HOUSTON (AP) A federal appeals court has upheld a judge's ruling to vacate the conviction of Enron Corp.'s late founder, Kenneth Lay, who had been found guilty earlier this year of committing fraud and conspiracy in one of the biggest corporate scandals in U.S. history.
The challenge to the ruling by U.S. District Judge Sim Lake came from Russell Butler, an Enron shareholder who lost $8,000 in the company's collapse.
Butler, a Maryland crime victims attorney, had asked Lake for an order of restitution based on Lay's conviction under the Crime Victims' Rights Act.
Lake ruled he was bound by previous court rulings, which stated that a defendant's death pending appeal extinguished his entire case because he hadn't had a full opportunity to challenge the conviction.
The ruling stopped the government's efforts through the criminal courts to seek $43.5 million in ill-gotten gains prosecutors allege he pocketed by participating in Enron's fraud.
Last month, the federal government 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.''
Butler appealed Lake's decision to the 5th U.S. Circuit Court of Appeals, but a three-judge panel of the court agreed with Lake.
``Unless the law of this circuit ... is changed retroactively by Congress, by the Supreme Court or by this court revisiting our precedent ... we and the courts of this circuit are bound to apply and enforce the doctrine of abatement,'' the panel wrote in its Nov. 1 four-page ruling.
Prosecutors offered no counter legal argument in the case, but asked Lake to hold off on a ruling until the end of October so Congress could consider legislation from the Justice Department that would change current federal law regarding the abatement of criminal convictions. Congress recessed for the elections without considering the legislation.
In court filings, prosecutors said they took no position on Butler's appeal but added that the federal government is proposing legislation to protect crime victims in such situations.
Samuel Buffone, the attorney for Lay's estate, did not immediately return a telephone call seeking comment on Tuesday.
Lay was convicted of 10 counts of fraud, conspiracy and lying to banks in two separate cases on May 25. 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.
Lay, 64, died of heart disease July 5 while vacationing with his wife, Linda, in Aspen, Colo.
Enron, once the nation's seventh-largest company, crumbled into bankruptcy proceedings in December 2001 when years of accounting tricks could no longer hide billions in debt or make failing ventures appear profitable.
Lay's co-defendant, former Enron Chief Executive Jeffrey Skilling, was sentenced to 24 years and four months in prison last month.