, WRI common stock price weakened further closing at $22.65 per

share down from $23.28 per share at the close of trading on May 9, 2001. From May 10, 2001 through

the end of the Class Period (i.e., November 8, 2002), WRI common stock price never closed at $23.00

per share or above.

201. On May 14, 2001, as reported in The Topeka Capital-Journal, it was disclosed that WRI

sought to block the KCC consideration of the Restructuring scheme in the rate case:

Western*s lawyers contend that the investigation should be kept separate from theupcoming rate case. In a motion filed last Friday, they said combining the issues wouldlead to “protracted and contentious” hearings, and would “defeat any attempt at orderlyconsideration of traditional rate case issues.” However, consumer advocate WalkerHendrix insists the commission can*t fairly evaluate the company*s need for higher ratesunless it gets into the restructuring plan.

“I don*t know how the commission can divorce itself from considering the business(restructuring) plan in view of the fact that capital costs and the capital structure of thecompany are issues in the case,” said Hendrix, chief attorney for the Citizens Utility



Ratepayers Board, a small state agency that advocates on behalf of residential and smallbusiness consumers.

Hendrix said Western*s management has transferred approximately $2 billion in equityfrom the utilities to the company*s unregulated operations in an attempt to shore upWester*s bottom line before the spin-off. He and others fear that ratepayers ultimately willbe required to restore the financial health of the utilities.

Jim Martin, a Western senior vice president, said in testimony filed last week that it ispremature for the commission to be looking into the restructuring issue. He said it wouldbe more appropriate for the commission to evaluate the plan when it holds hearings on thesale of Western*s utility operations to PNM.

This is a rate case to look at the revenue requirements of KPL and KGE as they currentlyoperate,” Martin said. “It is inappropriate to set the revenue requirement based on eventsthat have not yet occurred, may never occur and are not known or measurable.”


202. On May 15, 2001,WRI announced its first quarter 2001 results including dramatic losses

at Protection One, thus undercutting Wittig's claim of a “turnaround.” The press release provided is follows:

Western Resources today announced first-quarter 2001 earnings of $0.06 per sharecompared to $0.80 per common share for the same period a year ago. First-quarter 2000earnings included $0.83 per share from sales of marketable securities.

Monitored services resulted in a $0.36 per share loss for the quarter ending March 31,2001, primarily because of a lower customer base and the impact of amortizationexpenses.

203. Following this announcement on May 15, 2001, Westar's common stock price declined

to $21.75 per share.



Form 10-Q for Quarter Ended March 31, 2001, filed May 15, 2001

204. On or about May 15, 2001, WRI filed its Form 10-Q for the quarter-ended March 31,

2001, which provided, in part, as follows:

We and Westar Industries entered into an Asset Allocation and Separation Agreement atthe same time we entered into the merger agreement with PNM. Among other things, thisagreement permits a receivable owed by us to Westar Industries to be converted intocertain of our securities. At the closing of the merger, any of these securities then ownedby Westar Industries will be converted into securities of PNM or the holding company tobe formed by PNM.

On February 28, 2001, Westar Industries converted $350 million of the receivable intoapproximately 14.4 million shares of our common stock pursuant to the Asset Allocationand Separation Agreement.

On May 2, 2001, we entered into an amendment to the Asset Allocation and SeparationAgreement. Until the earlier of the closing of the PNM transaction or an investment graderating is received on the secured debt of our electric utility operations, the amendmentrequires Westar Industries to pay us the net cash proceeds received by Westar Industriesfrom the rights offering, any sale of the stock of ONEOK or Western Resources held byWestar Industries, or any borrowings by Westar Industries secured by a pledge of or asecurity interest in either of these investments. These payments would increase the balanceof the receivable owed by us to Westar Industries. We have agreed to use the cash wereceive from Westar Industries to reduce or minimize our third party debt. In addition, wehave agreed not to incur indebtedness for, and not to pledge our assets to secureindebtedness of, our unregulated businesses, including Westar Industries. All intercompanybalances have been eliminated in consolidation.

On May 8, 2001, the KCC opened an investigation of the separation of our electric utilitybusinesses from our non-utility businesses and other aspects of our unregulated businesses.The order opening the investigation indicated the investigation would focus on whether theseparation and other transactions involving our unregulated businesses are consistent withour obligation to provide efficient and sufficient electric service at just and reasonable ratesto our electric utility customers. The KCC staff was directed to investigate, among othermatters, the basis for and the effect of the Asset Allocation and Separation Agreement andthe receivable owed by us to Westar Industries, the split-off of Westar Industries, theeffect of business difficulties faced by our unregulated businesses and whether they shouldcontinue to be affiliated with our electric utility business, and our present and prospectivecapital structures. The order directed the KCC staff to complete the investigation and



submit a report to the KCC no later than October 8, 2001, unless extended by the KCC.We are unable to predict the outcome of this investigation or its impact on our strategicplans, financial position or results of operations.

(Emphasis added).

205. The statements in the preceding paragraph were materially false and misleading because,

in describing the Asset Allocation, there was still no disclosure of the $1.6 billion Misallocation. The

description of the intercompany receivable was false because there was no disclosure of the January

Transaction and the description of the May 8, 2001 KCC investigation was misleading because it failed

to disclose Wittig was 10 days later going to attempt to override this investigation by going forward with

the Restructuring and rights offering.

May 18, 2001 Westar Industries, Inc. Form S-1 Registration Statement

206. On May 18, 2001, despite the May 8, 2001 KCC Order investigating WRI's

Restructuring, WRI decided to move forward with the transaction notwithstanding WRI filed an amended

S-1 registration statement containing the following concerning Asset Allocation:

We have entered into an asset allocation and separation agreement with WesternResources which was amended on May 2, 2001, which provides for allocation of assetsand liabilities between Western Resources and us. The allocation agreement divides non-tax assets and liabilities substantially on a corporate organizational basis such that the assetsand liabilities of our and our subsidiaries (as reflected on our balance sheet) will remainassets and liabilities of ours and our subsidiaries and the assets and liabilities of WesternResources and its subsidiaries (other than ours and our subsidiaries) will remain assets andliabilities of Western Resources. Tax assets and liabilities are not treated in the allocationagreement, but rather are addressed in a separate tax disaffiliation agreement (which isdescribed below). Certain additional assets and liabilities relating to the unregulatedbusiness will be transferred from Western Resources to us, including certain smallercompanies, certain legal claims, and certain interests in leased facilities. We will alsoassume liability for any discontinued non-utility operations from and after January 1, 1995.Western Resources will retain all liabilities associated with Western Resources' former gas



business and electric utility business, including any marketing and other related servicebusinesses.

* * *

The allocation agreement also provides the terms for repayment of a receivable in theamount of approximately $116.6 million at April 30, 2001 owed to us by WesternResources. The receivable will be increased or decreased by additional advances orpayments between us and Western Resources, including the advance of the net proceedsof the rights offering. Pursuant to the allocation agreement, the outstanding balance of thereceivable will be repaid by our election, prior to the closing of the PNM merger and thesplit-of, to convert the receivable into (1) convertible preference stock of WesternResources, (2) shares of or common stock currently held by Western Resources at a pricebased on the average market prices or the 20 trading days preceding conversion, but notless than the subscription price or (3) shares of common stock of Western Resources ata price based on the average market prices for the 20 trading days preceding conversion.Furthermore, beginning with the date of the amendment we will be required to advance toWestern Resources the net cash proceeds from the sale of our interests in ONEOK andWestern Resources, or from any borrowings secured by us secured by either of theseinterests. These advances would increase the balance of the receivable, which will berepaid with the securities described above that we ultimately select. We must make allelections prior to the closing of the PNM merger and the split-off. The agreement as tothe use of the net proceeds will terminate upon the earliest of the closing of the PNMmerger and the split-off, or Western Resources' secured debt securities receiving aninvestment grade rating from Moody's and Standard & Poors. On February 28, 2001,we converted $350 million of the then outstanding balance of the receivable intoapproximately 14.4 million shares of Western Resources common stock, representingapproximately 17% of Western Resources' outstanding common stock, pursuant to theallocation agreement.

(Emphasis added).


reference to the Asset Allocation Agreement still failed to disclose the $1.6 billion Misallocation, and failed

to disclose there was no bonafide consideration for 14.4 million shares in light of the January Transaction.



May 22, 2001 Supplemental KCC Order (the “Supplemental Order”)

208. After the close of trading on May 22, 2001, the KCC issued an Order making it crystal

clear that WRI and Wittig's prior statements -- i.e., that the rights offering was “unrelated” or “unaffected”

by the May 8, 2001 KCC Order -- were false. The KCC ordered on May 22, 2001 (the “KCC

Supplemental Order”) that it was “supplementing its May 8, 2001 Order,” finding WRI's May 18, 2001

S-1 filing was of “no force and effect” and further directing WRI to take no action:

Directly or indirectly, that would increase the share of debt in the capital structure in theelectric business of WRI (“Western Resources Electric Business” or “WREB”), includingthe sale of rights to purchase Westar common stock in the rights offering described in theRegistration Statement.

(p.1, Intro.).

209. The KCC Supplemental Order further found that WREB's balance sheet was weighted

“heavily if not exclusively” with debt as opposed to the 50-60% common to the capital structure of most

utilities and thus, their financial condition posed a threat to the utilities' operations and needed to be

renewed and approved by the KCC:

WREB's capital structure reached its present state of imbalance rapidly. As recently asof December 31, 1997, its debt-equity ratio was approximately 50 percent equity, 50percent debt. See WRI Joint Proxy Statement received by the Commission on June 22,1999 at F-3. By September 30, 2000, WREB's debt-equity ratio was greater than 100percent debt. See WRI's Response to staff data request 168, Docket No. 01-WSRE-436-RTS. The reduction in equity in WREB's capital structure coincides with the injectionof equity into WRI's subsidiary, Westar's predecessor, which was created in October 8,1990.

