- The Washington Times - Thursday, July 6, 2006

HOUSTON (AP) — The death of Enron Corp. founder Kenneth L. Lay will likely cause his conviction to be erased from the record, analysts said yesterday.

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 not clear. 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 earlier this year, Lay said he had little else left and still owed his lawyers.

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

Lay and former Enron Chief Executive Officer 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.

Skilling is to be sentenced Oct. 23, and faces a government effort to seize nearly $140 million from him.

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,” Mr. 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 Judge Lake to vacate the convictions. If Judge 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,” Mr. Berg said.

Lay’s lead lawyer, Michael Ramsey, declined comment yesterday, 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. Mr. 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.

During his trial, Lay testified that his fortune — which reached about $400 million before Enron failed — had been wiped out and that he had debts of $250,000, not including legal bills.

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