U.S. ends effort to restore Lay conviction

Federal prosecutors will not challenge a judge’s ruling that vacates the conviction of Enron Corp.’s late founder, Kenneth L. Lay, for his role in one of the biggest corporate scandals in U.S. history.

Prosecutors on Monday withdrew their notice of appeal in the ruling last month by U.S. District Judge Sim Lake, who said Lay’s death vacated his conviction on fraud and conspiracy charges because Lay couldn’t challenge the conviction.

Prosecutors had filed a notice last week asking the U.S. 5th Circuit Court of Appeals to review Lake’s ruling. The notice came the same day Sens. Dianne Feinstein (D-Calif.) and Jeff Sessions (R-Ala.) introduced a bill that would keep federal convictions in force when a defendant dies, allowing victims to continue seeking restitution.

Lay, 64, died of heart disease July 5 while vacationing in Aspen, Colo. He was convicted May 25 of 10 counts of fraud, conspiracy and lying to banks.

Enron’s collapse in 2001 wiped out thousands of jobs, more than $60 billion in market value and more than $2 billion in pension plans.

Prosecutors said last week’s notice was protective, allowing them to review the bill and see whether it could help the appeal. The Justice Department helped draft the proposed legislation.

“Having concluded that review, the government now moves to withdraw its notice of appeal,” the motion said.

Lake’s ruling, which he based on previous court rulings from the 5th Circuit, had already been upheld by the appeals court this month.

An Enron shareholder had challenged the ruling, having asked Lake for an order of restitution based on Lay’s conviction under the Crime Victims’ Rights Act.

Lake’s ruling stopped the government’s efforts through the criminal courts to seek millions in ill-gotten gains that prosecutors allege Lay pocketed by participating in Enron’s fraud.

The federal government in October filed a civil forfeiture action against Lay’s estate in its efforts to recover more than $12 million it claims were “proceeds of the fraud proven in the criminal case against Lay.”