Escaping Justice?

Last week we read in the New York Times about how Ken Lay, the disgraced former CEO of Enron Corp. had fallen on hard times.

'Once at the pinnacle of Houston's financial and political elite with a fortune worth as much as $400 million, Mr. Lay, the former chairman of the Enron Corporation, is now facing financial ruin. '

While this may bring some smiles to the faces of former Enron employees, it certainly brings no real consolation for the loss of their retirement benefits due to the company's collapse. They actually were foolish enough to believe Lay when he told them to keep buying company stock – even after he had sold his.

Assuming Lay escapes a jail term, how will he and his wife spend their retirement years? Will they be living in a Motel 6, working at Wal-Mart, flipping burgers, or bagging groceries? Umm, don't think so. Ken apparently has a little nest egg.

In February 2000, Mother Jones has learned, the Lays paid about $4 million -- an amount greater than Lay's entire salary from Enron that year -- to buy variable annuities that will, starting in 2007, guarantee the couple an annual income of about $900,000.

While stocks and most other ordinary investments are open to attack by creditors, life insurance policies and annuities are protected in many states. Variable annuities of the sort purchased by the Lays are basically tax-deferred investments wrapped in insurance policies.

Six states -- including Texas, where the Lays live -- provide the maximum degree of protection to investments in variable annuities, leaving them virtually impervious to attack by creditors. But under Texas law, the variable annuities are untouchable unless those suing him could prove fraudulent intent.

Once the annuities reach maturity in February 2007, Kenneth and Linda Lay will be guaranteed monthly payments of $43,023 and $32,643, respectively, for life.

Posted on The Human Stain