A federal judge in Houston yesterday wiped away the fraud and conspiracy conviction of Kenneth L. Lay, the Enron Corp. founder who died of heart disease in July, bowing to decades of legal precedent but
frustrating government attempts to seize nearly $44 million from his family.The ruling worried employees and investors who lost billions of dollars when the Houston energy-trading company filed for bankruptcy protection in December 2001. It also came more than a week after Congress recessed for the November elections without acting on a last-ditch Justice Department proposal that would have changed the law to allow prosecutors to seize millions of dollars in investments and other assets that Lay controlled.
With the judge's order, Lay's conviction on 10 criminal charges will be erased from the record. "The indictment against Kenneth L. Lay is dismissed," U.S. District Judge Simeon T. Lake III wrote in a spare, 13-page order.
Legal analysts said Lake's ruling closely hewed to a long-held doctrine called abatement, which allows a conviction to be vacated if defendants die before they are able to exercise their right to appeal. Courts typically rule that defendants' constitutional rights to challenge their convictions outweigh other considerations, and the law hesitates to punish the dead, the analysts said.
Samuel J. Buffone, a Washington-based lawyer for Lay, said the family was pleased with the ruling. "As far as we're concerned, this is the last step," Buffone said. "It's as if the indictment never occurred."
But governance experts said Lay's name forever will be linked with the era's most complex and far-reaching corporate fraud.
"A lot of lives were ruined, both the perpetrators' and the victims'," said University of Tennessee corporate governance expert Joseph V. Carcello. "This happened on his watch. Even if he's not legally culpable, he's culpable as a manager."
Regulators at the Securities and Exchange Commission still may pursue their civil case against Lay's estate, but their task will be more difficult because they can no longer introduce the fact of his conviction and instead must prove again, in a resource-intensive trial, that he broke the law. The SEC case has been stayed pending resolution of the status of Lay's criminal conviction. The agency's five commissioners must decide in the weeks to come whether to proceed against Lay's estate . . .
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