“The only reason I’m here is because I went to prison,” prefaced Andrew Fastow Tuesday evening, Sept. 27 in the jam-packed Crum Auditorium. Students filled the seats, lined the walls and crouched between rows of seats.
Fastow was chief financial officer of Enron from 1998-2001. During that time, the company reached ultimate greatness. In 2000, they were the largest natural gas pipeline system, natural gas power trader and wind power company. Before Netflix graced the homes of people across the world, they were also the first to live stream video.
From their high peak in 2000, the tables turned in 2001 when the company went bankrupt. The CEO unexpectedly resigned. Stocks plummeted. The company was under investigative scope. In 2002, Enron became the largest corporate criminal investigation in history.
In 2004 Fastow was found guilty for two counts of securities fraud. He spent six years in federal prison.
“What I did was wrong, and it’s important that I apologize,” Fastow said. “But the story is not quite what it seems.”
“It never dawned on me that I was committing fraud,” he said.
In 2001, CFO Magazine awarded him the “CFO of the Year” award for the then-pivotal off-balance sheet financing. Consequently, the idea that donned him the award is also what awarded him jail time.
All of his operations were approved by internal and external attorneys as well as Enron accountants and executives.
Even at the time of his sentence hearing, when he was escorted out of the courthouse in chains, “I still didn’t know exactly what I had done wrong,” he said.
Fastow stood at the front of the auditorium for a lecture on “accounting and ethics,” an irony he himself notes.
Presenting the gray nature of accounting rules, he demonstrated how easy it is to do the unlawful.
“I looked at the rules and said, the fact that the rules are ambiguous, and nonsensical, that’s good. The more complex the better,” he said. “It’d be easier to find loopholes.”
Loopholes are the way around the principles, without technically following the rules. “How many of you think loopholes are bad?” Fastow asked. Only one to two people in the audience raised their hands.
The ambiguous nature of accounting, securities and tax laws still resonates even after the Enron scandal. Companies still find loopholes. They use operating leases. They use off-balance sheet financing. They use everything that led Fastow to his fate.
“It’s the extent to which I did it,” he said. “But if you can do it a little, why can’t you do it a lot?”
Fastow now provides litigation support at a law firm. He consults with directors, attorneys and hedge funds on how to best identify potentially critical finance, accounting, compensation and cultural issues.