Yesterday I was having a conversation with an Enron executive who put some difficult questions to me, questions I found myself blanking on.
For instance, why was there no discussion or accusation of anything criminal until 2002 – several months after the collapse of the company?
Why does a declining stock price cause bankruptcy – doesn’t that just mean the company is worth less?
And what exactly was Andy Fastow supposed to have stolen?
That last one tripped me up, and I felt a little ashamed because I’d accepted that there were bad actors at Enron and that he was probably one of them. But now that I really think about it, he was accused of having “inflated Enron’s earnings and hid debt.” That never happened at Enron – I know that for a fact. But, for the sake of argument let’s say it’s totally true. How does that equal theft? If Andy Fastow hid debt, he didn’t personally benefit from that, and then the conversation starts to wander toward an Honest Services discussion, which puts him about on par with Jeff Skilling.
The three transactions that I’ve said Fastow “stole from” were Chewco, RADR and Southampton. And now that I think about it, I don’t think he stole money at all. Chewco was trouble because it was alleged to have been incorrectly accounted for years. Southampton was the deal that sent the NatWest Three to prison. And RADR was a wind farm deal in which both Lea and Andy Fastow supposedly got kickbacks. But that isn’t theft, and the more I think about it, the more I am furious that I myself fell for the line that Andy Fastow is a thief.
In The Smartest Guys In The Room Sherron Watkins pours on the snark when she says, “We all knew Andy didn’t have the strongest moral compass…”
Well if that’s true, why didn’t anyone rein him in? And furthermore, if he had a reputation as someone who was willing to bend the rules, did that make it easier to accuse him of all manner of things that he might not have actually done? He’s sort of the Boo Radley of Enron, isn’t he? The guy everyone *just knows* did something terrible because he was a hard-ass at the PRC and maybe he took the last donut one morning.
But what if we’re all wrong and he’s not that guy? What if he’s just a much a victim of an overzealous DOJ as Jeff Skilling?
I think I need to consider this seriously. I will be spending the next few weeks reviewing Andy Fastow’s transactions, and sharing any insights and questions I have.
Do you like Skim Milk. I don’t. Just curious, what happened to the missing $ 40MM dollars?
Which $40 million?
Cara, I enjoy reading your insights regarding the Enron years but your recent questioning if any party was acutally injured by the demise of Enron and now if Fastow stole from Enron has me wondering if you are delusional or merely mis-remembering the facts because of the passage of time. Certainly people were injured finanically by Enron and not just people at Enron but the whole energy sector was affected. How you could queston that if you were in Houston during that time is beyond me. Also, if there is one person responsible for the catastrophic collapse on Smith Street it was Fastow. Theft may not be the exact correct legal term for what Fastow did but the end result was the same as he illegally obtained compensation from Enron shareholders. I await your caustic counter-attack but before you respond you may want to add a few laps to your jog today maybe it will clear your memory a bit.
Thank you for your comment.
You said:
I’ve never said there were no injured parties in the collapse of Enron; please point to the passage you’re referring to. Further, I’ve said if the so-called victims had actually done what Enron and Enron’s independent investment advisors told every single employee to do – which was divest – there would be much less of a problem.
The question of Fastow’s innocence or guilt is as open as any other Enron topic. Your assumption that the question is not worthy of discussion is exactly the attitude I’m fighting against. I have no idea if he’s really guilty – I’m saying there are questions that need to be answered rationally and without the hysteria of the DOJ and their footmen in the media.
Who? I know there were people who said they were hurt – and I believe that they believe they were hurt. But nobody was homeless as a result of Enron. Nobody except Cliff Baxter – one of the executives – killed themselves. Nothing actually catastrophic happened. Yeah, bad things happen. So what?
If you recall, the whole economy was in a downward trajectory at the time.
I believe the damage was exaggerated. Not that it didn’t happen.
Thank goodness that’s solved! So what did he do? Why is he responsible for the collapse of Enron?
But that’s the rub, isn’t it. I am not seeing that. I’m looking, but the facts don’t bear that out. If you have some details – specific transactions – I’d love to hear.
My memory is fine. I ran five miles at a 8:02 pace. I’m in top form. So tell me what makes you so certain that Andy Fastow caused the collapse of Enron Corporation.
What did Andy do?
1 – As CFO, he left the liquidity in the company so vulnerable that a rapid loss of confidence could sink the boat. (Massive ratings collateral triggers, overnight CP funding, etc.) ..in and of itself not criminal, but wholly incompetent.
2 – He then knowingly committed fraud by having the supposed 3% equity slice of the off balance sheet structures be held by related parties (Kopper, his wife, and likely him through undocumented agreement) when in fact the accounting required they be held by unrelated parties.
When 2 was revealed in the context of the aftermath of Jeff’s resignation, combined with the precarious nature of liquidity as a result of 1, it killed the company. If either 1 or 2 didn’t happen, i am not convinced the company would have died.
He then, of course, lied about a whole host of other things to make sure Jeff went down for 20+ while he is just getting out now. Not a crime, but should be.
With respect, Skilling and Fastow have, without any remorse, stolen from shareholders through shady and illicit deals that have set a new low in white collar crime. Skilling developed a culture of greed, theft, arrogance and selfishness. Either you are ignorant or delusional but please don’t insult those who have lost their pensions and your glib comment about Cliff Baxter insult his family. Please don’t make such ridiculous and cruel statements
Thanks for your comment.
Again, you’re falling into the same old tired cliche that I’ve fought against for years. If you’re going to badmouth Enron, do it with facts.
- How did Skilling and Fastow steal from shareholders? You’re aware, aren’t you, that Skilling is not even accused of theft?
- What shady and illicit deals?
- Skilling’s culture is not indicative of any crime, and besides, he didn’t singlehandedly create the culture at Enron. He was only CEO for six months.
- Why can’t I insult those who lost their pensions? If they’d divested, they wouldn’t have lost their money. That goes for the awesome people I call friends who were executives there.
- I sincerely doubt any comment I make about Cliff Baxter would insult his family.
- This is my blog. I will, of course, say exactly what I think. Nothing more, nothing less.
Thanks again for your comment.