Houston – Ken Lay’s death Wednesday may have spared his survivors financial ruin.
The death of Lay, the former head of Enron, effectively voids the guilty verdict against him, temporarily thwarting the federal government’s efforts to seize his remaining real-estate and financial assets, legal experts say.
“The death of Mr. Lay in all likelihood will render the government’s hard-fought victory null,” said Christopher Bebel, a former federal prosecutor based in Houston who specializes in securities fraud.
But while Lay’s death may have limited government efforts in his criminal case, he remains the subject of civil lawsuits by the Securities and Exchange Commission and former investors and Enron employees. Those lawsuits could still proceed, with the aim of taking control of some of Lay’s remaining assets.
Lay and Jeff Skilling, the two chief executives who guided Enron through its rise and fall, were found guilty in May of fraud and conspiracy and were free on bail pending their October sentencing.
On Friday, the Justice Department had moved to seize a total of $183 million in assets belonging to the two men – although the bulk of those assets were Skilling’s.
Five years ago, Lay’s personal fortune was valued as high as $400 million. But a large part of that was tied to the value of Enron’s stock, which is now virtually worthless.
Lay testified at his trial that his net worth had declined to minus $250,000, hampered by mounting legal bills and poor-performing investments. But his finances were apparently not so dire. According to legal documents filed at the federal courthouse in Houston on Friday, Lay had holdings in an investment account at Goldman Sachs valued at $6.3 million.
In addition, prosecutors said Lay’s luxury apartment in Houston had at least $1.5 million in value that could be forfeited to the United States.
The government’s forfeiture effort ahead of the planned sentencing of Lay and Skilling this fall, however, has been thrown into doubt, at least in relation to Lay’s assets, because the death of a criminal defendant before his sentencing and the appeal process may void the criminal case against him.
“Technically, he was found guilty, but that’s extinguished as of today,” said Joel Androphy, a prominent Houston defense lawyer.
A person involved in the government’s action against Lay, who did not want to be identified because of the delicate nature of the case, said Lay’s death did not necessarily rule out proceeding with forfeiture actions.
“The family, at the end of the day, cannot sit on the fruits of the fraud,” the source said. “Even if the verdict is nullified, he paid for his actions with his life. That is more tragic.”
The civil lawsuits against Lay may continue with efforts to seize his remaining assets. Lawyers involved in the civil lawsuits, however, have already signaled that they are more interested in seeking compensation from institutions with deeper pockets that may have profited from improper dealings with Enron, such as Wall Street investment banks, rather than focusing on Lay. Any life-insurance policies bought by Lay may also be shielded from federal seizure efforts since state laws normally cover such payments.
Ken Lay
Age: 64; born April 15, 1942, in Tyrone, Mo.
Family: Wife, Linda; son, Mark; daughter, Elizabeth; stepdaughter, Robyn.
Education: Bachelor’s and master’s degrees in economics from University of Missouri; doctorate in economics from University of Houston.
Career: Senior economist at Humble Oil and Refining Co. in Houston; after earning his doctorate, Lay was an economist in the Navy and, in 1971, became undersecretary of energy under Rogers Morton; left government in 1974 to be an executive of Florida Gas, becoming president of the company by 1981; returned to Houston in 1982 to run Transco Energy Co., and in 1984 took the helm of Houston Natural Gas; 1985, HNG merged with Omaha-based InterNorth, and the combined company became Enron with Lay as CEO; Enron reached No. 7 on the Fortune 500 in 2000 and claimed $101 billion in annual revenues.
Enron fallout: Stepped down as Enron’s CEO in January 2002 and quit as chairman the next month; Lay was convicted with former chief executive Jeff Skilling on May 25 of fraud and conspiracy. He also was convicted the same day in a separate trial of bank fraud and making false statements to banks in a case related to his personal finances.
THE ASSOCIATED PRESS
Former properties
After selling four properties in the Aspen area for $21.8 million, former Enron founder and chairman Ken Lay and his wife, Linda, had been renting and residing part time in a home on a ranch in Old Snowmass, northwest of Aspen. The Pitkin County properties sold by the Lays between February 2002 and July 2003, according to county assessor records:
Feb. 1, 2002: 20,266-square-foot vacant lot on Miner Trail Road, $2.15 million
Feb. 7, 2002: 4,712-square-foot, six-bedroom house on 3.25 acres at 165 Shady Lane, $10 million
March 26, 2003: 4,537-square- foot, four-bedroom house at 270 N. Spring St., $4.53 million
July 30, 2003: 4,559-square-foot, four-bedroom house at 285 N. Spring St for $5.16 million