Judge Vacates Conviction Of Kenneth Lay - KLTV.com - Tyler, Longview, Jacksonville |ETX News

10/18/06-Houston

Judge Vacates Conviction Of Kenneth Lay

Enron founder Kenneth Lay leaves the courthouse after being found guilty in this May file photo in Houston. Enron founder Kenneth Lay leaves the courthouse after being found guilty in this May file photo in Houston.

Enron founder Kenneth Lay's criminal record is now clean. A federal judge ruled Tuesday that Lay's death this summer vacated his conviction on fraud and conspiracy charges connected to the downfall of the once mighty energy giant. The ruling makes it more difficult for the government to seek $43.5 million from Lay's estate.

Lay was convicted May 25 of 10 counts of fraud, conspiracy and lying to banks in two separate cases. He died of heart disease July 5 while vacationing with his wife, Linda, in Aspen, Colo.

Enron's collapse in 2001 wiped out thousands of jobs, more than $60 billion in market value and more than $2 billion in pension plans.

Lay's attorneys argued that legal precedent called for his convictions to be erased and his indictment dismissed. They cited a 2004 ruling from the 5th U.S. Circuit Court of Appeals that found that a defendant's death pending appeal invalidates his entire case because he hadn't had a full opportunity to challenge the conviction and the government shouldn't be able to punish a dead defendant or his estate.

U.S. District Judge Sim Lake agreed, saying prosecutors had not "raised any legal basis for denying the rule's application in this case."

"On behalf of his estate, I'm really quite pleased with the ruling and glad this brings to a close the criminal proceeding against Mr. Lay," said Samuel Buffone, the attorney for Lay's estate.

The government had planned to seek $43.5 million for what it said was Lay's ill-gotten gains from Enron's fraud. The government could still pursue those gains in civil court, but they would have to compete with other litigants.

"Today's ruling does not change the fact that Mr. Lay was found guilty after a four-month jury trial and a separate bench trial," said Bryan Sierra, a Justice Department spokesman. "We will continue to pursue all remedies available for restitution on behalf of the victims of the fraud at Enron."

Kelly Kimberly, spokeswoman for Lay's family, declined comment, referring reporters to Buffone.

In his ruling, Lake also denied a request from Russell Butler, a Maryland crime victims attorney who lost $8,000 in Enron's collapse. He had asked for an order of restitution based on Lay's conviction, said his attorney, Keli Luther.

Luther said Lake's ruling was "unfair for victims that have been left penniless by Mr. Lay's actions."

Prosecutors offered no counter legal argument in the case, but had asked Lake to hold off on a ruling until next week so Congress could consider legislation from the Justice Department that changes current federal law regarding the abatement of criminal convictions. Congress recessed for the elections without considering the legislation.

In their motion to Lake last month, prosecutors Sean Berkowitz and John Hueston wrote that certain provisions of the proposed legislation would apply to Lay's case, including "that the death of a defendant charged with a criminal offense shall not be the basis for abating or otherwise invalidating either a verdict returned or the underlying indictment."

"It seems like there isn't much of an argument that could have been made" by prosecutors, said Carl Tobias, a law professor at the University of Richmond School of Law in Virginia. "The judge seemed to be pretty much bound by the earlier precedent."

Enron, once the nation's seventh-largest company, crumbled into bankruptcy proceedings in December 2001 when years of accounting tricks could no longer hide billions in debt or make failing ventures appear profitable.

Lay's co-defendant, former Enron chief executive Jeffrey Skilling, is scheduled to be sentenced on Monday.

Courtesy of the Associated Press.

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