Westar Energy, Inc. (“Westar” or the “Company”) provides electric utility and natural gas service primarily in Kansas via electric distribution and transmission lines.
The original Complaint charges that Defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of materially false and misleading statements to the market between March 31, 2001 and December 26, 2002. Specifically, the original Complaint alleges that these statements were materially false and misleading because they failed to disclose and/or misrepresented the following adverse facts, among others: (i) that the Company had engaged in certain trades that may have violated Federal Energy Regulatory Commission ("FERC") affiliate transaction rules, specifically that these transactions involved power sales from one Cleco Corporation (NYSE:CNL) affiliate to Westar and then back to another or the same Cleco affiliate, these transactions totaled approximately $3.4 million in 2000, $12.6 million in 2001 and $3.8 million in 2002; and (ii) further as a result of improper accounting practices regarding Westar's approximately 88% ownership of Protection One (NYSE:POI), a provider of property monitoring services, including electronic monitoring and maintenance of alarm systems, first and second quarter 2002 financial earning results had to be re-audited and restated.
The Complaint further alleges that on December 26, 2002, the last day of the Class Period, Westar announced in a press release that it had received a subpoena from the Federal Energy Regulatory Commission on December 16, 2002, and that in addition to seeking details on trades with Cleco and its affiliates, FERC also requested documents concerning power transactions between Westar's system and marketing operations, and information on power trades in which Westar or other trading companies acted as intermediaries.
As reported by the Company's FORM 10-Q for the quarterly period ended September 30, 2003, Plaintiffs filed a Consolidated Amended Complaint on July 15, 2003. The lawsuit is brought on behalf of purchasers of the Company's common stock between March 29, 2000, the date the company announced its intention to separate its electric utility operations from our unregulated businesses, and November 8, 2002, the date the KCC (Kansas Corporation Commission) issued an order prohibiting the separation. The Complaint alleges that the Company violated federal securities laws by making material misrepresentations, or omitting material facts, concerning the purpose and benefits of the proposed separation, the compensation of the Company's senior management and the independence and functioning of its board of directors and that as a result the Company artificially inflated the price of its common stock. The consolidated Complaint accuses Westar of making financial reports in direct violation of GAAP (Generally Accepted Accounting Principles) "in order to maintain an appearance of prospering performance and favorable financial results."
According to a press release dated April 15, 2005, Westar has reached an agreement in principle to settle pending shareholder securities class action and shareholder derivative lawsuits related to actions that occurred under former management. Under the terms of the settlement, the Company will make a payment of $1.25 million and the Company's insurance carriers will make a payment of $31.25 million.
By the Order and Final Judgment entered on September 1, 2005, the Settlement and the Plan of Allocation are approved. Plaintiffs’ lead Counsel is awarded 30% of the Settlement Fund in fees and $226,877.21 in reimbursement of expenses. The Action is dismissed with prejudice.