Excessive debt in a utility's capital structure endangers the utility's ability to serve customerseffectively and economically. The contractual obligation to pay interest to bondholders canput pressure on the utility's ability to fund its operations. Indeed, the financial difficultiesassociated with a debt-heavy capital structure are recognized by WRI itself, by WRI'switness in the current rate case, Dr. Charles Cicchetti who has proposed that for purposes



of establishing WREB's revenue requirement the Commission ignore the company's actualcapital structure and instead substitute a hypothetical capital structure of 50 percent equity,50 percent debt. See Prefiled Direct Testimony of Dr. Cicchetti, Docket No. 01-WSRE-436-RTS AT 27.

. . . . The Commission thus is empowered and obligated to act to prevent a utility fromplacing itself into a precarious financial condition so as to adversely affect its ability to carryout its public utility duties.

(Emphasis added).

210. On May 23, 2001, WRI common stock closed at $20.64 per share with over 742,300

shares trading -- more than twice its average trading volume -- down from $21.45 per share on the prior

day.

211. On May 30, 2001, The Topeka Capital-Journal quoted testimony of another financial

expert who found the Restructuring inflated by $172 million in revenue WRI utilities needed to operate with

a reasonable rate of return:

James Proctor, a corporate finance consultant hired by the staff of the Kansas CorporationCommission, the states's utility regulatory agency, said financial assumptions underlyingWestern's rate hike proposal make is appear that the company needs more money fromratepayers than it actually does.

A balance sheet prepared by Western shows its utility operations are about $250 millionin debt but for purposes of the rate case, the company has asked commissioners to assumethe utilities have a more traditional capital structure of 50 percent debt and 50 percentequity.

* * *

. . . [h]ypothetical structure inflates Western's revenue requirements by about $172 millionbecause of rate-making purposes, equity is more expensive than debt.

212. On June 1, 2001, as reported in The Topeka Capital-Journal, WRI had no cross-

examination to the financial expert Stephen Hill who harshly criticized the WRI in the rate case stating WRI



management was pursuing a plan to “wreck the finances of its electric utility operations” to bolster the

bottom line of its unregulated businesses.

213. On June 15, 2001, as reported in The Topeka Capital-Journal, motions were made in the

KCC investigation of the Restructuring to have the KCC direct WRI “to disclose the cost of compensation

agreements in place for 21 executives,” including Wittig.

Proxy Statement Filed June 12, 2001

214. On or about June 12, 2001, the Company’s Schedule 14A Proxy Statement (“2000

Proxy”) was filed with the SEC. The 2001 Proxy provided with respect to WRI's H.R. Committee, as

follows:

The Human Resources Committee is currently composed of Becker, Chairman, Dr. Budigand Dicus. This committee reviews the performance of corporate officers and changes inofficer compensation and benefits. This committee held seven meetings during 2000.

*****The executive compensation programs of the Company are administered by the HumanResources Committee of the Board of Directors (the “Committee”), which is composedof three non-employee directors. The Committee reviews and approves all issuespertaining to executive compensation. The objective of the Company's three compensationprograms (base salary, short term incentive and long term incentive) is to providecompensation which enables the Company to attract, motivate and retain talented anddedicated executives, foster a team orientation toward the achievement of businessobjectives, and directly link the success of our executives with that of our shareholders.

(2001 Proxy, pp. 5-6) (emphasis added).

215. The statement that the H.R. Committee was composed of “non-employee directors” was

false and misleading in the 2001 Proxy for the same reasons set forth above (¶ 135). In addition, it failed

to disclose that Koupal and Wittig attended the H.R. Committee meetings while their compensation was

being discussed and, indeed, that Koupal acted as secretary. Moreover, it failed to disclose that the H.R



Committee never reviewed or approved the acceleration of Wittig’s $5.4 million signing bonus, which

appeared in the executive compensation chart under “All Other Compensation” earned in year 1999; the

put right provision in the Split Dollar; or Wittig and Koupal’s enhanced SERP benefits.

216. The 2001 Proxy falsely stated and reiterated as it had in the prior year’s Proxy that

executive compensation was comprised of “Salary,” “Bonus,” “Other Annual Compensation,” “Restricted

Stock Awards” and “All Other Compensation”:

Long Term Compensation Annual Compensation Awards ------------------------------------ --------------------- Other Restricted Annual Stock Securities All Other Compensation Awards Underlying CompensationName and Principal Position Year Salary $ Bonus $ $(1) $(2) Options # $(3)--------------------------- ---- ------- --------- ------- --------- ------- ---------David C. Wittig 2000 303,400 1,171,170 134,794 2,155,781 58,500 486,969Chairman of the Board, President 1999 408,683 -- 105,909 1,738,625 114,000 5,756,753and Chief Executive Officer 1998 635,542 114,400 31,312 1,622,250 113,000 79,217

Douglas T. Lake 2000 224,476 642,706 57,417 1,317,813 9,000 700,999Executive Vice President, 1999 266,849 -- 31,494 948,219 40,000 429,664Chief Strategic Officer 1998 108,333 15,080 3,348 521,438 30,000 354,839

Carl M. Koupal, Jr. 2000 290,740 427,078 9,847 930,000 9,000 48,318Executive Vice President, 1999 307,020 -- 13,045 612,313 28,000 42,327Chief Administrative Officer 1998 250,125 36,720 4,258 502,125 28,000 31,610

Thomas L. Grennan 2000 175,750 299,702 56,375 496,875 6,000 69,953Executive Vice President, 1999 187,708 -- 35,965 445,000 20,000 64,292Electric Operations 1998 163,000 47,481 31,840 -- 12,000 17,761

Richard D. Terrill 2000 188,849 299,750 8,311 740,219 2,700 36,576Executive Vice President, 1999 180,000 28,400 12,448 361,563 16,000 36,224General Counsel 1998 130,667 17,160 3,919 -- 9,000 17,177

(2001 Proxy, p.12) (emphasis added).

217. As set forth above (¶ 139), the “Bonus” amounts were fraudulently obtained because

defendant Terrill falsely told the Board in February 2001, when these bonuses were approved that the

Board and the H.R. Committee had to include “extraordinary items” in calculating bonuses when, in fact,

the H.R. Committee had expressly ruled that it did not need to include such items. The statement of “All



Other Compensation” was also knowingly false and misleading because it had neglected to include the

value of rampant personal flights on the Company’s aircraft.

218. Additionally, WRI reiterated verbatim the same false and misleading statements concerning

the Split Dollar, as stated in the 2000 Proxy, as follows:

Subject to certain conditions, . . . the insured is allowed to transfer to the Company fromtime to time, in whole or in part, his interest in the death benefit under the policy at adiscount equal to $1 for each $1.50 of the portion of the death benefit for which theinsured may designate the beneficiary, . . . . Any adjustment would result in an exchangeof no more than one dollar for each dollar of death benefit nor less than one dollar for eachtwo dollars of death benefit. At March 31, 2000, the Company's liability under thisprogram was $19 million. . . .


219. As set forth above (¶ 141), the preceding statements were materially false and misleading

because the description of the highly unusual “put” provision failed to disclose that it was never reviewed

or approved by either the Board or the H.R. Committee.

220. The 2001 Proxy also provided little with respect to “change in control” compensation as

follows:

- We have entered into employment agreements with the named executive officersand one other officer, each of which contains change in control provisions, and wehave entered into change in control agreements with other of our officers and keyemployees. The agreements have three year terms with an automatic extension ofone year on each anniversary unless prior notice is given by the officer or by us.The agreements are intended to insure the officers' continued service anddedication to us and to ensure their objectivity in considering on our behalf anytransaction which would result in a change in control of us.

- Under the employment agreements, an officer is entitled to benefits, if his oremployment is terminated by us other than the Cause or upon death, disability orretirement, or by the officer for Good Reason, each as defined in the agreements.Under the change in control agreements, benefits are provided for such termination



only if they occur within two years of a change in control. Under the employmentagreements, benefits would also be provided if the officer were to terminated hisor her employment regardless of the reason within 90 days of a change in controlor if, the connection with a change in control, the officer were to leave our employand become an employee of a former subsidiary which is then a separate, publiclytraded company. A termination that would result in payments becoming payableis referred to as a “Qualifying Termination.”

(2001 Proxy pp. 15-16).

221. These statements were materially false and misleading because they failed to disclose that

material portions of the change of control compensation had not been reviewed or approved by the Board

and the H.R. Committee, including the termination by “the officer for good reason.”

222. In the 2001 Proxy, the Board of Directors “unanimously” recommended that shareholders

approve its nomination of three Class II directors (Budig, Nettles and Wittig) to continue to serve as

directors for another three years: “THE BOARD UNANIMOUSLY RECOMMENDS THAT

SHAREHOLDERS VOTE IN FAVOR OF ALL OF THE ABOVE NOMINEES.” (2001 Proxy, p. 3).

These statements were false and misleading because they failed to disclose that the Board and the H.R.

Committee of which Budig was a member did not act independently but rather was controlled by Wittig;

that Nettles and Wittig had in flagrant violation of their fiduciary duties, taken steps to oust outside directors

Sadaka and Owen because they properly opposed Wittig and senior management's massive change of

control compensation; Wittig's blatant misuse of corporate assets. But for the alleged misrepresentations

above, shareholders never would have reelected Budig, Nettles and Wittig.

223. On June 26, 2001 and June 29, 2001, the KCC held hearings on whether its Supplemental

Order of May 22, 2001 halting the rights offering and Restructuring attendant therewith should be made

permanent.



July 20, 2001 KCC Order

224. On July 20, 2001, the KCC Order took the extraordinary steps of both blocking the rights

offerings and Restructuring -- thus making the May 22, 2001 Supplemental Order permanent -- and

directing that WRI submit a financial plan within ninety days “restoring WRI to financial health,” reflecting

a “balanced capital structure,” protecting ratepayers from the risks of the non-utility business.

225. The KCC repeatedly found that the Restructuring was not designed to “unlock utility

assets,” maximize the value of WRI assets, or provide the financial community with a clearer view as to

the “value” of WRI. But rather it was intended to impose the debt used to acquire unregulated assets onto

the utilities and keeping the assets themselves entirely with Westar -- the business Wittig was to be

chairman and CEO. The KCC blocked the Restructuring scheme finding, in effect, it was a means of Wittig

to force Kansas ratepayers to subsidize the unregulated businesses

226. The July 20, 2001 KCC Order walked though the web of corporate transactions. First,

the KCC found that the conversion into an “investment” in Westar in January 2000 to be a “turning point”:

WRI converts its loan to Westar into an investment in Westar: The next step was a turningpoint Hill explained in the first quarter of 2000:

WRI management and board of directors elected to reclassify the funds that WRI hadadvanced to Westar though an intercompany receivable account as an investment in, ratherthan a loan to, Westar. That pivotal decision by WRI's management and board ofdirectors resulted in the transformation of $927 Million of debt on Westar's books (areceivable to WRI from Westar) to $927 million of common equity (an investment inWestar by WRI [footnote omitted]).

