A district court judge in Houston has ruled that the federal government may proceed with its attempt to seize about $13 million in cash and assets from the estate of Enron Corp. founder Kenneth Lay, who died last year (see NGI, July 10, 2006).
Lay died less than two months after he was convicted on 10 counts of fraud, conspiracy and lying to banks, but the convictions were thrown out under a legal doctrine that dictates that when a defendant dies before he has a chance to appeal, the conviction is extinguished (see NGI, Oct. 23, 2006).
However, Lay’s estate remains in play. The Justice Department filed a civil forfeiture action to pursue the assets tied to crimes based on Lay’s convictions. A civil forfeiture is intended to confiscate property used or acquired in violation of the law.
Last week Judge Ewing Werlein of the U.S. District Court for the Southern District of Texas ruled that the federal case may continue (United States v. 2121 Kirby Drive, Unit 33, Houston Texas). Werlein’s ruling will allow the government to seek nearly $13 million from the estate, which includes about $10 million in a bank account and a $3 million Houston condominium that Lay shared with his wife Linda Lay.
The judge wrote that the prosecutors provided “ample allegations” of criminal activity to pursue the case.
Linda Lay will continue to fight legal attempts to seize the assets, said her lawyer Samuel Buffone of Ropes & Gray. Buffone said, “the opinion of the court merely finds that the government has alleged a claim over the property. We are confident that once all the facts are known, the court will determine that the government has no valid claim to the assets.”
Lay’s widow had argued that the case should be dismissed because the government did not sufficiently prove that the cash and property in question was tainted. Her lawyer also argued that prosecutors sought to tie tainted funds to money laundering when Kenneth Lay was never charged with that crime.
At the very least, said court papers, the government should not be able to seize the condominium whether or not part of the mortgage was paid off with tainted money. On the Harris County, TX, tax roles, the condo is valued at about $6 million.
Because Lay had a clean record prior to his convictions, the government will have to prove his guilt in the civil forfeiture trial. No trial or hearings have been scheduled.
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