Lay's death may doom move to compensate Enron victims

WASHINGTON — Kenneth Lay, who catapulted Enron into the ranks of the nation's largest companies only to be convicted of fraud after its collapse, died early Wednesday after suffering what a family spokeswoman said was a heart attack at a rental property in Old Snowmass, Colo.

Lay, 64, faced the prospect of spending the rest of his life in prison after a Houston jury found him guilty in May of conspiring to inflate the energy company's stock price and misleading investors and employees who lost billions amid its 2001 bankruptcy.

Friends said Lay, who looked grayer and thinner during the four-month trial but otherwise bore no outward signs of poor health, expected to be handcuffed and taken into custody immediately after his sentencing this fall.

Lay's death all but ensures defense lawyers will seek to throw out his criminal conviction and it casts serious doubt on the ability of the government and investors to recover money from the Lay estate, legal experts said.

Barry Boss, a Washington, D.C., lawyer not involved in the Enron case, said Lay's death complicated prosecutors' request Friday for a $43.5 million judgment against him because it is not clear if restitution can be sought against someone who has died.

"Under the prevailing case law ... I don't see any way they can proceed against Lay for restitution in the criminal case, or anything else for that matter," said Boss, of Cozen O'Connor.

Deputies from the Pitkin County, Colo., sheriff's office were called to the Lay residence at 1:41 a.m. to respond to a medical emergency. An ambulance took Lay to Aspen Valley Hospital, where he was pronounced dead at 3:11 a.m., a hospital administrator said.

Robert Kurtzman, a forensic pathologist who performed an autopsy, declared the immediate cause of death to be coronary artery disease. At a televised news conference, the doctor said there was "no evidence of foul play."

Joe DiSalvo, director of investigations for the sheriff's office, said the results of a toxicology screen, which would pick up any unusual substance in Lay's system, would not be available for a few weeks.

"He's been under extraordinary stress for five years," the Rev. Stephen Wende of Houston's First United Methodist Church said after speaking with relatives, including several of Lay's five children and dozen grandchildren. "I don't think his spirit gave way, but his body did."

Lead defense attorney Michael Ramsey, who himself underwent two heart procedures to unclog arteries in the course of the trial, has yet to speak publicly.

But a source who spoke on condition of anonymity because family members had not authorized him to discuss the case, said Lay's team undoubtedly will cite legal precedents that allow defendants to vacate their convictions if they die in the midst of an appeal.

Meanwhile, Trey Davis, a spokesman for the University of California, the lead plaintiff in a multibillion-dollar lawsuit against former Enron executives, their investment bankers and accountants, said Wednesday he did not expect shareholders would continue to pursue civil claims against Lay given his death.

A Securities and Exchange Commission case against Lay continues, but it will be a more uphill battle if regulators can no longer point to Lay's criminal conviction and must reintroduce reams of evidence.

How much is in the Lay family coffers remains as much in dispute as the man's legacy.

Earlier this year, Lay testified during six sometimes combative days on the witness stand that his personal debts had mounted to nearly $100 million during his final year at Enron.

He told the jury that he and Linda, his second wife of two dozen years, had sold lavish properties in Aspen and Galveston, Texas, but were still $250,000 in the hole. The dream he lived, Lay said, had become "the American nightmare."

Five days ago, however, federal prosecutors sought to seize $6.3 million they said Lay was about to collect from an investment in a Goldman Sachs limited partnership fund. The government also wanted at least $1.5 million more that Lay borrowed from Enron to pay off the mortgage on the 33rd floor Houston luxury condominium in which he and his wife lived.

Prosecutors, who declined comment Wednesday, may seek to recover the balance of the money from Jeffrey Skilling, Lay's handpicked protégé whose abrupt August 2001 resignation sent Lay back into the chief executive post.

Skilling's lawyer Wednesday called Lay's death a "tremendous loss to Jeff and all the people who worked with Ken over the years." Skilling, who has vowed to appeal, now will be sentenced by himself on 19 fraud and conspiracy charges Oct. 23.

The man who overcame a hardscrabble upbringing in rural Missouri as the son of an itinerant preacher won scholarships to the state university, cultivated powerful mentors and ultimately earned a doctorate in economics from the University of Houston.

Early in his career, Lay served in the U.S. Navy and as an official at the Interior Department and what is now known as the Federal Energy Regulatory Commission in Washington, D.C.

He returned to Texas in 1982 to work for Transco Energy and then Houston Natural Gas, which, after a merger, he renamed Enron.

As his influence grew, Lay evangelized for energy deregulation and donated millions of dollars to Republicans and Democrats alike, becoming a political power broker and a friend of the Bush family. But Bush administration officials did nothing even as he pleaded with them to intervene in the waning days of Enron's life in late 2001.

Federal investigators descended on the company within days of its bankruptcy, uncovering what they called a conspiracy to prop up Enron's stock price and conceal billions of dollars in debt using sophisticated business partnerships.

The investigation resulted in guilty pleas or convictions of more than two dozen people, including the former top accountant, finance chief and the only two men to have served as chief executive since Lay founded the company in 1985.

Terry Giles, a Houston lawyer and friend who spoke with Lay by phone last week, said, "I'm always going to believe he died of a broken heart. I think the conviction just really broke his heart."

Researcher Richard Drezen contributed to this report.