Federal prosecutors are investigating whether the wife of former Enron Corp. (search) Chairman Kenneth Lay (search) illegally sold shares in the company just before it went bankrupt, a lawyer for Lay said Wednesday.
The Department of Justice's Enron Task Force (search) is investigating whether Linda Lay engaged in insider trading in the sale of 500,000 shares of Enron stock on Nov. 28, 2001, through the Lay's charitable foundation, according lawyer Michael Ramsey.
The sale took place after a credit-rating cut was issued for Enron's debt, Ramsey said, but before trading in the stock was halted when it was announced a proposed buyout of the energy company by rival Dynegy Inc. had fallen apart.
The stock was sold for about $2.36 a share, and all the funds went to charitable organizations that had been promised pledges by the Lay's foundation, he said.
Enron, whose stock fell 85 percent that day to 61 cents, collapsed into bankruptcy less than a week later, prompting a flurry of lawsuits and criminal charges.
Ramsey denied the stock sale broke any laws.
"Neither Ken nor Linda profited from this sale at all," he said. "They lost more on Enron than anyone," he said.
Ken Lay has said his total net worth stood at about $20 million, with most of that money earmarked to cover his legal fees to fight charges of conspiracy, fraud and lying to banks.
No date has been set for his trial.
Linda Lay tearfully told a television interviewer in January 2002 the couple was near bankruptcy. She opened a second-hand shop to sell the couple's unwanted furnishings but closed it earlier this year.
The head of the Enron Task Force, Andrew Weissmann, declined to comment on whether Linda Lay was the target of an investigation.
Prosecutors charged the wife of former Enron Chief Financial Officer Andrew Fastow (search) with filing false tax returns in what legal observers said was an attempt to persuade her husband to strike a plea deal.
Fastow agreed in January to a deal that will send him to prison for 10 years in exchange for his cooperation in the cases against Lay, former Chief Executive Officer Jeff Skilling (search) and former Chief Accounting Officer Richard Causey.
Fastow's wife, Lea, is currently serving a one-year sentence after striking a deal with the government to reduce the charges.