[lit-ideas] [lit-id] fyi-- Lay case, nytimes
- From: Carol Kirschenbaum <carolkir@xxxxxxxx>
- To: lit-ideas@xxxxxxxxxxxxx
- Date: Thu, 06 Jul 2006 18:51:06 -0700
Lay's Death Complicates Efforts to Seize Assets
By SIMON ROMERO
Published: July 6, 2006
HOUSTON, July 5 - In yet another bizarre twist to the Enron saga, the sudden
death of Kenneth L. Lay on Wednesday may have spared his survivors financial
ruin. Mr. Lay's death 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 based here who specializes in securities fraud.
But while the death of Mr. Lay 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 Mr.
Lay's remaining assets.
Mr. Lay and Jeffrey K. 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.
Just last Friday, the Justice Department had moved to seize a total of $183
million in assets belonging to the two men.
The bulk of those assets belong to Mr. Skilling. Five years ago, Mr. Lay's
personal fortune was valued as high as $400 million. But a large part of
that was tied to the value of Enron's stock, which is now virtually
worthless.
Mr. Lay testified at his trial that his net worth had declined to
liabilities of $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 here Friday,
Mr. Lay had holdings in an investment account at Goldman Sachs valued at
$6.3 million.
In addition, prosecutors said that Mr. Lay's full-floor luxury apartment in
this city's River Oaks district had at least $1.5 million in value that
could be forfeited to the United States.
The government's forfeiture effort ahead of the planned sentencing of Mr.
Lay and Mr. Skilling this fall, however, has been thrown into doubt, at
least in relation to Mr. Lay's assets since the death of a criminal
defendant before 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 M. Androphy, a prominent defense lawyer in Houston.
A person involved in the government's action against Mr. Lay, who did not
want to be identified because of the sensitivity of the case, said that Mr.
Lay's death did not necessarily rule out proceeding with forfeiture actions,
explaining, "The family at the end of the day cannot sit on the fruits of
the fraud." But, this person said: "Even if the verdict is nullified, he
paid for his actions with his life. That is more tragic."
The civil lawsuits against Mr. 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 Mr. Lay in the criminal case to rely
upon as proof.
Still, lawyers in the civil lawsuits may proceed against Mr. 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), legal experts said.
Lawyers involved in the civil lawsuits, however, have already signaled that
they were more interested in seeking compensation from institutions with
deeper pockets that may have profited from improper dealings with Enron,
like Wall Street investment banks, rather than focusing on Mr. Lay. Shortly
after Enron filed for bankruptcy protection in late 2001, Mr. Lay still had
extensive real estate holdings, including three beachfront homes in
Galveston, Tex., and two luxury homes in Aspen, Colo., one with five
bedrooms and the other with four bedrooms. All those properties have since
been sold.
Any life insurance policies bought by Mr. Lay may also be shielded from
federal seizure efforts since state laws normally cover such payments. While
jurors found Mr. Lay guilty, his death may also complicate any efforts to go
after life insurance proceeds, even if the original policies were acquired
with ill-gotten gains.
Attention now shifts to Mr. Skilling, Mr. Lay's protégé. The sentencing of
Mr. Skilling is now set for October instead of September at the request of
his Los Angeles-based lawyer, Daniel Petrocelli, who had a previously
scheduled trial involving the rock band The Eagles.
Mr. Skilling has more assets open to federal seizure than Mr. Lay had,
including more than $50 million in cash and securities in a Charles Schwab
account, $4.6 million in value at his 9,000-square-foot home in Houston and
a condominium worth nearly $580,000 in Dallas, according to the government's
forfeiture documents.
Mr. Petrocelli said the government's efforts to go after the assets of his
client and those of Mr. Lay illustrated an overreaching of federal
authority. "The issue is the recklessness and overzealousness with which the
government has pursued the Enron case right from the inception," Mr.
Petrocelli said.
At issue, too, are Mr. Skilling's obligations to his lawyers. Mr.
Petrocelli's law firm, O'Melveny & Myers, is awaiting more than $20 million
of payments from its client for work carried out since last September. "Jeff
wants to pay his lawyers, to whom he owes tens of millions of dollars," Mr.
Petrocelli said, "and would like to satisfy family obligations including
child support."
Lawyers for Mr. Lay may also be left with unpaid invoices. Michael Ramsey, a
lawyer for Mr. Lay who experienced his own heart problems during the trial,
declined to comment on Wednesday, saying simply, "I am not well."
For Mr. Skilling, an even more pressing concern may be his sentencing before
Judge Simeon T. Lake III, with sentencing experts saying Mr. Skilling could
get more than 20 years of jail time in a medium- or maximum-security prison,
in line with federal sentencing guidelines. If anything, Mr. Lay's death may
warrant even harsher scrutiny of Mr. Skilling's crimes by Judge Lake.
"Jeff Skilling is quite literally the last man standing in the Enron
scandal," said Robert A. Mintz, a former federal prosecutor now in private
practice in New Jersey.
Alexei Barrionuevo contributed reporting for this article.
begin 666 01_.dat
J1TE&.#EA`0`!`(#_`,# P ```"'Y! $`````+ `````!``$```$!,@`[
`
end
------------------------------------------------------------------
To change your Lit-Ideas settings (subscribe/unsub, vacation on/off,
digest on/off), visit www.andreas.com/faq-lit-ideas.html
Other related posts:
- » [lit-ideas] [lit-id] fyi-- Lay case, nytimes
