More on Ken Lay...
Late last month, the wife of former Enron chairman Kenneth Lay tearfully told a national television audience that she and her husband were struggling to avoid personal bankruptcy following the collapse of the Houston energy-trading company. What Linda Lay failed to tell viewers of NBC's Today show, however, was that she and her husband had shifted millions in personal assets to investments that are beyond the reach of creditors or legal judgments.
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.
"There are a lot of people in Texas, with a lot of spouses and family around them, who are scared of having it all sued away from them," says Ben Baldwin, Jr., the president of Baldwin Financial Systems, Inc., an investment advisory firm in Northbrook, Illinois. "It may well have been the creditor protection that drove interest in the annuity. It would have been a natural -- I could see that happening very easily. Litigation is all over the place. The higher visibility a person is, the higher the likelihood of lawsuits."
