K.Lay's Valhalla Ride as Innocent...

[motordavid]

Avoiding the Grassy Knoll Gang, but his death left
his fam. with "something" as opposed to nothing.
BR,mD

Quirk of U.S. Law Exonerates Lay,
Possibly Hindering Asset Seizure
By ASHBY JONES and JOHN R. EMSHWILLER
July 7, 2006; Page C3

The fact that former Enron Chairman Kenneth Lay's death on Wednesday may well spare him from being officially branded a felon is the result of a legal principle that has been in place for years in U.S. law.
The rule, widely referred to as abatement ab initio, dictates that when a defendant dies before he has the chance to appeal a conviction, the conviction essentially gets wiped away. Everything "associated with the case is extinguished, leaving the defendant 'as if he had never been indicted or convicted,' " wrote the U.S. Court of Appeals for the Fifth Circuit in a 2004 opinion that is a recent articulation of the principle. Fifth Circuit law governs the criminal trial of both Mr. Lay and his co-defendant, former Enron president, Jeffrey Skilling.

Mr. Lay died of a heart attack while staying at a rented vacation house near Aspen, Colo.
The guilty verdicts rendered against Mr. Lay in May on conspiracy and fraud counts "no longer exist," says John Dowd, the head of the criminal litigation group at Akin Gump Strauss Hauer & Feld in Washington. "He technically dies an innocent man." Mr. Dowd represented David Delainey, the former head of Enron's retail energy unit, who pleaded guilty and testified for the prosecution in the Lay-Skilling criminal trial.
According to a 2002 scholarly article written by Rosanna Cavallaro, a professor at Suffolk University Law School in Boston, the premise of the abatement ab initio principle rests upon the importance of the appellate process to the integrity of the criminal system. Appellate review of a conviction, she writes, "is so integral to the array of procedural safeguards due a criminal defendant that incapacity to obtain such review nullifies the jury verdict." The guilty verdict against Mr. Skilling stands. Mr. Skilling has said he will appeal.
The nullification of Mr. Lay's conviction might well hinder the government's efforts to collect from Mr. Lay's estate. Last week, the government announced it would attempt to seize some $43.5 million from Mr. Lay, money it viewed as ill-gotten proceeds of his fraud. Now the government will likely be forced to go after the money through some other means outside the criminal process, says Prof. Cavallaro.
The government is free to bring a civil lawsuit against Mr. Lay's estate in an attempt to get the funds. Mr. Lay's death could erect a barrier on this front as well, says Prof. Cavallaro, as the government in a civil suit would likely be precluded from relying on facts proved during the course of Mr. Lay's criminal trial. Rather, the government would have to re-prove them in a civil proceeding. The principle likely applies to a civil suit filed by the SEC currently pending against Mr. Lay, says Peter Henning, a law professor at Wayne State University.
It isn't clear how much of Mr. Lay's once-great wealth remains for either the government or civil plaintiffs to go after. At the end of 2000, with Enron still riding high, Ken Lay had a net worth of about $350 million, most of it in company stock, according to his own testimony at his criminal trial this year. At the end of 2001, after Enron had collapsed into bankruptcy and its stock had become practically worthless, Mr. Lay testified that he still had a net worth of about $50 million. An Aug. 31, 2001, personal balance sheet, which was introduced at trial, for Mr. Lay and his wife, Linda, showed that the couple's non-Enron wealth was centered on real estate as well as stakes in both public and private companies.
By the time of this year's trial, Mr. Lay estimated that his net worth had fallen to essentially zero, though it has never been completely clear where his remaining wealth went. Mr. Lay's estate includes at least about $10 million in assets, though it isn't known what sorts of liabilities, including unpaid bills to his lawyers, are outstanding.
The two major assets appear to be the Lays' home, a condominium that occupies an entire floor of a luxury Houston high-rise, known as the Huntingdon. In his criminal-trial testimony, Mr. Lay said that the "tax appraised value" was $4 million -- though his 2001 personal balance sheet estimated that the condo had a $10 million value and was filled with an additional $2 million of furnishings.
Mr. Lay owns part of a Goldman Sachs Group Inc. investment fund, with his share valued at nearly $6.3 million, according to a filing in Houston federal court by government prosecutors. The government filing is seeking forfeiture of the condo and the Goldman account as a result of Mr. Lay's conviction on conspiracy and fraud charges.
After Enron's collapse, Mr. Lay sold many of his remaining assets, including several vacation homes in Aspen, Colo., and Galveston, Texas. During his trial testimony, Mr. Lay estimated that he grossed about $20 million from the sale of his Aspen properties. He said the money went to pay various "obligations," including legal bills, as well as living expenses. It isn't known whether Mr. Lay was covered by life insurance.
Write to Ashby Jones at [email protected]1 and John R. Emshwiller at [email protected]2
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