US Can Seek Ken Lay Estate Assets, Judge Rules.

Remember Kenneth Lay???

By Kristen Hays
The Houston Chronicle
Thursday 15 November 2007

The government may go ahead with its bid to seize assets from Ken Lay's estate, a judge ruled Wednesday, denying a request from the Enron chairman's widow to stop the effort.

U.S. District Judge Ewing Werlein's ruling allows the government to seek nearly $13 million from Lay's estate, including the upscale condominium he and wife Linda Lay shared.

The judge wrote that prosecutors had provided "ample allegations" of criminal activity tied to the cash and property in question to pursue its case.

But that doesn't mean Linda Lay faces imminent eviction. The case can proceed with both sides gathering evidence and witnesses in preparation for trial. No trial or hearings have been scheduled.

Ken Lay's May 2006 convictions on 10 counts of fraud, conspiracy and lying to banks were erased because he died of heart disease before he could be sentenced or launch an appeal.

The government had intended to pursue seizure of assets tied to crimes based on those convictions. After the convictions were erased, prosecutors filed the civil forfeiture action.

Because Lay's record is clean, the government will have to prove his guilt again at a civil forfeiture trial as though the criminal trial hadn't happened.

However, the government's burden of proof in a civil case is lower than in a criminal case. A civil case requires a "preponderance of evidence" while a criminal conviction requires proof "beyond a reasonable doubt."

"They're playing the game as far as they can take it," said Adam Gershowitz, an assistant professor at the South Texas College of Law in Houston. "It would require a huge amount of resources to retry the case."

Samuel Buffone, a Washington attorney who represents Linda Lay, said she intends to fight.

"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," Buffone said.

Justice Department spokeswoman Jaclyn Lesch declined comment.

The government contends Ken Lay gained $99 million from criminal activity, mostly by repaying Enron loans with company stock throughout 2001 when the company was in financial turmoil. Prosecutors say they can trace and recover nearly $13 million of that.

The amount includes $2.5 million Lay used to pay off the condominium's mortgage days after Enron went bankrupt in December 2001; $10 million that was controlled by a partnership named after the couple; and about $22,000 in a bank account.

Linda Lay had argued that the case should be dismissed because the government didn't sufficiently bolster allegations that the cash and property in question was tainted. She also argued that prosecutors sought to tie tainted funds to money laundering when her husband was never charged with that crime.

At the very least, she reasoned, the government shouldn't be able to seize the dwelling whether or not part of the mortgage was paid off with tainted money. The condominium is valued at about $6 million on Harris County tax rolls.

Prosecutors countered that the condominium is fair game, like the cash, because tainted funds were allegedly used to pay off the mortgage, and it doesn't matter whether the couple bought it years earlier with clean funds.

http://www.truthout.org/docs_2006/111607L.shtml