(July 20, 2001 KCC Order, pp. 8,15) (emphasis added).

227. This transaction would allow for infusing Westar with WRI equity for no consideration.

This January Transaction was followed by the PNM merger agreement in November 2000 and Asset



Allocation Agreement whereby separate balance sheets were established for Westar and the utilities.

PNM was only to acquire the utilities. The net effect of the asset allocation and the January Transaction

the KCC found to be devastating: the utilities would be left with $2.97 billion in debt and a negative

common equity of negative $300 million. In contrast, Westar, as of December 31, 2000, had a positive

equity balance of $2.248 billion (assets valued at $3.268 billion combined with total liabilities of

approximately $1 billion).

228. The KCC further detailed that the Restructuring scheme went even further to undermine

the utilities and bolster Westar in February 2001. In February 2000 Westar was given 14.4 million WRI

shares with the potential for more.

229. The KCC found the transactions paid for by WRI to management of Westar

which would be a separate public company -- i.e., Wittig -- would only undermine the utilities. The KCC

concluded:

In sum, all transactions are designed to ensure that at the time of the splitoff, WRI's electricbusiness will hold significant debt but no Westar assets, while Westar will own all of WRI'sunregulated assets but will not be responsible for WRI's long-term debt used to acquirethem. Description of the harm to WRI caused by the split-off and flowing from thetransactions.

The split-off and related Transactions put financial pressure on WRI's electric business,since their cumulative effect is to allocate to WRI (which at the time of the split-off wouldconsist only the WREB) the debt associated with Westar's unregulated investments.Conversely, Westar would have significantly more equity than debt because its capitalstructure will have been artificially enhanced by the Transactions which consolidateWestar's ownership of its assets but allocate the debt used to acquire the assets to theWREB.

A likely scenario would require WRI to service the long-term debt though electric rates,while those WRI shareholders who receive Westar shares in the split-off will receive thebenefit of the assets without the burden of the long-term debt incurred to acquire them.



Without the Westar assets of offset the long-term debt used to acquire them, WRI mustfind some other way to pay off the debt. Rated increases, or cost-cutting measures whichwould impair WRI's ability to perform routine maintenance, retain qualified employees ormake the necessary capital improvements to meet the needs of Kansas electric consumersare likely to result. While the Commission cannot say with certainty that ill-effects willresult, the Commission is not required to subject customers to known risks until likely ill-effects are certain and irreversible.

(July 20, 2001 KCC Order, pp.12, 24-26) (emphasis added).

230. On July 20, 2001, WRI’s common stock price plummeted 12.85% -- from $21.70 per

share on July 20, 2001 -- to $18.91 per share on July 23, 2001.

July 25, 2001 KCC Order Rejecting WRI’s Rate Increase

231. On July 25, 2001, the KCC issued an order rejecting WRI’s November 27, 2000

application for a rate increase of $151 million, taking into account the Company’s plan to restructure its

organization “lurking in the background,” which “the evidence indicate[d] . . . would result in an electric

utility with an actual capital structure that is heavily debt-laden.” The KCC could not ignore the detrimental

effect WRI’s Restructuring plans would have on the financial health of the utility and on the ratepayers:

[WRI has] emphasized that restructuring issues should not be part of a proceeding todetermine cost of service and that concerns of the parties will be able to be considered bythe [KCC] in future proceedings (such as a merger filing). [WRI states] that the [KCC][should focus on regulatory matters and not management decisions. Conversely, [theKCC] Staff and Intervenors posit, in varying degrees, that the [KCC] cannot ignore theevidence in the record of [WRI’s] restructuring plans and the effects on the financial healthof the utility and on ratepayers.

* * *... Parties challenging [WRI’s] restructuring plans have pointed to the detriment to electriccustomers that would result from an electric utility with an actual capital structure that isprimarily composed of debt. This situation, if it were to occur, would negatively affectregulated electric operations and would require Commission inquiry and action.



(July 25, 2001 KCC Order, p. 4-5) (emphasis added). The KCC determined that rates should be cut by

$22.7 million.

232. For rate case purposes, WRI was allowed to recover an “authorized rate of return”

(“ROR”) on its “rate base” (which is primarily its net plant investment) plus recovery of expenses, property

taxes, and state/federal income taxes. The ROR is the Company’s overall cost of capital, which includes

a debt component and an equity component. WRI’s proposed reorganization would increase the electric

utility’s debt, and thus decrease its ROR. The KCC, however, rejected WRI applications, not on its

questionable proposed reorganization, but rather on WRI’s then current corporate abuses and improper

practices, and proposed the following operations and rate base adjustments:

(a) WRI originally allocated 34% of the its compensation for seven executives to non-regulated

activities. CURB adjusted this number to 60% after a review of corporate activities and the aircraft logs.

Based on the evidence presented, the KCC proposed an allocation adjustment of ($739,579) because

100% of Lake’s corporate activities should have been allocated to non-regulated operations, and thus WRI

was improperly forcing the ratepayers to pay Lake’s executive compensation which was actually related

to non-regulated and non-utility operation;

(b) An adjustment of ($2,945,649) which was primarily related to the misallocation of non-

regulated operation service expenses, (ie., consulting and legal service fees) that were being charge to the

regulated utility;

(c) An adjustment of ($24,585,720) to correct for WRI’s manipulative practice of making

changes mid-stream to established asset depreciation rates, not recognizing the renewal of a license to

extend the life of the Wolf Creek Nuclear Plant, and deferred income taxes;



(d) An adjustment of ($12,794,600) to account for the revenues WRI would generate from

its new Gordon Evans plant. WRI was planning to charge the ratepayers for the cost of this new generation

facility but not offset this by the revenues generated from selling the power to off-system purchasers under

optimal market conditions;

(e) An adjustment of ($4,862,650) to account for a decrease in expenses incurred to terminate

a stock option program, because the expenses WRI attempted to claim were often unknown and

immeasurable, one-time or non-recurring, amortized inappropriately and mis-allocated to non-regulated

operations; and

(f) An adjustment of ($227,546) to correct WRI’s misallocation of Board of Director’s fees

between the regulated utility and the non-regulated businesses and recommended that the Company should

allocate a substantial portion of Board of Directors’ fee to the non-regulated and non-utilities operations.

233. On July 25, 2001, WRI’s common stock prices closed at $17.00 per share with over 3.44

million shares trading -- a decline of 7.1% from the prior day’s closing price of $18.30 per share.

234. On July 26, 2001, WRI and PNM issued a joint press release stating that if the two recent

KCC Orders stand in the way, the proposed transaction between PNM and WRI “will be difficult to

complete.”

235. On August 6, 2001, it was reported in The Topeka Capital-Journal that WRI made a

motion before the KCC seeking reconsideration of the KCC’s July 20, 2001 Order.

236. On August 10, 2001, WRI made a similar motion requesting the KCC to reconsider its

July 25, 2001 decision cutting overall rates by $22.7 million.



237. On August 14, 2001, WRI issued a press release announcing its financial results for the

quarter-ended June 30, 2001. While electric operations reported earnings of $0.29 per share, Protection

One reported a loss for the quarter of $0.35 per share.

Form 10-Q for the Quarter Ended June 30, 2001

238. On August 14, 2001, WRI filed its Form 10-Q for the quarter-ended June 30, 2001, which

provided, in part, as follows:

On November 8, 2000, we entered into an agreement under which Public ServiceCompany of New Mexico (PNM) is to acquire our electric utility businesses in a stock-for-stock transaction. Under the terms of the agreement, both PNM and we are tobecome subsidiaries of a new holding company, subject to customary closing conditionsincluding regulatory and shareholder approvals. The split-off of Westar Industries to ourshareholders immediately prior to closing is a condition to closing the transaction. At thesame time we entered into the agreement with PNM, Westar Industries and we enteredinto an Asset Allocation and Separation Agreement which, among other things, providesfor the split-off of Westar Industries and for a payable owed by us to Westar Industriesto be converted by Westar Industries into certain of our securities.

On May 8, 2001, the Kansas Corporation Commission (KCC) opened an investigationof the separation of our electric utility businesses from our non-utility businesses and otheraspects of our unregulated businesses. The order opening the investigation indicated thatthe investigation would focus on whether the separation and other transactions involvingour unregulated businesses are consistent with our obligation to provide efficient andsufficient electric service at just and reasonable rates to our electric utility customers. TheKCC staff was directed to investigate, among other matters, the basis for and the effectof the Asset Allocation and Separation Agreement and the payable owed by us to WestarIndustries, the split-off of Westar Industries, the effect of business difficulties faced by ourunregulated businesses and whether they should continue to be affiliated with our electricutility business and our present and prospective capital structures. On May 22, 2001, theKCC issued an order nullifying the Asset Allocation and Separation Agreement as nothaving been filed with and approved by the KCC, prohibiting us and Westar Industriesfrom taking any action to complete a rights offering for common stock of WestarIndustries, which was to be a first step in the separation, and scheduling a hearing toconsider whether to make the order permanent.



On July 20, 2001, the KCC issued an order that, among other things, (1) confirmed itsMay 22, 2001 order prohibiting us and Westar Industries from taking any action tocomplete the proposed rights offering and nullifying the Asset Allocation and SeparationAgreement; (2) directed us and Westar Industries not to take any action or enter into anyagreement not related to normal utility operations that would directly or indirectly increasethe share of debt in our capital structure applicable to our electric utility operations, whichhas the effect of prohibiting us from borrowing to make a loan or capital contribution toWestar Industries; and (3) directed us to present a plan by October 18, 2001, consistentwith parameters established by the KCC's order, to restore financial health, achieve abalanced capital structure and protect ratepayers from the risks of our non-utilitybusinesses. In its order, the KCC also acknowledged that we are presently operatingefficiently and at reasonable cost and stated that it was not disapproving the PNMtransaction or a split-off of Westar. We have filed a petition for general reconsideration ofthe order.

