Kenneth Lay, praised in the 1990s for his brilliance in building Enron Corp. only to be despised by many following his conviction six weeks ago on 10 fraud and conspiracy charges, died early Wednesday of what appeared to be a massive heart attack at his vacation home in Aspen, CO. He was 64.

Lay was scheduled to be sentenced on Oct. 23 after being found guilty of bank fraud and conspiracy in May (see Daily GPI, May 26). He apparently died of natural causes. 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 for a medical emergency. Lay was then transported to Aspen Valley Hospital where he was pronounced dead at 3:11 a.m. An autopsy is pending, and the results are expected later this week.

A statement from the Lay family read, “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 and his wife Linda had attended church in Houston on Sunday, then they had gone to Colorado for a week, according to Lay’s pastor, Dr. Steve Wende of First Methodist Houston. In a memo to church staff, Wende said Lay’s heart “simply gave out.”

Lay 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.

Last Friday, there was more bad news. The Enron Task Force asked a Houston court to order Lay and ex-Enron COO Jeffrey Skilling, Lay’s co-defendant, to relinquish $182.2 million in assets — about $43.5 million were 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, according to Peter J. Henning, a law professor at Wayne State University, and Ellen S. Podgor, a law professor at Stetson University College of Law. Writing in their “White Collar Crime Prof Blog,” they said 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.

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 was born on April 15, 1943 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.

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.

Lay returned to the business world in 1974, becoming vice president of corporate development of Florida Gas Co. and president of subsidiary Florida Gas Transmission Co. In 1979, he was named 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 leadership of Houston Natural Gas Co. (HNG), a relatively staid gas utility headquartered in Houston which 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. At that point the new company boasted of running natural gas pipelines “coast to coast and border to border.”

At that point Lay later said the company’s “vision” was to become the premier integrated natural gas company in North America. In 1990 that vision shifted to becoming “the world’s first natural gas major,” and in February of 1996 Lay said the objective was to be “the world’s leading energy company.” At that point Lay was projecting net income for Enron of over $1 billion by 2000. 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 Jeff Skilling. Kinder, who had operated in the background, concerned with the nuts and bolts of running the company and accountability, went on to found Kinder Morgan, a leading energy company which now is valued at many billions of dollars.

Skilling, had been hired away from McKinsey Co. where he was a consultant six years earlier and was running the company’s trading arm at the time. With Lay’s blessing, Skilling, then COO, transformed Enron as the energy business became deregulated, branching out into various 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 resigned in January 2002 and disappeared from the social scene.

But when the company was flying high, so was Lay. He was the face of Enron, traveling the world in pursuit of new connections. Considered by his employees to be a grandfatherly, genial man, Lay also 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 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.

Washington, DC was eerily silent on the passing of Lay. The only apparent comment came during a press briefing at the White House Wednesday. When a reporter referred to Lay as a friend of President Bush, 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?

At his death, Lay was married to Linda Phillips Lay. He had five children 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

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 apparent heart attack.

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