The sudden death of Kenneth Lay on Wednesday may have spared his survivors financial ruin.
The death of the former head of Enron, effectively voids the guilty verdict against him, temporarily thwarting the federal government's efforts to seize his remaining real estate and financial assets, legal experts say.
"The death of Mr Lay in all likelihood will render the government's hard-fought victory null," said Christopher Bebel, a former federal prosecutor who specializes in securities fraud.
But while Lay's death may have limited government efforts in his criminal case, he remains the subject of civil lawsuits by the Securities and Exchange Commission and former investors and Enron employees. Those lawsuits could still proceed, with the aim of taking control of some of Lay's remaining assets.
Lay and Jeffrey Skilling, the two chief executives who guided Enron through its rise and fall, were found guilty in May of fraud and conspiracy, and were free on bail pending their sentencing.
Last Friday, the Justice Department moved to seize a total of US$183 million in assets belonging to the two men.
Five years ago Lay's personal fortune was valued at US$400 million. But a large part of that was tied to the value of Enron's stock, which is now virtually worthless.
Lay testified at his trial that his net worth had declined to liabilities of US$250,000, hampered by mounting legal bills and poor-performing investments. But his finances were apparently not so dire. According to legal documents filed at the federal courthouse on Friday, Lay had holdings in an investment account at Goldman Sachs valued at US$6.3 million.
In addition, prosecutors said that Lay's full-floor luxury apartment in Houston's River Oaks district had at least US$1.5 million in value that could be forfeited to the US.
The government's forfeiture effort ahead of the planned sentencing of Lay and Skilling this fall, however, has been thrown into doubt, at least in relation to Lay's assets, since the death of a criminal defendant prior to his sentencing and the appeal process may void the criminal case against him.
"Technically, he was found guilty, but that's extinguished as of today," said Joel Androphy, a prominent defense lawyer in Houston.
A person involved in the government's action against Lay, who requested anonymity because of the delicate nature of the case, said that Lay's death did not necessarily rule out proceeding with forfeiture actions.
"The family at the end of the day cannot sit on the fruits of the fraud," the source said. "Even if the verdict is nullified, he paid for his actions with his life. That is more tragic."
The civil lawsuits against Lay may continue with efforts to seize his remaining assets, but even those moves may be complicated by his death since technically there was no conviction of Lay in the criminal case to rely upon as proof.
Still, lawyers in the civil lawsuits may proceed against Lay's remaining assets through motions inspired by admiralty law. Under that law, the government or a private party can take action against property (or the ship) without going after the owner (the captain) experts said.
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