Memorial services for the enigma that was Kenneth Lay, 64, founder of the bankrupt Enron Corp., were to be held Sunday in Aspen, CO, where he died early last Wednesday, and in Houston this coming Wednesday. Lay, regarded by some as a good friend, devoted to his family and a leading supporter of the Houston community, was seen by others as among the worst of the robber barons, enriching himself while leaving some Enron pension and shareholders penniless. Prevailing legal opinion is that his death before he had a chance to appeal his conviction will wipe his slate clean in the eyes of the law. History will determine the rest.

“A celebration of Ken’s life for family and friends” will be held at Houston’s First United Methodist Church at 11 a.m. CST Wednesday. A statement from the family read, “The Lay Family asks that their privacy be respected as they mourn the loss of their husband, father, grandfather and brother.” A family friend told the Houston Chronicle that Lay wished to be cremated and wanted his ashes buried in Colorado.

According to a statement from the Pitkin County, CO, Sheriff’s Office, deputies and an ambulance were sent to Lay’s home at 1:41 a.m. Mountain Time last Wednesday for a medical emergency. Lay was then transported to Aspen Valley Hospital where he was pronounced dead at 3:11 a.m. An autopsy indicated Lay suffered a massive heart attack, and he also suffered from clogged arteries, according to officials. Toxicology tests also are being performed, and those results are expected in about three weeks.

Lay and his wife Linda had attended church in Houston on July 2, then they had gone to Colorado for a week, according to Lay’s pastor, Dr. Steve Wende of First United Methodist Church in Houston. In a memo to church staff last week, Wende said Lay’s heart “simply gave out.”

At the time of his death Lay had been awaiting his sentencing Oct. 23 after being found guilty of on 10 counts of bank fraud and conspiracy in May (see NGI, May 29). He had faced a maximum penalty of 45 years in prison for charges related to Enron’s collapse and from zero to six months on each of four separate banking charges. He was expected to face at least 25 years in prison.

Besides the sentencing, Lay also faced more bad news. On June 30 the Enron Task Force had asked a Houston court to order Lay and ex-Enron COO Jeffrey Skilling, Lay’s co-defendant, to relinquish $182.2 million in assets. Most of the assets were Skilling’s, but about $43.5 million were estimated to be Lay’s assets. The government claimed, among other things, that Lay’s and Skilling’s homes and other assets were acquired by fraud.

But with his death, Lay’s criminal convictions — and anything the government may acquire from his estate — are in doubt. Lay’s defense team and members of the Enron Task Force had little comment last week. But according to several legal experts, the criminal convictions most likely will be “extinguished.” The civil lawsuits against his estate also are in doubt.

Lay’s legal team had not yet filed an appeal to his case. However, Stanford University law professor Robert Weisberg said Lay’s lawyers likely would have challenged his conviction. And because an appeal would have taken several years, “the general rule is that if the conviction hasn’t gotten past the first appeal, it is supposed to be abated, dismissed, conviction erased,” he said.

“Technically, he was found guilty, but that’s extinguished” at his death, added Houston lawyer Joel M. Androphy.

Peter J. Henning, a law professor at Wayne State University, and Ellen S. Podgor, a law professor at Stetson University College of Law, wrote last week in their “White Collar Crime Prof Blog” that “Under the Fifth Circuit’s law of abatement of a criminal conviction when a defendant dies before appellate review of the conviction, ‘It is well established in this circuit that the death of a criminal defendant pending an appeal of his or her case abates, ab initio, the entire criminal proceeding.'” They cited United States v. Asset, 990 F.2d 208 (5th Cir. 1993).

Henning cited a recent Fifth Circuit decision, United States v. Estate of Parsons, 367 F.3d 409 (5th Cir. 2004), in which “the court explained that ‘the appeal does not just disappear, and the case is not merely dismissed. Instead, everything associated with the case is extinguished, leaving the defendant as if he had never been indicted or convicted.'”

