Judge voids Lay's Enron fraud conviction

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HOUSTON (AP) -- A federal judge yesterday vacated the conviction of Enron's late founder Kenneth L. Lay, wiping away a jury's verdict that he committed fraud and conspiracy in one of the biggest corporate scandals in U.S. history.

Mr. Lay was convicted of 10 counts of fraud, conspiracy and lying to banks in two separate cases May 25. 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.

Mr. Lay died of heart disease July 5 while vacationing with his wife, Linda, in Aspen, Colo.

U.S. District Judge Sim Lake, in a ruling yesterday, agreed with Mr. Lay's lawyers that his death required that his conviction 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 extinguished 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.

"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 Mr. Lay's estate. "The judge engaged in a fair and reasoned application of 5th Circuit law."

Yesterday's ruling thwarts the government's bid to seek $43.5 million prosecutors say Mr. Lay took by participating in Enron's fraud. The government still could pursue those claims in civil court, but they would have to compete with any other litigants also pursuing Mr. Lay's estate.

In his ruling, Judge Lake also denied a request from Russell Butler, who said he was a victim of Enron's collapse and had asked for an order of restitution based on Mr. Lay's conviction.

"With this ruling, the criminal case is over. It doesn't end the civil case or the ability of anyone to file or pursue a civil case against the estate," Mr. Buffone said.

Kelly Kimberly, spokeswoman for the Lay family, declined comment, referring reporters to Mr. Buffone.

A spokeswoman for the Department of Justice did not immediately return a telephone call seeking comment.