239. The statements in preceding paragraph were materially false and misleading because, inter

alia, (i) even though an Asset Allocation Agreement was entered into in November 2000, the actual

allocation was never publicly disclosed, and only became known in July 2001 in the KCC decision; (ii)

failed to disclosed that the KCC May 22, 2001 order was required because May 8, 2001 order was

violated when WRI sought to proceed with the rights offering.

October 2001 WRI's Purported “Cost Cutting Measures” and “Financial Plan”

240. Beginning October 2001, defendants Wittig and Lake led investors to believe that they

were responding to the KCC's criticism by adopting so called “cost cutting measures.” However, in fact,

what occurred was to reduce senior management in only three months from six positions to two -- Wittig

and Lake. Terrill, Koupal, Grennan, and Martin were all dismissed. Wittig did not replace Terrill with

another counsel. Moreover, from October 2001 through the end of the Class Period, Wittig tightened his

grip on compensation by acting as undisclosed secretary of the H.R. Committee. In the same period, the

executive vice president of shared services retired.



241. On October 17, 2001, it was reported in The Topeka Capital-Journal that defendant Wittig

in response to the July 25, 2001 KCC rate decision, met with the KCC to discuss the anticipated cost

cutting measures at the utilities. The KCC spokesman said Wittig advised the KCC that there would be

a downsizing of executive staff -- “top-level, management-level personnel.”

242. On November 5, 2001, WRI issued a press release announcing its financial results for the

quarter-ended September 30, 2001. However, the press release also disclosed it would be filing a

“financial plan” pursuant to the KCC Orders [July 20, 2001] as follows:

KCC Financial Plan

On November 6, 2001, Western Resources will file with the KCC the financialplan required by an earlier Commission order. The principal objective of thefinancial plan is to reduce Western Resources’ debt by $100 million to $175million in the next several months and to below $1.8 billion in the next one to threeyears. The plan proposes an offering of common stock by Westar Industriesfollowed by a sale by Western Resources of its Westar Industries common stockor Western Resources common stock. The plan does not contemplate aseparation of the unregulated assets held by Westar Industries from WesternResources without any substantial reduction in Western Resources’ debt, afundamental concern raised by the Commission in earlier orders.

243. The description of the Financial Plan was materially false and misleading because it failed

to disclose that the Financial Plan made no effort to address the core issues raised by the KCC such as the

$1.6 billion Misallocation and the January transaction.

244. In an article in The Topeka Capital-Journal, on November 5, 2001, it was reported that

WRI was going to ask the KCC to sell off Westar in a two-step process designed to reduce WRI’s debt

by $1 billion as follows:

Western officials say they will ask the Kansas Corporation Commission for permission tosell stock in the subsidiary that contains the company’s unregulated assets and use the



proceeds to pay off approximately $1 billion of the parent corporation’s $2.8 billion short-and long-term debt. They say such a significant reduction in the debt could restore thecredit ratings of Western’s utility operations to investment grade by the spring of 2003.

David Wittig, Western chairman, president and chief executive officer, said the subsidiary,Westar Industries, would be sold to investors in a two-step process. First, he said,between 10 percent and 20 percent of the company would be sold for approximately$9.75 a share to Western stockholders. The remainder of Westar’s stock would be soldin a public offering once it reached approximately $15.50 a share. That price would besufficient to guarantee enough cash to reduce Western’s debt to the $1.8 billion goal,Wittig said.

245. In that same article, Wittig was further quoted as stating the following concerning the

Financial Plan:

“We have listened very carefully to what the commission said,” Wittig said during a recentinterview with The Topeka Capital-Journal.

[Wittig] explained that the new proposal is an attempt to address the KCC’s fears thatWestern’s approximately 636,000 electric customers would end up footing the bill for debtaccumulated by Westar's unregulated operations, which include Protection One, a largebut recently unprofitable home and business security firm.

*****

“Wittig acknowledged that it wasn’t clear under the initial restructuring plan whetherWestern would have been fairly compensated for its investments in the unregulatedbusinesses, which also include ONEOK, Inc., a Tulsa, Okla. - based natural gasdistribution company.”

*****“Wittig said if the KCC approved Western’s new financial plan by Christmas, thecompany could stage the rights offering in March and sell Westar’s remaining shares to thepublic by the second quarter of 2003.”

246. Wittig’s statements concerning the Financial Plan were materially false and misleading

because the Plan did not address the core Misallocation issues raised by the KCC.



247. On December 6, 2001, WRI reported its expected financial results for electric operations

and Westar Industries in 2002. WRI also announced as follows:

Western Resources is also evaluating cash saving in areas that will not impair servicequality and reliability for customers. In addition, the two most senior executives, David C.Wittig and Douglas T. Lake, will take a voluntary 20 percent reduction in their basesalaries in 2002 and members of the board of directors will take a 20 percent reductionin their annual cash retainer in 2002.

248. As set forth above (¶ 114), the statements in the preceding paragraph were false and

misleading because Wittig, Lake and the Board continued to pillage WRI assets for personal financial gain

and benefit. Further, Wittig and Lake acted to “make up” for the “cut” through new payments to them from

Protection One and to determine that the “cut” would trigger their change of control compensation and thus,

actually become extremely lucrative for them and costly to the Company. Despite, Wittig’s 20% base

salary reduction, his salary actually doubled and his total compensation increased by 154% for the fiscal

year 2002.

249. On January 8, 2002, the KCC expressly expanded its inquiry to assess the impact of and

risks associated with WRI*s interest in or affiliations with nonutility business activities on WRI*s

jurisdictional electric utility business. The KCC also invited comments on whether the Commission should

adopt standards or guidelines for affiliate relationships to avoid subsidization of nonutility services or

products by the regulated operations. The KCC also sought information on whether accounting guidelines

or criteria can effectively evaluate, measure and monitor the impact of the financial condition of the holding

company on the regulated electric operations (term WREB); whether accounting procedures and practices

are in place to correctly and equitably record and disclose affiliate transactions; whether accounting

procedures and practices are in place to accurately report assets owned and liabilities attributable to the



electric operations. The January 8, 2002 Order authorized discovery to facilitate the investigation and

provide Commission Staff and other intervening parties a meaningful opportunity to participate.

. . . the split-off, the asset allocation agreement, the rights offering, the intercompanyreceivable and the ownership of WRI common stock by Westar, are interdependent andconsidered collectively, are contrary to the public interest and pose substantial risk of harmto Kansas electric customers.

250. On February 18, 2002, WRI announced its financial results for the year-ended December

31, 2001. WRI announced that it would:

record a net charge of approximately $654 million in the first quarter of 2002.Approximately $465 million of the charge is related to the impairment of Protection Oneand Protection One Europe goodwill, which will be reflected in the statement of incomeas a cumulative effect of a change in accounting principle. The balance, $189 million, isrelated to the impairment of Protection One customer accounts and will be reflected in thestatement of income as an operating cost. An independent appraisal firm was engaged toassist in the determination of estimated fair values. This non-cash charge will not result inany violation of debt covenants and is not expected to affect liquidity.

(Emphasis added).

251. On February 19, 2002, the next trading day, WRI’s common stock closed at $16.75 per

share.

February 19, 2002 H.R. Committee Meeting

252. On February 19, 2002, the H.R. Committee met and awarded Wittig a bonus of $267,000

for 2001 but, acting in concert with Wittig, intentionally withheld its disclosure from the 2001 Proxy and

indeed falsely stated the H.R. “took no action with respect to Wittig’s 2001 short term compensation.

253. On April 22, 2002, WRI reported its financial results for the quarter-ended March 31,

2002. The quarter results included the previously announced net charge of $657 million -- $466 million



related to the impairment of Protection One and Protection One Europe goodwill and $191 million related

to the impairment of Protection One customer accounts.

254. On April 22, 2002, WRI’s common stock price closed at $17.76 per share.

255. On April 26, 2002, it was reported in The Topeka Capital-Journal that WRI was

considering selling its $877 million stake in ONEOK. ONEOK has first rights to buy back Westar’s 45%

in the Company.

2001 Annual Report

256. On or about April 1, 2002, WRI filed it year-end 2001 Form 10-K and Annual Report

with the SEC. The 2001 Annual Report provided as follows:

The Financial Plan

The July 20, 2001 KCC order directed us to present a financial plan to the KCC. Wepresented a financial plan to the KCC on November 6, 2001, which we amended onJanuary 29, 2002. The principal objective of the financial plan is to reduce our total debtas calculated by the KCC to approximately $1.8 billion, a reduction of approximately $1.2billion. The financial plan contemplates that we will proceed with a rights offering and that,in the event that the PNM merger and related split-off do not close, we will use our bestefforts to sell our share of Westar Industries common stock or shares of our commonstock, upon the occurrence of certain events. The KCC has scheduled a hearing on May31, 2002 to review the financial plan. We are unable to predict whether or not the KCCwill approve the financial plan or what other action with respect to the financial plan theKCC may take.


the net result of the Financial Plan remained effectively the same as in the original Restructuring scheme:

to keep the non-regulated entities alive in the face of mounting losses, to provide a safe haven for the

current utility management, and to transfer a considerable ownership interest in WRI to Westar. When it

was scrutinized by the KCC staff and the KCC itself it was soundly rejected for precisely these reasons.



Proxy Statement Filed May 6, 2002

258. On or about May 6, 2002, WRI filed the Company’s Schedule 14A Proxy Statement with

the SEC, reiterating the same falsities and material misrepresentations regarding executive compensation

paid to the Individual Defendants and other key company employees as stated in prior years’ proxies.

WRI continued to make material misrepresentations about the independence, function and perceived

presence of the H.R. Committee as follows:

The Human Resources Committee is currently composed of Becker, Chairman, Dr. Budigand Dicus. This committee reviews the performance of corporate officers and changesin officer compensation and benefits. This committee held six meetings during 2001.