The court in the Parsons case vacated a forfeiture order, which Henning said means that the government’s claim against Lay for $43.5 million will be dismissed. According to the court ruling, “The finality principle reasons that the state should not label one as guilty until he has exhausted his opportunity to appeal. The punishment principle asserts that the state should not punish a dead person or his estate.”

Civil claims against Lay’s estate may continue, but because the criminal conviction would be “wiped out,” the plaintiffs may not rely on Lay’s conviction as proof in their case, Henning said. Skilling’s conviction would not be affected by Lay’s death, according to the experts.

Last week, the lead plaintiff in an Enron shareholder class-action lawsuit indicated it would not pursue Lay’s estate. According to The Times of London, the Regents of the University of California, which are the lead plaintiffs in the class action, will meet later this month to vote on removing Lay from their lawsuit.

“I do not expect that we will pursue the litigation against Mr. Lay or rather what’s left of his estate,” said Trey Davis, a spokesman for the University of California. “The final decision is up to the Regents, but I do not imagine it would be worth our while to go after what he has left behind.”

Robin Harrison, who represents some of the shareholders, said he had planned to begin discussing a possible settlement with Lay and Skilling later this summer. Harrison said Lay and Skilling were the only parties who had not either been dismissed by the court or reached a settlement. “It’s too early to tell what might happen to our efforts to resolve the case,” Harrison said.

Lay reported personal assets worth about $50 million when the Enron trial began last January. However, Lay’s wife, Linda, and his children are said to have large annuities, which will pay them an income for many years. Annuity and insurance policy income is protected from creditors under Texas law. The Lays and their children also have several homes, including Lay’s Houston home in the exclusive River Oaks subdivision. The home, in a luxury high-rise condominium project, is estimated to be worth $10 million, with the furnishings valued at $2 million. The family also has 13 vehicles, including three Mercedes and five Jeeps.

Lay’s Legacy

Lay’s legacy was a paradox. For years, Houston residents and many in the energy industry had viewed Lay as a genial and grandfatherly man, apt to remember the names of his employees and small details about their lives. He and his wife were leading philanthropists in the city, donating millions to various causes. Even after his indictment in July 2004, many of the former employees at Enron still viewed Lay as an innocent CEO — mislead by his former executives. However, once Lay took the stand in his defense earlier this year, a new portrait emerged. He was defiant and arrogant on the stand, even with his own counsel, and many considered his testimony damaging to his case.

Following 56 days of testimony, Lay was found guilty on all 10 criminal charges against him. His right-hand man and former COO Jeffrey Skilling also was convicted. The jury convicted Lay of one count of conspiracy, three counts of securities fraud and two counts of wire fraud. In a separate bench trial, U.S. District Judge Sim Lake found Lay guilty on three counts of making false statements to banks and one count of bank fraud. Each count carried a maximum five to 10-year sentence, and legal experts said that Lay may have faced 25 years or more in prison.

Lay’s Rise and Fall

Lay was born on April 15, 1942 in Tyrone, MO. The son of a Baptist minister, Lay delivered newspapers and mowed lawns to help the family make ends meet. He was considered an excellent student, eventually graduating Phi Beta Kappa from the University of Missouri in Columbia with undergraduate and masters degrees in economics. He later earned a doctorate in economics from the University of Houston.

After growing up in modest circumstances, many of his colleagues and old friends remember Lay as someone who wanted to make money. In 1965, Lay ventured into the business world, becoming an economist in corporate planning for Exxon Co., U.S.A. predecessor Humble Oil & Refining. In 1968, he joined the U.S. Navy as an Ensign, Lt. Junior Grade, rising to become special assistant to the Navy Comptroller and a financial analyst for the Office of Assistant Secretary of the Navy at the Pentagon. Lay joined the Federal Power Commission, now the Federal Energy Regulatory Commission, in 1971 as technical assistant to the vice chairman. And in 1972, he was named deputy under secretary of energy at the Department of Interior.

