Lay's Death Won't Stop Lawsuits, But Government's Efforts to Recoup His Money Are Stalled

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July 06, 2006 10:42 AM

The death of former Enron CEO Ken Lay will not stop former employees, shareholders and investors from suing his estate, according to legal experts. The government's actions to seize Lay's assets, however, will be stalled, and it is unclear whether or not they will be able to continue.

Lay was found guilty of defrauding Enron employees and investors in May and was to be sentenced in October. The government had begun seizing his assets in an effort to recover the over $43 million in what the government claimed were ill-gotten gains obtained through fraud.  Those efforts are now stopped in their tracks because legal experts say that under the law in this case, Ken Lay was entitled to the presumption of innocence until his appeals had been heard.

"Courts will not allow the taint of a conviction to follow someone to their grave if there is no finality to it," according to Houston attorney Joel Androphy.

Experts further say that if a defendant dies while an appeal is pending, the case is extinguished as if the charges were never brought and the trial never happened. The legal result is that the government can no longer use Lay's guilty verdict to go after his assets, no matter whether they are seeking to punish or to make the victims whole.  It might be able to use other means to get to what remains.

The Department of Justice says they will not comment on Lay's death and the legal implications until the time is appropriate.

And in any event, the civil law suits filed by investors and employees will keep moving forward. There still may be some tough legal battles ahead.