The federal government sued the estate of Enron Corp.’s deceased founder Kenneth Lay, seeking to strip it of $12.7 million in ill-gotten gains from an accounting fraud that investors claim cost them $30 billion.
Prosecutors linked the suit, filed Monday in federal court in Houston, to the Oct. 17 voiding of Lay’s conviction on 10 counts of conspiracy, securities fraud and bank fraud.
U.S. District Judge Sim Lake tossed out the May verdict on grounds that Lay hadn’t had a chance to appeal it before he died of heart disease in July. The ruling blocked the government’s effort to seize the estate’s assets in the criminal case.
The suit is “a civil forfeiture action to recover property that constitutes proceeds of the fraud proven in the criminal case against Lay,” Assistant U.S. Attorney General Alice Fisher said.
The government wants to seize Lay’s River Oaks condominium in Houston, property associated with a family investment partnership and a Bank of America account with more than $22,000 — “all proceeds obtained directly or indirectly as a result of various federal crimes,” Fisher said.
Prosecutors claim that $2.5 million of the current market value of Lay’s condo and $10 million in the family partnership’s property are traceable to Lay’s illegal activity, which the government will have to prove again at trial.
Michael Ramsey, Lay’s lead trial lawyer, could not be reached for comment. Samuel Buffone, Lay’s appellate lawyer, would not comment on the government’s suit.
To support the government’s request, the suit includes a 26-page affidavit by an FBI agent who traced proceeds from Lay’s stock trading activity, including his use of a private Enron line of credit.
The government estimates in its suit that Lay reaped $99 million in criminal proceeds from his role in the Enron fraud.
Lay was convicted alongside former Enron Corp. CEO Jeffrey Skilling, who was sentenced Monday to 24 years, four months in prison for his conviction on 19 counts of conspiracy, fraud, lying to auditors and insider trading.