The corporate world beckoned, and in 1974, Lay was named vice president of corporate development of Florida Gas Co. and president of subsidiary Florida Gas Transmission Co. In 1979, he became president of Continental Resources Co., formerly Florida Gas.

Ready for new challenges, Lay joined Transco Energy in 1981 as president and COO. In 1984, with Transco’s blessing, Lay took over the helm of Houston Natural Gas Co. (HNG), an intrastate pipeline company headquartered in Houston that had been the object of a hostile takeover attempt. Within months HNG, under Lay’s direction, bought Transwestern Pipeline and then Florida Gas Transmission. In 1985, a year after Lay moved in as CEO of HNG, Omaha-based InterNorth, parent of Northern Natural Gas, acquired HNG. But in a wag-the-dog turn of events, HNG’s executives were given the top spots at InterNorth, and the Nebraska company was moved to Houston. The new company was renamed Enron Corp., and Lay was named chairman and CEO. The new company then boasted of running natural gas pipelines “coast to coast and border to border.”

Lay later said that Enron’s “vision” at that early date was to become the premier integrated natural gas company in North America. By 1990 that vision shifted to becoming “the world’s first natural gas major,” and in February 1996 Lay said Enron’s objective had expanded once again, aiming to become “the world’s leading energy company.” At that point Lay was projecting net income for Enron of more than $1 billion by 2000.

However, Lay’s vision for the company, and perhaps his legacy as well, took a fateful turn in late 1996. Instead of naming Enron’s No. 2 executive, Richard Kinder, as CEO, Lay forced him out of the company and replaced him with Skilling. Skilling, a consultant who had been hired away from McKinsey Co. in the late 1980s, had been running Enron’s trading arm, and he was considered a go-getter and risk taker. Kinder, who had operated in the background, concerned with the nuts and bolts of running the company and accountability, resigned. Kinder went on to found Kinder Morgan, a leading energy company now valued at many billions of dollars.

With Lay’s blessing, Skilling, then COO, transformed Enron as the energy business became deregulated, branching out into an ever-increasing variety of worldwide enterprises. Enron quickly became “the” place to work in Houston. It was the stock to own, the company in the news. Still flying high and nearing retirement, Lay turned the CEO role over to Skilling in early 2001. But when Skilling unexpectedly resigned six months later, Lay again took the reins, and he reigned over Enron until it collapsed into bankruptcy in early December 2001. Lay, who said he knew nothing about the financial shenanigans at Enron — even after his convictions — resigned in January 2002 and disappeared from the social scene.

Lay’s Generosity

But when Enron was flying high, so was Lay. He was the face of Enron, politicking in Washington and traveling the world in pursuit of new connections, while Skilling minded the store. Until his resignation from Enron, Lay’s employees were said to love him. And he and his family were also loved by Houstonians for incredible philanthropy efforts, spearheading fund drives for various causes, generously donating his time and money. Lay also was instrumental in helping to build a new baseball stadium for the Houston Astros. Originally named “Enron Field,” the stadium was renamed when Enron collapsed.

Outside of Houston, Lay was a top Republican donor and supporter of George W. Bush’s campaign for Texas governor and then president. Bush gave Lay the nickname “Kenny Boy,” and the two were said to have maintained a friendship for several years.

A Bush “Pioneer,” Lay was one of the largest individual contributors to the Bush-Cheney 2000 presidential campaign. Records show he donated more than $650,000 to Republicans (and another $62,000 to Democrats). Lay allowed the Bush team to use his personal Enron jet during the campaign, and he also served on the presidential transition advisory committee. According to some reports, Lay was on the short list to be named Secretary of the Treasury following Bush’s victory; ultimately, that job went to Paul O’Neill.

However, Washington, DC was eerily silent on the passing of Lay. When a reporter referred to Lay as a friend of President Bush during a press briefing at the White House, spokesman Tony Snow quickly corrected him by noting that Lay was just an “acquaintance” of the president’s.