*****The executive compensation programs of the Company are administered by the HumanResources Committee of the Board of Directors (the "Committee"), which is composedof three non-employee directors. The Committee reviews and approves all issuespertaining to executive compensation. The objective of the Company's three compensationprograms (base salary, short term incentive and long term incentive) is to providecompensation that enables the Company to attract, motivate and retain talented anddedicated executives, foster a team orientation toward the achievement of businessobjectives, and directly link the success of our executives with that of our shareholders.

(2002 Proxy, pp. 5-6) (emphasis added).

259. The statement that the H.R. Committee was composed of “non-employee directors” was

false and misleading for the same reasons set forth above (¶¶ 135, 215). In addition, WRI failed to

disclose that Wittig and Lake attended the H.R. Committee meeting executive sessions, where executive

compensation was being discussed and which were to exclude all management. Indeed, when asked to

leave Wittig refused to be removed without an attorney present. Moreover, after Koupal was forced out

of the company during the management restructuring in the fall of 2001, Wittig assumed the “position” of

secretary. Further, the statement that it “reviews and approves all issues pertaining to executive



compensation” is false and misleading because the H.R. Committee never reviewed or approved Wittig’s

accelerated $5.4 million signing bonus, which appeared in the executive compensation chart under “All

Other Compensation” earned in year 1999; Wittig and Koupal’s enhanced SERP benefits; the put right

provision in the Split Dollar; or the amendment to Wittig’s split-dollar agreement which enabled him to

exercise his put right in small increments and “minimize the amount that appears in the compensation table”

-- further misleading investors about his exuberant compensation.

260. The 2002 Proxy contains material misrepresentations about the independence, function and

perceived presence of the Nominating Committee as follows:

The Nominating Committee is currently composed of Mr. Nettels, Chairman, Mr.Becker and Mr. Edwards. This committee reviews and recommends nominees forelection to our Board of Directors including nominees recommended by shareholders ifnominations are submitted in accordance with the procedures for shareholder proposalsdiscussed later in this proxy statement. This committee held one meeting in 2001.

261. The statements in the preceding paragraph were misleading because the Nominating

Committee abused its authority when Nettels and Becker, at the direction of Wittig conspired and then

traveled to New York, without consulting with the Board beforehand, to oust Leonard from the Board

for engaging in an authorized sale of stock, which they claimed was an embarrassment to the

Company. Indeed, the other directors were opposed to taking such action.

262. The 2002 Proxy, as those filed before it, falsely stated executive compensation was

comprised of “Salary,” Bonus,” “Other Annual Compensation,” “Restricted Stock Awards” and “All

Other Compensation.”



Long Term Compensation Annual Compensation Awards ------------------------------------ --------------------- Other Restricted Annual Stock Securities All Other Compensation Awards Underlying CompensationName and Principal Position Year Salary $ Bonus $ $(1) $(2) Options # $(3)--------------------------- ---- -------- --------- ------------ ---------- ---------- ------------David C. Wittig (4) 2001 313,026 -- 163,936 2,643,245 -- 489,896Chairman of the Board, President 2000 303,400 1,171,170 134,794 2,155,781 58,500 486,969and Chief Executive Officer 1999 408,683 -- 105,909 1,738,625 114,000 5,756,753Douglas T. Lake 2001 463,344 178,000 18,536 1,546,360 -- 5,758Executive Vice President, 2000 224,476 642,706 57,417 1,317,813 9,000 700,999Chief Strategic Officer 1999 266,849 -- 31,494 948,219 40,000 429,664Douglas R. Sterbenz 2001 190,963 150,256 22,080 24,200 -- 7,362Senior Vice President, Generation 2000 115,000 165,735 3,602 15,625 2,700 19,327and Marketing 1999 113,573 318,207 573 -- 2,700 7,463Shane A. Mathis 2001 226,276 74,600 2,628 338,800 -- 18,933Senior Vice President, 2000 158,756 149,180 5,922 391,288 3,500 40,806Commodity Strategy 1999 150,625 30,900 4,575 -- 3,500 28,778Carl M. Koupal, Jr. 2001 273,453 -- 16,770 1,010,810 -- 817,254Retired Executive Vice President, 2000 290,740 427,078 9,847 930,000 9,000 48,318Chief Administrative Officer 1999 307,020 -- 13,045 612,313 28,000 42,327Thomas L. Grennan 2001 212,533 -- 52,171 692,207 -- 589,832Retired Executive Vice President, 2000 175,750 299,702 56,375 496,875 6,000 69,953Electric Operations 1999 187,708 -- 35,965 445,000 20,000 64,292Paul R. Geist 2001 167,111 50,000 1,014 77,440 -- 13,562Senior Vice President, Chief 2000 118,000 31,221 125 93,750 -- 1,033Financial Officer and Treasurer 1999 12,962 11,290 -- -- -- 354


263. As set forth above (¶¶ 139-41, 217), this statement was knowingly false and misleading

because it had neglected to include the cost of personal flights on the Company’s aircraft, which was

required to be included as part of Wittig, Lake and others’ income.

264. Again, WRI reiterated the same false and misleading statements about the Split Dollar put

right provision as follows:

Subject to certain conditions, . . . the insured is allowed to transfer to the Company fromtime to time, in whole or in part, his interest in the death benefit under the policy at adiscount equal to $1 for each $1.50 of the portion of the death benefit for which theinsured may designate the beneficiary, . . . . Any adjustment would result in an exchangeof no more than $1 for each $1 of death benefit nor less than $1 for each$2 of deathbenefit. At December 31, 2001, our liability under this program was $18.6 million. Koupal retired in October 2001 and received a payment in January 2002 of approximately$4.6 million under the program in exchange for his assignment to us of approximately $9.1million of insurance benefits. . . .



265. As set forth above in paragraphs ___, the statements in the preceding paragraph were

materially false and misleading because WRI failed to disclose that the put provision of the Split Dollar had

not been approved by either the Board or the H.R. Committee and that Koupal further enhanced his and

Wittig’s entitlement without Board nor H.R. Committee approval.

266. The 2002 Proxy also contained false and misleading statements regarding WRI’s “stock

for compensation” program whereby the Company’s executive officers forego a percentage of their base

compensation in exchange for RSUs. The Company misstated Wittig’s actions under the RSU program,

so as to make it appear that Wittig elected to receive 58.5% of his base compensation in the form of WRI

common stock, as follows:

The use of restricted share units and dividend equivalents as a significant component ofcompensation creates a strong and direct linkage between the financial outcomes of theemployees and the shareholders. Restricted share units require specified appreciation inthe share price of the Company's common stock and the continued employment of theexecutive until the specified appreciation occurs, unless the executive's employmentterminates due to retirement, death, disability, termination without cause by us, for goodreason by the executive or a change in control of the Company. Restricted share unitsgranted in 2001 vest if the share price of the Company's common stock remains at orabove $27.83 for any period of twenty consecutive trading days beginning on February8, 2001, the date of grant, and ending on February 7, 2011. Dividend equivalents are paidon the restricted share units from the date of grant. The value of a single dividendequivalent is equal to the dividends that would have been paid or payable on a share ofcommon stock from the date of grant.

In April 1999, the Committee adopted a stock for compensation program which allowedthe Company's executive officers and other key employees to receive up to a specifiedpercentage of base compensation in the form of restricted share units. The percentage ofbase compensation allowed to be paid in restricted share units ranged from approximately5% to approximately 60% depending on the salary of the individual. Restricted share unitswere valued based upon 85% of the closing price for the Company's common stock onthe date of payment. In 2001, this program was modified to allow participants to purchaseshares of the Company's common stock, rather than receive restricted share units, at 85%of the closing price for the Company's common stock on the date of purchase. In addition,



the limitations on the percentage of base compensation allowed to be used to purchaseshares and certain deferral requirements were eliminated. In 2001, Wittig elected topurchase shares of the Company's common stock with approximately 58.5% of his basecompensation under the program.

(Emphasis added).

267. The statements made in the 2002 Proxy regarding the RSU program are riddled with

falsities. As set forth above, although the RSU program’s purported purpose was to align the long-term

interest of employees with the interests of the Company’s shareholders, Wittig “unaligned” the interests of

employees and the Company and re-aligned the RSU program with his interests -- his personal

compensation. Having used the Board and the H.R. Committee to authorize the exchange of previously

awarded WRI RSUs for Guardian RSUs, Wittig and Lake used the program to purchase undervalued

Guardian shares with their base salary. The statement in the paragraph above is false and misleading

because Wittig did not purchase shares of WRI’s common stock, but rather used 58.5% of his base salary

to acquire shares of Guardian with undisclosed knowledge that he intended Protection One to acquire

Guardian, with which Wittig would reap a windfall.

268. The 2002 Proxy also sought to get shareholder approval of the election of two then current

Class III directors (Becker and Lake) and one Class I director (R.A. Edwards) to serve a three-year term.

The 2002 Proxy failed to disclose that the Board was non-functioning; that there was no independent

Board under Wittig; that Wittig either made decisions without the Board review or documented any

decision the Board had to make; that Wittig and other senior management attended all meetings regarding

their own compensation and drafted their own compensation documents, and controlled all work done by

compensation experts who were purportedly working for the H.R. Committee, they would have never



approved the Board nominations. But for the alleged misrepresentations enumerated herein, shareholders

never would have elected them and the Board would not have been so configured.

10-Q for the Quarter Ended March 31, 2002

269. On or about May 15, 2002, WRI caused its Form 10-Q for the quarter ended March 31,

2002, which contained materially false and misleading statements, to be filed with the SEC. WRI

knowingly misrepresented that its second financial plan, as presented to the KCC pursuant to their July 20,

2001 Order, had the “primary objective”of reducing total company debt, and that the Company was unable

to predict whether the KCC will approve the plan, as follows:

The Financial Plan

The July 20, 2001 KCC order directed us to present a financial plan to the KCC. Wepresented a financial plan to the KCC on November 6, 2001, which we amended onJanuary 29, 2002. Our financial plan is set forth in full in our Annual Report on Form 10-K for the year ended December 31, 2001 under "Item 1. Business - Significant BusinessDevelopments - The Financial Plan." The principal objective of the financial plan is toreduce our total debt as calculated by the KCC to approximately $1.8 billion, a reductionof approximately $1.2 billion. The financial plan contemplates that we will proceed witha rights and warrants offering of Westar Industries common stock to our shareholders andthat, in the event that the PNM merger and related split-off do not close, we will use ourbest efforts to sell our share of Westar Industries common stock, or shares of our commonstock, upon the occurrence of certain events. The KCC has scheduled a hearing to beginon July 1, 2002 to review the financial plan. We are unable to predict whether the KCCwill approve the financial plan or what other action with respect to the financial plan theKCC may take.

