Risk & Compliance

Lay’s Death Clears His Record

Under the "abatement doctrine," the death of former Enron Chairman Kenneth Lay wipes both his conviction and indictment from the criminal record, c...
Marie Leone and Tim ReasonJuly 5, 2006

The death of former Enron chairman Kenneth Lay will clear his record of his conviction, and even his indictment, ending Department of Justice efforts to recover Lay’s bonuses and other earnings.

The legal doctrine, known as the abatement doctrine, will also likely complicate efforts by the Securities and Exchange Commission to take disgorgement action against Lay’s estate. Civil suits against Lay will be similarly hampered.

“If you’re on appeal and you die before that appeal is decided, it’s like stepping into the way-back machine,” says law professor Peter J. Henning of Wayne State University. “It’s as if Lay were never charged.”

Henning, the editor of the White Collar Crime Prof Blog, says he was aware of the abatement doctrine, but was surprised to discover that it would even void Lay’s indictment.

The abatement doctrine is well-established among all courts, but also was reaffirmed in 2004 by a court in the circuit where Lay was convicted. In United States v. Estate of Parsons, the court explained that “the appeal does not just disappear, and the case is not merely dismissed. Instead, everything associated with the case is extinguished, leaving the defendant as if he had never been indicted or convicted.”

The reason for this, the court explained, is that “the state should not label one as guilty until he has exhausted his opportunity to appeal.”

In Parsons, explains Henning, the court vacated a forfeiture order, suggesting that that the Department of Justice’s claim against Lay for $43.5 million will also be dismissed.

The abatement doctrine is also likely to complicate many of the civil suits against Lay, since plaintiffs will no longer be able to point to his conviction — or even his indictment.

“The implication [of Lay’s death] is that civil suits against him cannot claim that they are entitled to summary judgment,” says James Sanders, criminal attorney with McDermott Will and Emery. Sanders has had personal experience with the abatement doctrine. As an Assistant US Attorney in Chicago in the early 1980s, he successfully prosecuted a white collar defendant, who was sentenced and then murdered a week later. “His entire conviction was voided,” says Sanders.

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