Risk Management

Ken Lay’s Widow Battles Feds over $13M

Linda Lay fights to hold on to her $6-million condo, while prosecutors claim it was bought with laundered money.
Stephen TaubMay 24, 2007

Kenneth Lay’s widow is locked in a battle with the federal government over $13 million in cash and property. The federal government is trying to seize that sum, asserting that the assets are tied to crimes committed by the former Enron chairman, according to the Houston Chronicle.

Lay’s lawyers, however, say that the government did not sufficiently make its case that the money and property were tainted, and thus subject to seizure, according to the report. “Civil forfeiture is a harsh remedy,” the court filing stated, noted the paper. “Because forfeiture has the potential to deny innocent owners of their right to own property free from governmental interference, courts have historically viewed forfeitures warily.”

The battle is the latest twist in a rambling case in which the former Enron executive was found guilty of crimes linked to the collapse of the energy giant. The convictions, however, were subsequently thrown out because Kenneth Lay died of a sudden heart attack before his appeal was heard.

Linda Lay stated in the court filing that at the very least, the government should not be able to seize the Houston condominium she shared with her husband — valued at $6 million — even if some of the mortgage was paid off with allegedly tainted funds, according to the Chronicle. The paper noted that Justice Department spokeswoman Jaclyn Lesch declined to comment.

However, the government argues that if some of the money used to pay the mortgage was tainted, then it has a right to seize the property, according to the report. The government claims that Ken Lay gained $99 million from criminal activity, mostly from repaying Enron loans with company stock throughout 2001, when the company’s financial health was being questioned.

Further, prosecutors believe that they can trace more than $12 million of the allegedly ill-gotten gains The condominium “represents property involved in money laundering” because Ken Lay deposited funds from his sales of Enron stock back to the company in one of two bank accounts, and then withdrew enough to pay off the mortgage, the government reportedly avers in court filings.

Linda Lay’s argument is that the government is trying to tie the supposedly tainted funds to money laundering, a violation her husband was never charged with, says the paper. “The condominium was purchased before the allegedly tainted deposits were made, and Mr. Lay and his wife lived there,” Linda Lay’s filing said, according to the Chronicle.