X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
The death Wednesday of Kenneth Lay, the founder and former chairman and CEO of Enron Corp., means any restitution in the criminal case will probably be vacated and the future of the Securities and Exchange Commission and civil cases will be more difficult to pursue, according to attorneys following the case. “It’s a tragic end to a tragic story,” said Kirby Behre, a former federal prosecutor and now partner at Paul, Hastings, Janofsky & Walker in Washington. “You don’t have to be doctor to know that he was under a lot of stress. The sentencing won’t go forward, mooted by his death, but the more interesting issue will be seizure and now forfeiture of the assets — do they transfer to his wife? Even if they pass to a spouse or family, they’re still attachable and still forfeitable to the government.” Jacob Frenkel, a defense attorney at Shulman Rogers Gandal Pordy & Ecker in Rockville, Md., who worked at the SEC and is also a former federal prosecutor, said while Lay’s death is sad and shows the “human soul” of the case, there will be a lot of pressure on the government to pursue Lay’s assets. “But whether it can be done through a criminal proceeding, that’s the unanswered question. It’s not a case against an entity; it’s a case against him, and he’s no longer here. Then there’s the SEC case and civil litigation. Those seeking to pursue his assets may or may not be able to find recovery.” Lay’s pastor, Steve Wende of First United Methodist Church of Houston, said in a statement that the 64-year-old died unexpectedly of a “massive coronary” while in Colorado for the week. “Apparently, his heart simply gave out,” Wende said. According to a statement from the Pitkin County Sheriff’s Office, deputies and an ambulance were dispatched to Lay’s house in Old Snowmass, Colo., at 1:41 a.m. Mountain time for a medical emergency. Lay was taken to Aspen Valley Hospital, where he was pronounced dead at 3:11 a.m. An autopsy report is expected later this week. Family spokeswoman Kelly L. Kimberly confirmed in a statement Lay’s death was “of natural causes,” saying, “The Lays have a very large family with whom they need to communicate, and out of respect for the family we will release further details at a later time.” Lay was scheduled to be sentenced Oct. 23 after being convicted in late May on six counts of conspiracy, wire fraud and securities fraud related to Enron’s 2001 collapse into bankruptcy. He faced a maximum of 45 years in prison and was free on a $5 million bond backed by his children’s homesteads. Prosecutors in Lay’s trial declined to comment on his death and their efforts to seek a $43.5 million judgment from him, representing what they claim he pocketed as part of the conspiracy. The government recently asked Judge Simeon Lake III in Houston to direct that Lay and former Enron CEO Jeffrey Skilling forfeit $183 million as a consequence of their conviction. Barry Boss of Cozen O’Connor in Washington said the development might delay the sentencing for Skilling, who was convicted of 18 counts of conspiracy, securities fraud and making false statements to auditors along with a single count of insider trading and faces a maximum of 185 years. He’s free on a $5 million cash bond. Lay established Enron in 1985 when he helped orchestrate the $2.3 billion acquisition of Houston Natural Gas Corp., where he served as CEO, by Omaha-based natural gas pipeline operator InterNorth Inc. — itself a collection of electric and gas utilities. The company eventually moved its headquarters to Houston, and Lay became chairman in 1986. Through the 1980s and early 1990s, Lay expanded Enron by constructing power plants and pipelines. In the mid-1990s, the company began to trade derivative instruments based on energy and broadband assets. At its peak, the company employed more than 20,000 and claimed more than $100 billion in annual revenues with the goal of becoming the biggest company in the world. In February 2001, Lay turned over the reins of the company to Chief Operating Officer Jeffrey Skilling. But Skilling’s tenure lasted only a few months, and Lay returned to Enron in August. By then, company executives had begun questioning Enron’s accounting practices. In October 2001, the company announced that it would reduce shareholder equity by more than $1 billion due to errors in accounting for dealings by CFO Andrew Fastow. From that point, the company’s decline accelerated quickly. In November, Enron’s European businesses filed for protection from creditors. And on Dec. 2, 2001, after the collapse of a $9 billion deal with white knight Dynegy Inc., Enron itself filed what was then the largest bankruptcy in U.S. history. Lay quit as CEO in January 2002 and was indicted by federal authorities in July 2004. Throughout four years of government investigations into the Enron scandal and during his 16-week trial, Lay insisted that he had done nothing wrong. Testifying in his own defense, Lay maintained that all of his public comments about Enron’s financial health were based on information gathered by others and vetted by internal and external accountants and attorneys that he believed they were true at the time. He said the company was in good health when he took it over and blamed Fastow, an organized group of short sellers and The Wall Street Journal for causing a run on the bank. “I don’t think there was any conspiracy of any kind. The last thing I would do would be to pick up a conspiracy,” he said, raising his voice. Lay also defended his extravagant lifestyle, including a $200,000 yacht for wife Linda’s birthday party, despite racking up $100 million in personal debt, saying, “It was difficult to turn off that lifestyle like a spigot.” But after five days of deliberation, the jury in Houston convicted Lay and co-defendant Skilling. Jurors later said documentary evidence and the sheer number of former employees who testified led them to the verdict. Lay said on his Web site he was “shocked” at the verdict as he didn’t expect the outcome. “I firmly believe I’m innocent of the charges against me,” he said outside the courthouse. “We believe God is in fact in control and indeed he does work all things for good for those who love the Lord.” Lay was born on April 15, 1942, to a poor preacher, feed store worker and farm equipment salesman and his wife in Tyrone, Mo. He received bachelor’s and master degrees in economics from the University of Missouri and a doctorate in economics from the University of Houston. He began his career in the industry working for Humble Oil & Refining Co., a forerunner of Exxon Mobil Corp., as an economist in corporate planning from 1965 to 1968. He then served in the Navy, including at the Pentagon, from 1968 to 1971. After he was discharged, Lay taught economics at George Washington University at night while working at what is now the Federal Energy Regulatory Commission and later as an undersecretary for energy in the Department of the Interior. In 1974, Lay left government work and took a job as vice president of corporate development at Florida Gas Co. The utility later merged with Continental Resources Co., where he rose to become president. He later became president and chief operating officer of Transco Energy Co. from 1981 to 1984 and then became chairman and CEO of Houston Natural Gas from 1984 to 1985, before it merged with InterNorth to become Enron. Lay leaves behind his wife Linda, five children and 12 grandchildren.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.