270. The statements in the preceding paragraph are false and misleading for the same reasons

set forth above (¶¶ 105-13, 243, 246, 257), it fails to disclose that the Financial Plan made no effort to

address the core issues raised by the KCC such as the $1.6 billion Misallocation and the January

transaction.



271. Additionally, in the same 10-Q filing and repeated verbatim in WRI’s 10-Q filing for the

quarter ended June 30, 2002, the Company knowingly misrepresented the impairment of goodwill it was

required to make under Statement of Financial Accounting Standards (“SFAS”) No. 142 “Accounting for

the Goodwill and Other Intangible Assets” and the charge against existing customer accounts it was

required to take under SFAS No. 144 “Accounting for the Impairment and Disposal of Long-Lived

Assets.” The Company falsely reported a non-cash charge of $656.8 million, net of tax, of which $466.3

million was related to goodwill and $190.5 million was related to customer accounts, as follows:

Effective January 1, 2002, we adopted the new accounting standards SFAS No. 142,"Accounting for Goodwill and Other Intangible Assets," and SFAS No. 144, "Accountingfor the Impairment and Disposal of Long-Lived Assets." SFAS No. 142 establishes newstandards for accounting for goodwill. SFAS No. 142 continues to require the recognitionof goodwill as an asset, but discontinues amortization of goodwill. In addition, annualimpairment tests must be performed using a fair-value based approach as opposed to anundiscounted cash flow approach required under prior standards.

SFAS No. 144 establishes a new approach to determining whether our customer accountasset is impaired. The approach no longer permits us to evaluate our customer accountasset for impairment based on the net undiscounted cash flow stream obtained over theremaining life of the goodwill associated with the customer accounts being evaluated.Rather, the cash flow stream to be used under SFAS No. 144 is limited to the futureestimated undiscounted cash flows from existing customer accounts. Additionally, the newrule no longer permits us to include estimated cash flows from forecasted customeradditions. If the undiscounted cash flow stream from existing customer accounts is lessthan the combined book value of customer accounts and goodwill, an impairment chargeis required.

The new rule substantially reduces the net undiscounted cash flows used for impairmentevaluation purposes as compared to the previous accounting rules. The undiscounted cashflow stream has been reduced from the 16-year remaining life of the goodwill to theremaining life of customer accounts for impairment evaluation purposes and does notinclude estimated cash flows from forecasted customer additions.

To implement the new standards, an independent appraisal firm was engaged to helpmanagement estimate the fair values of goodwill and customer accounts. Based on this



analysis completed during the first quarter of 2002, we recorded a non-cash charge ofapproximately $656.8 million, net of tax, of which $466.3 million is related to goodwill and$190.5 million is related to customer accounts.

272. WRI’s reporting of its accounting for these charges was false and misleading because on

November 1, 2002, the Company announced it would “restate its first and second quarter 2002 financial

results to reflect an additional impairment at Protection One pursuant to the application of SFAS Nos. 142

and 144.” Accordingly, the Company recorded an additional $93 million, or $1.37 per share, in losses in

the first half of 2002 due to this accounting error.

273. On May 29, 2002, as reported in The Topeka Capital-Journal WRI made public a letter

written by defendant Lake stating “WRI had little confidence in the ability of senior management to

formulate or execute a business plan that makes economic sense for the Company and its shareholders.”

274. On May 30, 2002, WRI announced that it had replaced Arthur Andersen with Deloitte &

Touche, LLP as WRI’s outside auditor.

275. As reported in The Topeka Record, on May 31, 2002, WRI announced its plans to sell

its 7.4% of ONEOK:

The Tulsa natural gas supplier has up until the end of November to buy the common andpreferred shares at a cash price of $21.77 each. If ONEOK doesn’t buy the shares,Westar can sell them to a third party within 16 months.

276. On June 6, 2002, it was reported in The Topeka Capital-Journal, that WRI sought to delay

the KCC hearings on the Financial Plan until after the sale of the ONEOK stock. The delay was opposed

by business and consumer groups who reportedly believed:

But attorney for business and consumer groups opposed to Western’s current proposal ---which calls for the split-off of Westar --- charged that the company’s proposal for sellingthe ONEOK stock isn’t fair to ratepayers. They said because of how the stock is owned,



Western would have to give its Westar subsidiary millions of shares of stock in exchangefor using the sale proceeds to pay down the parent company’s $3.3 billion debt.

“They are exchanging one debt for another,” said Sarah Loquist, a Wichita school districtattorney.

277. On June 7, 2002, as reported in The Topeka Capital-Journal, the KCC rejected WRI’s

request to delay rulings on the Financial Plan until after the sale of the ONEOK stock. This sale of the

ONEOK stock was opposed unless proceeds were put in escrow:

Rather that dely the hearing, the Kansas Corporation Commission ordered Western toinclude details of the proposed ONEOK transaction in written testimony due June 18. Thecommission said it was important to move forward with an investigation aimed atdetermining the causes of Western’s financial problems and developing solutions to them.

Sadaka Resignation Letter Publicly Disclosed

278. On June 28, 2002, the resignation letter (dated March 28, 2001) of outside director

Sadaka was released. The letter described and quoted in The Topeka Capital-Journal Wittig's personal

compensation, including the change of control golden parachute, as follows:

“As best as I can determine, you received well over $15 million in compensation, plusstock options, restricted units and, I understand, some fairly costly perks,” Sadaka wroteto Wittig, whom she referred to as a long-time friend.

Sadaka wrote that her concerns about the level of executive compensation reached acritical point after the February 2001 board meetings. Minutes of those meetings, alsomade public on Friday, indicate that executive compensation packages were among thetopics discussed.

“Although I believe in paying managers well, I also think that huge awards that seniormanagement will receive from these golden parachutes could only be justified if thecompany had performed in a superior manner. Unfortunately, it has not,” Sadaka wrote,noting that since Wittig took command of the company in 1999, its earnings and stockprice had gone down significantly while its debt had ballooned.



279. Following these disclosures, WRI’s common stock price declined from $16.24 per share

on June 27, 2002 to $15.35 per share on June 28, 2002 with over 1.04 million shares trading.

280. On July 5, 2002, as reported in The Topeka Capital-Journal the KCC said that it approved

the sale of the ONEOK stock but with conditions to be specified on July 8, 2000.

281. On July 8, 2002, it was reported in The Topeka Capital-Journal defendant Geist claimed

too much was being made of WRI's financial problems pointing to the “due diligence” of WRI and its

management completed by 130 companies in a recent debt offering:

“These investors performed a tremendous amount of due diligence on Western Resourcesand its management before making their investment decision,” Geist said, referring to thecompany by its old corporate name.

282. However, in the same article, the testimony of a financial expert of MBIA Insurance

Company was reported as follows:

MBIA, CURB and other parties didn*t like the company*s plan. They filed testimonyurging the commission to force Westar to sell its $971 million investment in ONEOK Inc.,a Tulsa, Okla. natural gas company, and Protection One, the monitored security subsidiarywhose losses some believe are at the root of Westar* s financial problems.

One way to look at Westar*s financial problems is to compare the company to a familythat is deeply in debt that transfers its credit card balances to cards with higher interestrates rather than paying them off, said Louis Dudney, a Chicago certified public accountanthired to analyze Westar*s finances by MBIA Insurance Corp.

“It is, I think, a reasonable analogy,” Dudney said, “If a family no longer can live at acertain lifestyle and pay that debt off, then they have too much debt outstanding. And eventhough they refinance it, doesn*t solve the long-term problem.”

MBIA, which insures hundreds of millions of dollars in Westar*s bonds, CURB and otherparties are asking the KCC to order the company to sell off some of its assets to pay downdebt, it is like a bank or some other lending institution requiring the over-extended familyto sell a car or some other asset to pay down its debt, Dudney said.



Heading into the hearings, Westar was touting a plan to separate its regulated andunregulated operations into separately traded companies. David Wittig, Westar*schairman, president and chief executive officer, said issuing stock in the unregulatedoperations would raise up to $1 billion for debt reduction.

283. On July 8, 2002, WRI common stock declined from $15.45 per share on July 5, 2002 to

$14.96 per share on July 8, 2001. The WRI common stock never returned to a price $15.00 or above

for the remainder of the Class Period.

284. On July 10, 2002, the KCC testimony of two additional financial experts was reported in

The Topeka Capital-Journal with one calling for Wittig's resignation and the other testifying that WRI's

unregulated operations was responsible for the $1.6 billion of WRI's debt:

Stephen Hill, an analyst representing the Citizens Utility Ratepayers Board, charged thatWittig, a former Wall Street deal maker, has used the state*s largest utility company as “hisown little investment bank.”

“We are in a situation with this utility where its balance sheet is in pitiful shape,” Hill said,blaming Wittig for decisions that doubled the company*s debt from $1.6 billion in 1995 to$3.25 billion today.

“If we can work out some kind of a deal with him to go on his merry way, we’d be awhole lot better off,” Hill said, prompting Commissioner Brian Moline to remark, “Wouldthat it would be that simple.”

Hill and the KCC staff*s lead witness, economist James Proctor, said that much of the debtthat is keeping Westar*s credit ratings at junk bond levels is the result of unprofitableinvestments in non-utility businesses. The main culprit, they said, is Protection One, amonitored security company with national reach that generates enough cash to sustain itsoperations but hasn*t posted a profit in years and isn*t expected to in the near future.

Proctor testified Wednesday that Westar*s unregulated operations, housed in a subsidiarycalled Westar Industries, are responsible for $1.63 billion of the parent company*s overalldebt.

*****



Hill said that while the KCC doesn*t have the authority to demand that Westar*s boardreplace Wittig, it could negotiate a deal allowing the non-utility businesses to be split offunder his control in exchange for him relinquishing his positions with the remaining utilitycompany.

