U.S. District Judge Sim Lake in Houston Tuesday vacated the conviction of Enron founder Kenneth Lay, who died in July. The decision threw out the jury’s verdict in May that Lay committed fraud and conspiracy in the months before Enron collapsed in late 2001 (see Daily GPI, July 6; May 26).

Lay had been convicted on 10 counts of fraud, conspiracy and lying to banks in two separate cases. He died unexpectedly of heart disease on July 5 while vacationing in Aspen, CO. He was to be sentenced on Monday (Oct. 23). Next Monday remains the sentencing date for ex-CEO Jeffrey Skilling, Lay’s co-defendant.

Lake, who presided over Lay’s and Skilling’s four-month trial in Houston, agreed with Lay’s lawyers that his convictions should be erased because of his death. Lay’s lawyers cited a 2004 ruling by the Fifth U.S. Circuit Court of Appeals, which found a defendant’s death pending appeal extinguished the conviction because the accused had not had a full opportunity to challenge the conviction. The appeals court also ruled in 2004 that the government should not be allowed to punish a dead defendant or the estate of the defendant.

Lake’s ruling will prevent the government from seeking about $43 million from Lay’s estate, which it sought because prosecutors alleged Lay had enriched himself through illegal means by participating in Enron’s fraud. The government still could pursue Lay’s estate in civil court, but it would have to compete with other litigants that are also seeking a portion of the estate.

Prosecutors also lost an attempt to have the ruling delayed. A delay was requested to allow Congress time to consider Justice Department legislation that would change current federal law regarding the abatement of criminal convictions.

In their motion, prosecutors said some of the provisions of the proposed legislation “would be directly relevant to the situation presented by defendant Lay’s death.” As an example, they said the legislation would provide “that the death of a defendant charged with a criminal offense shall not be the basis for abating or otherwise invalidating either a verdict returned or the underlying indictment.”

©Copyright 2006Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.