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Last Updated: Tuesday, 17 October 2006, 21:06 GMT 22:06 UK
Late Enron boss's verdict quashed
Kenneth Lay
Kenneth Lay died at his Colorado ranch in July
A US court has ruled that the conviction of former Enron boss Kenneth Lay cannot stand as he died before he was able to appeal against the verdict.

He died in July, less than two months after his conviction for fraud and conspiracy related to Enron's collapse.

A US district judge ruled that the case against him should be wiped out as a dead defendant could not be punished.

The US energy giant went bankrupt in 2001 with debts of $31.8bn (18bn), leaving 4,000 people out of work.

The verdict is likely to hamper the government's efforts to recover $43.5m in cash and other financial assets which prosecutors claim that Mr Lay stole from Enron shareholders.

The authorities can still pursue these claims in a civil court but will have to compete with other litigants, which include ex-investors and employees of the energy giant.

Black hole

Mr Lay's lawyers argued the conviction should be overturned following his death, citing a 2004 appeals court ruling that the state could not punish a dead defendant or their estate unless their case had been heard on appeal.

Mr Lay was chairman of the Texas firm at the time of its spectacular collapse in 2001 after a huge black hole was uncovered in its finances.

He was found guilty of being aware of and doing nothing to prevent a massive fraud at the company, which knocked $60bn off its market value.

Mr Lay's co-defendant, former Enron chief executive Jeffrey Skilling, is due to be sentenced on Monday.

Andrew Fastow, the firm's former finance director who gave evidence against Mr Lay and Mr Skilling in their fraud trial, was sentenced to six years in jail earlier this month.

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