285. On July 10, 2002, WRI's common stock price closed at $14.03 per share.

286. On July 17, 2002, Wittig was served at the Company offices with a subpoena issued by

a grand jury in paneled by the United States Attorney's Office for the District of Kansas. The subpoena

required Wittig to produce documents and to testify before the grand jury relating to a $1.5 million loan he

had made to Weidner, president and general counsel of CCB in Topeka, Kansas. While there was no

press release or news article disclosing receipt of the subpoena on the following two days, WRI common

stock price declined 14.5% -- from $13.21 on July 17, 2002 to $12.80 per share on July 18, 2002 and

$11.72 per share on July 19, 2002. WRI common stock never closed at $13.00 per share or higher for

the remainder of the Class Period.

287. On September 12, 2002, Wittig testified before the grand jury. His testimony went beyond

the subjects of his loan to Weidner and included other subjects relating to use of the Company's aircraft

and other subjects relating to the Company.

288. On September 17 and 18, 2002, the Company and certain employers were served with

grand jury subpoenas. Their subpoenas demanded production of documents relating to Wittig, the

Company's aircraft and the annual shareholder meetings. On September 17, 2002, the Company's

common stock price closed at $10.66 per share down from $11.00 per share on the close of trading on

the prior day with over twice the volume of the prior day. Significantly, WRI common stock price never

returned to $11.00 or higher until after the announcement of Wittig's resignation on November 22, 2002.



289. On September 23, 2002, the Board of WRI met and was advised of the grand jury

subpoenas and the Board also acted to cut back management compensation. This action was taken in

advance of the date -- September 26, 2002 -- the KCC had ordered WRI to release the public documents

revealing the full compensation awarded to Wittig and senior management including payments for “change

in control.”

290. The WRI Board chose only to disclose on July 23rd t cut back on management

compensation but not the grand jury subpoenas. Further, the Board accepted Wittig's formation of a

special committee to investigate the issues raised by the criminal investigation including Wittig's placement

of defendant Nettles on that committee. Nettles had been Wittig’s friend and confidant since they were

roommates in college.

KCC Staff and KCC Rejects WRI's Proposed Financial Plan

291. On September 26, 2002, the KCC staff issued a memorandum (“Staff Memo”) to the

KCC finding that WRI's Financial Plan was not “in compliance with the principles of the July 20, 2001

[KCC] Order voiding the misallocation of assets and debt within WRI's corporate family.” The Staff

Memo found that out of WRI's $3.6 billion consolidated debt as of December 31, 2002 only $1.5 billion

of debt has been used to finance the utility leaving $2.1 billion used to finance the unregulated investments

including Protection One. However, the Staff Memo found under the Financial Plan, WRI attributed only

$5 billion of debt to the unregulated businesses in the creation of Westar Industries meaning “for the

[Financial Plan] is accepted it will result in WRI unregulated businesses' capital being subsidized by $1.6

billion of equity from WRI's regulated electric utility operation.” The Financial Plan, the Staff concluded,

made permanent the Misallocation.



292. The Staff recommended the reversal of certain accounting entities and the dissolution of

Westar Industries, and/or form a separate holding company limited to utility operations assets and liabilities.

The Staff also recommended an investigation of WRI's management compensation.

293. On September 26, 2002, as reported in The Topeka Capital-Journal, the KCC stated in

a public hearing on the same date that it would order the Restructuring of WRI's assets and liabilities, not

accepting the Financial Plan.

294. On September 27, 2002, it was reported in The Topeka Capital-Journal that WRI

disclosed that on September 17, 2002, it had been served with grand jury subpoenas seeking “documents

and testimony concerning use of the aircraft, the chief executive officer of the company and the company

generally.”

Restatement To Reflect Further Protection One Impairment

295. On November 1, 2002, the Company announced a restatement of its first and second

quarter 2002 financial statements to reflect a $93 million charge reflecting larger important charges at

Protection One and potential liability arising from a call option related to Westar Energy's 6.25% senior

unsecured note issued in August 1998.

296. On November 7, 2002, Wittig was indicted for federal crimes relating to his loan to

Weidner. Defendant Wittig was placed on “administrative leave” from all his positions at the Company.

WRI's common stock collapsed dropping 21.6% -- from $10.85 per share on November 6, 2002 to

$8.50 per share on November 7. 2002.



KCC November 8, 2002 Order

297. On November 8, 2002 the KCC issued a detailed order (the “November 8, 2002 KCC

Order”) wherein it (1) rejected the Financial Plan proposed by WRI; (2) directed WRI to reverse certain

accounting transactions, including the January Transaction; (3) directed WRI to transfer its KPL utility

division to a utility-only subsidiary of WRI, after Commission review and approval of a plan to be submitted

by WRI within 90 days of this Order; (4) instituted interim standstill protections to prevent harm to WRI*s

utility businesses as a result of their affiliation with WRI's nonutility businesses pending adoption of final

requirements relating to such affiliation; and (5) instituted an investigation into the appropriate type,

quantity, structure and regulation of the nonutility businesses with which WRI*s utility businesses may be

affiliated. The specific accounting transactions which had to be reversed included:

(a) The $1.06 billion note receivable which was converted into an “equity investment” in 2000;

(b) The $1.8 billion in equity capital transferred to Western Industries as of December 31,2001 which included:(i) the transfer of WRI*s investment in ONEOK to Westar Industries;(ii) the transferring, of miscellaneous other WRI investments to Westar Industries; and (iii)additional cash investments from WRI to Westar Industries; and

(c) WRI*s capital contribution of $0.15 billion to Westar Industries retained earnings accountrelates to the after-tax impact from WRI paying $0.26 billion of interest expense in years2000 and 2001 on debt used to finance the nonutility investments held by WestarIndustries.

298. On November 8, 2002, WRI’s common stock closed at $9.17 per share with over 1.8

million shares trading.

299. On November 15, 2002, defendant Dicus resigned from WRI's Board of Directors.



300. On November 22, 2002 WRI announced that it accepted “effective immediately” Wittig's

resignation from all positions at WRI. The Company also announced it did not make nor has it agreed to

make any payments to Wittig in connection with his resignation.

301. On December 6, 2002, WRI announced that defendant Lake had been placed on

“indefinite administrative leave” and that Lake had resigned as a WRI director.

SCIENTER ALLEGATIONS

302. The intentional and/or reckless nature of the conduct by WRI and the Individual Defendants

is reflected by the following:

(a) WRI's Board well knew the compensation to Wittig and other members of seniormanagement were indefensible. On September 23, 2002, three days before the dateKCC had directed the Company to release all documentation relating to Wittig'scompensation -- i.e., September 26, 2002, the Board dramatically revised and cut backWittig's employment agreement, including Wittig's compensation under the change ofcontrol agreement. The revised change of control agreement limited payments to Wittigto $15.3 million -- 51% reduction. The Board also capped the executive compensation,disabled executives from claiming stock earnings immediately and eliminated theCompany’s relocation program (¶¶ 39, 25, 289);

(b) At Wittig's direction, the Board approved -- without any cost information -- modificationof Wittig's employment agreement so that he would obtain full change of controlcompensation in the event of the Restructuring announced on March 29, 2000 (¶¶ 69-71);

(c) Terrill withheld compensation information requested by Sadaka following the November2000 Board of Directors meeting, including information regarding the Split Dollar policywhich, by January 2001 was worth $14 million (¶¶ 42, 90-91);

(d) Wittig also rejected Sadaka’s suggestion after November 2000 Board Meeting foran independent counsel to advise on compensation issues (¶¶ 77-82);

(e) At the February 8 and 9, 2001 Board meeting, Wittig concealed hiscompensation ($13-14 million) from the Split Dollar (¶¶ 84-89);



(f) In early 2001, after outside directors Sadaka and Leonard objected to Wittig’s changeof control compensation in light of WRI’s enormous debt and poor financial performanceWittig implemented, as described in the notes of Defendant Lake, a “strategy to getJane/Owen off board.” Wittig sought information from WRI’s outside counsel aboutdemoting Sadaka to a different “class” director. On January 25, 2001, Cahill Gordonsent Wittig, Lake and Terrill a speech to be given to Leonard and Sadaka encouragingtheir resignation. Using Leonard’s bona fide WRI stock sales as a pretense Wittig sentBecker and Nettels to New York in April 2001 to encourage his resignation, which wasreceived shortly thereafter. (¶¶ 92-99);

(g) On November 6, 2001, Wittig sought modification of his employment agreement to allowwithdrawal of funds in “small increments” to “minimize the amount that appears in thecompensation [Proxy] table (¶ 259);”

(h) Wittig transferred ownership of airplanes to Protection One to minimize attention paid tothe Company's airplanes by the KCC and the public (¶ 116);

(i) Wittig and Lake knew they were improperly using airplanes because they falsified flightlogs all trips recorded as “for business purposes.” Koupal at least once discussed the flightlogs and Wittig said all use was for business purposes. Also, Wittig's assistant complainedto Koupal about the falsification but was rebuffed (¶¶ 115-20);

(j) Stadler, the head of WRI's tax department, repeatedly instructed senior managementbeginning in 1989 that the Company was not properly recording personal travel under thetax laws. However, even though Stadler’s July 2000 memo reflecting his objections andWittig’s misused expenses in 1999 and 2000 was circulated to Koupal, Terrill, Schneweisand Wages, it was disregarded since within a few days Terrill flew his family to theHamptons for the weekend with Wittig's family (¶ 40);

(k) Arthur Andersen also advised management as far back as 1989 that corporate practiceswith respect to business air travel was deficient under tax laws (¶ 117);

(l) In the fall of 2001, Wittig refused to allow internal auditor Tryon from conducting an auditof corporate airplane use (Id.);

(m) Defendants Beck and Budig awarded Wittig a $267,000 2001 short-term incentive bonusa the February 19, 2002 Board meeting, but intentionally agreed to “defer” it so as toavoid publication of it in the 2001 Proxy (¶¶ 12, 25, 252);

(n) Wittig directed WRI to invest in QuVis to enhance his personal undisclosed (in WRI’s2002 Proxy) investments in QuVis (¶¶ 35 ,114, 122);



(o) Wittig caused WRI to issue to him and senior management RSUs of Guardian withoutdisclosing his plans to acquire it (¶¶ 123, 125, 266-67);

