By Carrie Johnson
Washington Post Staff Writer
Thursday, July 6, 2006; A01
Kenneth L. Lay, who catapulted Enron Corp. into the ranks of the nation's largest companies only to be convicted of fraud after its collapse, died early yesterday 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 in May found him guilty of conspiring to inflate the energy company's stock price and misleading investors and employees who lost billions of dollars in its 2001 bankruptcy. Friends said Lay, who looked grayer and thinner during his 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 that defense lawyers will seek to throw out his criminal conviction -- and 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 lawyer not involved in the Enron case, said Lay's death complicates prosecutors' request Friday for a $43.5 million money judgment against him because it is not clear whether the government can seek restitution 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 rental property at 1:41 a.m. Mountain time 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 on Lay's body yesterday, said the immediate cause of death was coronary artery disease. At a televised news conference, he said there was "no evidence of foul play." He added that Lay might have had a previous heart attack.
Joe DiSalvo, director of investigations for the sheriff's office, said the results of a standard 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," said pastor Stephen P. Wende of Houston's First United Methodist Church after speaking with relatives, including some of Lay's five children and dozen grandchildren. "I don't think his spirit gave way, but his body did."
Last night, the Lay family issued a statement saying they "are grieving the sudden loss of their husband and father."
Lead defense attorney Michael W. Ramsey, who underwent two heart procedures to unclog his arteries during the trial, has yet to speak publicly about Lay's death. But a source who spoke on condition of anonymity because family members had not authorized him to speak about the case said Lay's defense team will undoubtedly cite legal precedents that allow defendants to vacate their convictions if they die during an appeal.
For instance, the U.S. Court of Appeals for the 5th Circuit two years ago tossed Andrew Parsons's conviction on arson, mail fraud and money-laundering charges. A divided appeals court extinguished the conviction on two grounds: The justice system is wary of labeling defendants guilty if they have not had a chance to appeal, and it is loath to punish dead people or their estates.
Meanwhile, Trey Davis, a spokesman for the University of California, the lead plaintiff in a multibillion-dollar lawsuit lodged against former Enron executives, their investment bankers and accountants, said yesterday that he did not expect shareholders to continue to pursue civil claims against Lay. A Securities and Exchange Commission case against Lay continues, but it will be a more difficult battle if regulators can no longer point to Lay's criminal conviction and must introduce reams of evidence anew.
Exactly how much money 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 that his personal debts had mounted to nearly $100 million in 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, Colo., and Galveston, Tex., but were still $250,000 in the hole. The dream he lived, Lay said, had become "the American nightmare."
Six days ago, 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 had borrowed from Enron to pay off the mortgage on the 33rd-floor luxury condominium in Houston where he and his wife lived.
Prosecutors, who declined to comment yesterday, may seek to recover the balance of the money from Jeffrey K. Skilling, Lay's handpicked protege whose abrupt August 2001 resignation from the company sent Lay back into its chief executive post. Skilling's lawyer yesterday 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, faces an Oct. 23 sentencing alone on 19 fraud and conspiracy charges.
The death of Lay, who walked to and from court each day wearing a signature smile and a red tie, stopped short a life worthy of Horatio Alger, whose namesake award he once won. Lay overcame a hardscrabble upbringing in rural Missouri as the son of an itinerant preacher and collected scholarships to the state university. He cultivated relationships with powerful mentors and ultimately earned a doctorate in economics from the University of Houston.
Early in his career, Lay served in the Navy and as an official at both the Interior Department and what is now known as the Federal Energy Regulatory Commission in Washington. He returned to Texas in 1982 to work for a firm called Transco Energy Co. 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 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 December 2001 filing for bankruptcy protection, 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 probe, one of the largest and most sophisticated corporate corruption investigations in history, 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.
The Rev. William A. Lawson, pastor emeritus at Wheeler Avenue Baptist Church and a leader in Houston's civil rights community, said that in boom years, Lay had "set the standard" for Houston's business elite, making more than $25 million in charitable donations to the United Way, the United Negro College Fund, the NAACP and other causes. At Lay's request, the YMCA in suburban Houston last month stripped his name from the building.
Lay's death set off a bitter debate on the Internet yesterday, as bloggers heaped invective on him and called the death convenient for a man on the eve of forfeiting his wealth and facing a lengthy prison sentence. But Lay's friends, many of whom had spoken with him in the past week, rejected the notion that his death resulted from anything other than natural causes. "The Ken Lay that I knew was much too strong in faith, much too strong in family, to have taken his own life," Lawson said.
Ramin Oskoui, a cardiologist at Sibley Memorial Hospital in the District, said a fatal heart attack would not be surprising in a man who had watched his reputation deflate and saw his liberty fleeing before his eyes.
"It is well known that emotional or physical stress can precipitate a heart attack," Oskoui said, adding that for one in three men, the first cardiac symptoms result in death.
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."
Friends said Lay continued to express public optimism after the verdict, even in the face of jurors who called his undisclosed stock sales a "disgrace" and news reports that cast him as a villain who symbolized an era of corporate chicanery. But maintaining that facade may have taken its toll.
"Down deep, underneath the exterior, there had to be unbelievable amounts of tumult and stress," Giles said. "After the conviction, there had to be a sense of doom."
Staff researcher Richard Drezen contributed to this report.