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Lay's death may void conviction

Since he hadn't been sentenced yet, the defense can ask to have the sentence vacated, a request that probably would be granted.

By ASSOCIATED PRESS
Published July 7, 2006

HOUSTON - The death of Enron Corp. founder Kenneth Lay will likely cause his conviction to be erased from the record, experts said Thursday.

The 64-year-old executive's sudden death Wednesday from heart disease allows his lawyers to ask the court to vacate his conviction for fraud and conspiracy in Enron's scandal that left thousands jobless and wiped out billions from investors.

What will become of his money and assets, however, is still unclear. If his conviction is erased, that would thwart the government's effort to seize millions prosecutors say he gained from participating in Enron's fraud.

The government wants $43.5-million. Prosecutors suggested he could apply his $5-million condominium and a $6.3-million investment toward that sum. During his criminal trial this year, Lay said he has little else left and still owes his lawyers.

But his assets could remain targets in civil litigation from shareholders and others, including the Justice Department. What, if any, assets would be targeted hasn't been specified.

Lay and former Enron CEO Jeffrey Skilling were convicted May 25 of fraud and conspiracy for lying to investors and employees about Enron's financial health before the company crashed into bankruptcy protection in December 2001.

Lay was convicted of six counts of fraud and conspiracy, and Skilling was convicted of 19 of 28 counts of fraud, conspiracy, insider trading and lying to auditors. In addition, U.S. District Judge Sim Lake convicted Lay in a separate trial of bank fraud and lying to banks in his personal banking.

Roma Theus, vice chairman of the corporate integrity and white collar crime committee of the Chicago-based Defense Research Institute and a former federal prosecutor, said that because an appeal was pending, Lay's convictions are abated.

"The law views it as though he had never been indicted, tried and convicted," Theus said.

Without that, the government cannot continue its efforts to seize Lay's assets through criminal courts, he said.

David Berg, a Houston civil litigator, said all that's left is a bureaucratic process in which Lay's attorneys can file court papers, with Lay's death certificate, asking Lake to vacate the convictions. If Lake complies as expected, Lay would no longer be a felon.

"His lawyers will move to set aside the conviction, and it'll be done. The slate is wiped clean," Berg said.

Lay's lead lawyer, Michael Ramsey, declined comment Thursday, saying he would make no public statements until he conferred with Lay's family.

But the Justice Department, the Securities and Exchange Commission and suing shareholders can still pursue at least part of Lay's estate through civil courts. Berg said Lay's wife, Linda, legally owns half of Lay's estate, and at least her half - if not part of his - is exempt from seizure.

Lay died early Wednesday while vacationing with his wife near Aspen, Colo. Dr. Robert Kurtzman, Mesa County coroner in Grand Junction, Colo., said an autopsy showed Lay had severely clogged coronary arteries.

Lay's death also put officials at his alma mater in the position of having to deflect comment about his unspent endowment - even as they wrestle with how, or whether, to honor their infamous donor.

For seven years, the University of Missouri in Columbia has tried without success to fill the endowed Kenneth L. Lay Chair in Economics, created by his donation of more than $1-million in Enron stock that the university sold before the company collapse.

Since Enron sought bankruptcy protection in 2001, the university has resisted calls by some faculty members, alumni and even the school's chancellor for the donation to be returned, steered toward a chair in business ethics, or given to jilted Enron investors if Lay were found guilty of criminal acts.

According to the contract between Lay and the university's Board of Curators, any change in the donation's status had to be approved by Lay "during the lifetime(s) of the donors."

But the contract also allows curators to "change the terms and conditions for handling this fund, if, in its judgment, it becomes advisable to do so in order to better carry out the original intent and purpose of the fund."

After Lay's conviction, curator John Carnahan III suggested the university negotiate a mutually agreeable "change in charitable purpose."

Fellow curator Don Walsworth, while noting the university accepted the donation "in good faith," also said he expects the debate to continue.

"The university has to make a decision," he said. "It's going to take a lot longer for this to settle."

[Last modified July 7, 2006, 01:00:46]