As for his own reaction, Snow said, “When somebody dies, you leave behind those who grieve and I think they deserve our compassion. But I don’t know, what do you think would be the appropriate thing to say” about Lay?

On Thursday, Bush, speaking on CNN’s “Larry King Live,” said he hoped Lay’s “heart was right with the Lord.” He called Lay “a good guy,” and he said he “was really surprised” by Lay’s death. “You know, my hope is that his heart was right with the Lord, and I feel real sorry for his wife. She’s had a rough go and she’s now here on earth to bear the burdens of losing her husband, a man she loved.” Bush said he planned to write Linda Lay a letter expressing his condolences.

“One of the things I respected him for was he was such a contributor to Houston’s civil society,” Bush said. “He was a generous person. I’m disappointed that he betrayed the trust of shareholders.”

Few people publicly commented on Lay’s death last week, and many of his critics appeared to observe the maxim against speaking ill of the dead. However, while individuals were reluctant to comment, Lay’s life and death drew different reactions from newspaper columnists, editorials and Internet blogs.

The Wall Street Journal focused on Lay’s contribution to the crackdown on corporate America in recent years, culminating in the Sarbanes-Oxley Act requiring stricter accountability from executives of investor-owned firms.

One columnist gave Lay credit for leading the political fight to deregulate energy markets. Another in the Washington Post lamented under the headline “Ken Lay’s Last Evasion; To Some, CEO Is Cheating Them One More Time.” Another at the same newspaper took a more charitable view under a headline reading: “Ken Lay’s Optimism was Outpaced by Reality.”

Skilling, who had no comment, said through his lawyer Daniel Petrocelli that he was “devastated by Ken’s passing…Jeff worked closely with Ken for many years. and Ken’s passing is a tremendous loss, not only to Jeff but to all of the people who worked with Ken and got to know him. He was a good man.” Petrocelli would not discuss the legal ramifications of Lay’s death.

Members of the Enron Task Force said they were shocked by the news, but they also had little comment. They would not comment about attempts to seize Lay’s property.

“This is a time for grieving for the family,” Bryan Sierra, a Department of Justice spokesman, said in a statement.

At his death, Lay was married to Linda Phillips Lay. He had five children and stepchildren and 12 grandchildren.

Following his convictions, Lay posted a message on his website, On it, he wrote, “Certainly, we are surprised at the verdict against me. Perhaps it is more appropriate to say we are shocked, as this is not the outcome we expected.

“I firmly believe that I am innocent of the charges against me, as I have said from day one. I still firmly believe that to this day. I will continue to work diligently with my legal team to prove this.

“In spite of what has happened, I am still a very blessed man. I have a very warm, loving and Christian wife and family that supports me, as well as many, many loving and supportive friends. I’d like to thank all of the people who have shown their concern, support and kept our family in their prayers.

“Most of all, my family and I believe that God is in control and, indeed, He does work all things for good for those who love the Lord. And we love our Lord.”

1965: Exxon Corp., U.S.A. economist

1969: Assistant economics professor at George Washington University

1971: Assistant to Federal Power Commission commissioner

1972: Undersecretary for energy at Department of the Interior

1974: Florida Gas Co. vice president

1976: Florida Gas president

1979: The Continental Group executive vice president

1981: COO, president, Transco

1984: CEO, chairman Houston Natural Gas

1985: CEO, Chairman of Enron, a company formed by the merger of Houston Natural Gas and InterNorth

January 2001: Relinquishes CEO role to Jeffrey Skilling

August 2001: Returns as CEO after Skilling’s resignation

December 2001 Enron declares Bankruptcy

January 2002: Lay resigns from Enron

July 2004: Indicted by grand jury

May 2006: Convicted on 10 criminal counts of fraud and conspiracy

July 5, 2006: Lay dies of a heart attack.

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