(p) Wittig used WRI’s relationship with Capital City Bank to engage in criminal bankingactivity (¶ 126);

(q) Wittig concealed that over $1.6 billion of WRI's reported long-term debt prior to theRestructuring had been used to acquire the unregulated assets and that it would remain withthe utilities. Wittig had it simply canceled without any consideration from Westar andplanned to have the utilities service this massive debt of $1.6 billion by increasing electricityrates (¶¶ 164, 166, 186, 204);

(r) Wittig falsely told investors between March 29, 2000 and July 20, 2001 that theRestructuring would “maximize” and “unlock” the value of WRI utilities and provideinvestors with a clearer picture or “definition” of WRI assets when, in fact, it was designedto undermine the financial condition of the utilities for the benefit of Westar and Wittigpersonally (¶¶ 128-29, 131-32, 148-49, 152, 191);

(s) Koupal, in the minutes of July 2000 H.R. Committee meeting, fabricated “approval” ofenhancements to his and Wittig's change of control compensation (¶ 143);

(t) Wittig falsely stated on June 16, 2000 that he had “total Board support” for hiscompensation when, in fact, the Board had not approved Wittig's $5.4 million bonusdescribed in the 2000 Proxy, the Board had not been presented with anywhere near thetrue amount of Wittig's or senior management’s change of control compensation under theRestructuring. When a closer approximation was given to the Board in November 2000 --Wittig’s being $35 to $65 million and all of senior management’s being $93 to $174 million-- there was strong opposition which Wittig concealed and, never corrected his earlierstatement of “total board support” (¶¶ 134-41);

(u) Wittig falsely concealed in describing the Restructuring in Westar's S-1 RegistrationStatements filed on October 5, 2000 and May 18, 2001 by referring to an “Allocation andSeparation Agreement” but intentionally withholding disclosure of the actual assets anddebt allocated and thus the misallocation of assets and debt between Westar and theutilities (¶¶ 161, 206);

(v) Wittig falsely told investors in October and December 2001 he was “cutting cost” when,in fact, through his undisclosed fraudulent schemes he was bilking the Company's assetsand he more than made up for his purported “cut “ by receiving new additionalcompensation as a director of WRI's wholly owned subsidiary Protection One (¶¶ 240,246); and



(w) Wittig also forced out outside directors Louis Smith in April 2001 and Russell Meyer inJune 2000 who were also critical of Wittig's management of WRI (¶ 99).

303. The scienter of WRI and the Individual Defendants is further reflected in management’s

desire to purge WRI’s non-utility businesses of excessive debt and split them off into Westar, triggering

Wittig, Lake and others’ change of control provisions, providing Wittig and others with potential enormous

lump-sum cash payments and further providing Wittig with the ability to run the unregulated Westar with

substantially less debt than it should have assigned to it.

STATUTORY SAFE HARBOR

The statutory safe harbor provided for forward-looking statements does not apply to any of the

allegedly false forward-looking statements pleaded in this Complaint to the extent that said forward-looking

statements were not identified as a “forward-looking statement” when made or to the extent that meaningful

cautionary statements identifying important factors that could cause actual results to differ materially from

those in the forward-looking statements did not accompany those forward-looking statements.

Alternatively, to the extent that the statutory safe harbor does apply to any forward-looking statements

because at the time each of those forward-looking statements was made, the speaker knew the forward-

looking statement was false and the forward-looking statement was authorized and/or approved by an

executive officer of the Company who knew that those statements were false when made.



COUNT I

Against WRI and the Individual Defendants ForViolation of Section 10(b) of the Exchange Act and

Rule 10b-5 of the Securities and Exchange Commission

304. Plaintiffs repeat and reallege each and every allegation contained in the foregoing

paragraphs as if fully set forth herein.

305. This Count is asserted against all defendants and is based upon Section 10(b) of the

Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated thereunder.

306. During the Class Period, defendants, singularly and in concert, directly engaged in a

common plan, scheme, and unlawful course of conduct, pursuant to which they knowingly or recklessly

engaged in acts, transactions, practices, and courses of business which operated as a fraud and deceit upon

plaintiffs and the other members of the Class, and made various deceptive and untrue statements of material

facts and omitted to state material facts in order to make the statements made, in light of the circumstances

under which they were made, not misleading to plaintiffs and the other members of the Class. The purpose

and effect of said scheme, plan, and unlawful course of conduct was, among other things, to induce plaintiffs

and the other members of the Class to purchase WRI common stock during the Class Period at artificially

inflated prices.

307. During the Class Period, defendants, pursuant to said scheme, plan, and unlawful course

of conduct, knowingly and recklessly issued, caused to be issued, participated in the issuance of, the

preparation and issuance of deceptive and materially false and misleading statements to the investing public

as particularized above.



308. Throughout the Class Period, WRI acted through the Individual Defendants, whom it

portrayed and represented to the financial press and public as its valid representative. The willfulness,

motive, knowledge, and recklessness of the Individual Defendants are therefore imputed to WRI, which

is primarily liable for the securities law violations while acting in his official capacities as Company

representatives, or, in the alternative, which is liable for the acts of the Individual Defendants under the

doctrine of respondent superior.

309. As a result of the dissemination of the false and misleading statements set forth above, the

market price of WRI common stock was artificially inflated during the Class Period. In ignorance of the

false and misleading nature of the statements described above and the deceptive and manipulative devices

and contrivances employed by said defendants, Plaintiffs and the other members of the Class relied, to their

detriment, on the integrity of the market price of the stock in purchasing WRI common stock. Had Plaintiffs

and the other members of the Class known the truth, they would not have purchased said shares or would

not have purchased them at the inflated prices that were paid. Plaintiffs and the other members of the Class

have suffered hundreds of millions of dollars in damages as a result of the wrongs herein alleged in an

amount to be proved at trial.

310. By reason of the foregoing, defendants directly violated Section 10(b) of the Exchange Act

and Rule 10b-5 promulgated thereunder in that they: (a) employed devices, schemes, and artifices to

defraud; (b) made untrue statements of material facts or omitted to state material facts in order to make the

statements made, in light of the circumstances under which they were made, not misleading; or (c) engaged

in acts, practices, and a course of business which operated as a fraud and deceit upon plaintiffs and the



other members of the Class in connection with their purchases of WRI common stock during the Class

Period.

COUNT II

Against The Individual Defendants ForViolation of Section 20(a) of the Exchange Act

311. Plaintiffs repeat and reallege each and every allegation contained in each of the foregoing

paragraphs as if set forth fully herein.

312. The Individual Defendants, by virtue of their positions, stock ownership and/or specific acts

described above, were, at the time of the wrongs alleged herein, control persons within the meaning of

Section 20(a) of the 1934 Act.

313. The Individual Defendants had the power and influence and exercised the same to cause

WRI to engage in the illegal conduct and practices complained of herein.

314. By reason of the conduct alleged in Count I of the Complaint, the Individual Defendants

are liable for the aforesaid wrongful conduct, and are liable to plaintiffs and to the other members of the

Class for the substantial damages which they suffered in connection with their purchases of WRI common

stock during the Class Period.

COUNT III

Against All Defendants For Violation of Section 14(a) of the Exchange Act

315. Plaintiffs repeat and realleges allegations in ¶¶ 62-127 of this Complaint as though

separately set forth and pleaded.



316. Plaintiffs bring this claim pursuant to §14(a) of the Exchange Act and Rule 14a-9(a)

promulgated thereunder. Section 14(a) of the Exchange Act provides that no person shall solicit or permit

the use of its name to solicit any Proxy, which contravenes any rules promulgated by the SEC. Rule 14a-

9(a), 17 C.F.R. 240 14a-9(a), prohibits any false and misleading statements or omissions with respect to

the solicitation of a Proxy.

317. The materially false and misleading statements and omissions contained in the Proxy and

Supplemental Proxy are identified as such in ¶¶ 134-45, 214-23, and 258-68.

318. By their respective actions and omissions set forth above, defendants WRI and the

Individual Defendants acting individually and in concert, solicited Proxies from plaintiffs and the other

members of the Class by means of the 2000, 2001 and 2002 Proxies and which, as a result of the

negligent, reckless or intentional actions of each of the respective defendants, contained false or misleading

statements and omissions. WRI shareholders relied on such false and misleading statements and omissions

in determining whether and how to vote. If the truth had been disclosed, the shareholders would not have

approved the Board nominations and recommendations. Defendants WRI and the Individual Defendants

thereby violated §14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder, and thereby caused

damage to plaintiffs and the other Class members.

PRAYER FOR RELIEF AND JURY DEMAND

WHEREFORE, Plaintiffs, on their own behalf and on behalf of the Class, pray for judgment as

follows:

A. Declaring this action to be a proper class action and certifying Plaintiffs as class

representatives under Rule 23 of the Federal Rules of Civil Procedure;



B. Awarding compensatory damages in favor of Plaintiffs and the other members of the Class

against all defendants, jointly and severally, for the damages sustained as a result of the wrongdoings of

defendants, together with interest thereon;

C. Awarding Plaintiffs the fees and expenses incurred in this action, including reasonable

allowance of fees for Plaintiffs’ attorneys and experts; and

D. Granting such other and further relief as the Court may deem just and proper.

JURY DEMAND

Plaintiffs demand a trial by jury of all issues so triable.

Dated: July 15, 2003

Respectfully submitted,

By: /s Christopher M. Joseph Stephen M. Joseph (Kansas Bar 07452)

Christopher M. Joseph (Kansas Bar 19778)JOSEPH & HOLLANDER, P.A.500 North Market StreetWichita, KS 67214-3590(316) 262-9393

- and -

JOSEPH & HOLLANDER, P.A.1243 S.W. Topeka Blvd., Suite BTopeka, KS 66612-1852(785) 234-3272

Plaintiffs’ Liaison Counsel

- and -



By: /s Joel P. Laitman Samuel P. SpornJoel P. LaitmanChristopher LomettiJay P. SaltzmanAshley KimFrank R. SchirripaSCHOENGOLD & SPORN, P.C.19 Fulton StreetNew York, New York 10038(212) 964-0046

Plaintiffs’ Lead Counsel


in the united states district court for the ......to undermine the financial condition of the...

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