Arthur Andersen Acknowledges Andy Fastow’s Divestment From LJM

Arthur Andersen letter acknowledging Andy Fastow’s divestment from LJM, with Andy’s signature at the bottom.

James Derrick Asks Andy Fastow About His Involvement In LJM

This looks like Enron General Counsel James Derrick has sent a memo to V&E attorney James Dilg proposing language to ask Andy Fastow about his involvement in LJM.

I’m not positive that’s what’s going on but that’s what it looks like.

On The Hunt For Fastow News

The media is desperate for news about Fastow. At least two people have told me that reporters have called their attorney’s office to find out anything they can about him. This is funny. The dude is still basically in prison. His life hasn’t changed much. Some, granted, but not tremendously. So there really isn’t any “news” except that he’s at a the halfway house. That’s the news. That’s it. That’s all you’re getting for the time being. When he’s released, it will be interesting to see if he so much as utters, “excuse me,” for stepping on a reporter’s foot. My guess is he’s not saying a word to anyone for a long time.

Searching For Andy Fastow

Andy Fastow has a really sweet face. It looks lived in. And his eyes look very wise, like an old man. I have the feeling he has what my grandmother would have called an “old soul.” I’ve looked at his face for a long time, trying to see something in it that would make me know, deep in my bones, who he is. I’ve searched for answers (notably here but search my blog for “andy fastow” and you’ll see about 15 pages of posts about him.)

For a long time, I believed he was this very complex person who had compartmentalized his life to such a degree that he could, for instance, be a terrific husband (which itself turned out to be a complex and complicated notion) and at the same time a brilliant criminal mastermind. I thought he was too complex to be evil, and too sophisticated to be anything less than elegant in his criminality. This was supported by friends of Andy who would tell me how he kept toys and candy in his drawers at work. How he was the biggest goofball you ever saw in your life… but refused to acknowledge an underling at a Christmas party. He loved his wife passionately, devotedly for twenty years… then started seeing someone else. He considered himself Jeff Skilling’s biggest fan at Enron… then lied to his face, over and over again. He was well compensated at Enron, and married an heiress… then stole millions. That sort of division, the lack of coherence, attracts me. I want to know how and why a person behaves that way. I wanted to know him.

But then some of the same friends, and some of people who knew him but didn’t think of him as a friend at all, kept trying to tell me that the mystery that was so obvious to me was just not there. There was nothing really interesting about him. Someone who hated Andy at Enron finally had enough of me waxing poetic about the man and said that I had to get over the thinking he was more than a simple, common criminal.

It really struck me because first of all, this person worked shoulder to shoulder with Andy every day for many years. He knew Andy as well as anyone at Enron possibly could. And then his friends began to say the same thing. They just sort of felt a quiet dullness about his crimes. They could see him doing it. It didn’t seem that out of character. “He’s a jerk” was a phrase I heard a lot, usually uttered in a flat, nonjudgemental voice. Simply stating a fact.

I fought against this one-dimensional view of Andy Fastow. I wanted to believe he was more and bigger and better and deeper. But eventually, I came to realize the evidence didn’t lead me there.

I’ve come to believe that Andy Fastow was deeply insecure. All the darkness I mistook for complexity is probably his profound unwillingness to actually show himself to anyone completely. I think he stole money because he was jealous of the traders and wanted to earn big money. Ken Rice and Kevin Hannon were big shots, and friends of Andy, and they, with Jeff Skilling, were sort of the It boys. They had money and success and visibility. I think it appealed to Andy so much that he just grabbed it in the quickest way he could. His insecurity was probably not entirely unfounded. I think he began to do transactions that might be risky, but Enron tolerated it because, well he was the CFO and he had the support of the board. They gave him a wide berth. His incompetence, mixed with his aggressive bullying of anyone who rose any doubts about his deals, was kindling at Enron.

I wonder what he felt the first time he did something he knew was illegal. I wonder if he was elated or grim. I wonder if his heart was pounding. If his breathing was rapid and shallow. If his cheeks burned with shame. If his mind was filled with sudden images of the SEC knocking on his door. I wonder if he looked at everyone differently the next day. They had been his coworkers and bosses and peers on Tuesday. By Wednesday they were victims.

When he was fired from Enron in October 2001, I think he knew that it was all over for Enron. I like to think – based on absolutely nothing but the same part of me that really wants him to be this complicated, complex, brilliant man -that he looked at what he had done and was horrified. That he saw it, clearly, maybe for the first time. That he crawled inside himself and felt as much bitter rage at himself as his body could stand.

That would be enough punishment for me. Because once you acknowledge those parts of yourself that you don’t want anyone else to see, nobody ever has to punish you again. You punish yourself.

Andy is progressing toward freedom and a normal life. I am actually curious to see what he will do. Will he vanish into the mists of time as a trivia question, or will he come back louder and bigger than ever, doing the rubber chicken circuit and giving talks warning the graduating MBA 2020 class at Tufts not to step over that fine line that divides the immoral from the righteous?

That’s the thing about Andy Fastow. You think you’ve nailed him down somewhat, and then he surprises you again. I think enough people are curious that he will have a second act. And, oh, I hope it is a good one.

Michael Kopper’s Notes To Fastow Re: Chewco

Michael Kopper wrote an analysis of the distributions/purchase of Chewco’s interest in Jedi. Michael Kopper could be a novelist; his thoughts are clear, each one in a neat paragraph. Brilliant. In my opinion, this is a really cool document.

Portrait of Andy Fastow

(I didn’t paint it. That’s the beauty of it – I just came across it randomly in my travels.)

Willful Blindness: Enron Didn’t Have It

A few days ago, I mentioned the journalist who wrote a book about “willful blindness”. She is on a media tour now, hawking her book, and CNN plays the straightman to her insanity. To whit:

CNN: Where did the idea of “willful blindness” start for you?

Margaret Heffernan: I read the transcript of the trial of Jeffrey Skilling and Kenneth Lay and in the instructions to the jury, the judge cited the legal concept of willful blindness — that if there is information that you could have known, and should have known, but somehow managed not to know, the law treats you as though you did know it.

Reading the transcripts is a good start to learning about the Enron case. But I find both the question and the answer bizarre. Who gets all excited about the notion of willful blindness? It’s like getting excited about irony — excited enough to write a book about it.

She continues:

I thought of all the other areas in which willful blindness has a role, both in history and in the present day. Most major accidents, disasters and crimes play out in full public view — the question is not what’s hidden and secret, but how can this happen in public and nobody do anything? To relate it back to Enron, I kept thinking — how could Ken Lay not know how dishonest his company was?

Well there are three really good answers to that and none of them have to do with willful blindness. The first is that the “dishonest” bits of the company were hidden from him. He could not be expected to know if something was hidden from him.

Secondly, as a leader of the company, he was responsible for the vision and strategy of the company – not the everyday tasks of everyone inside the company. It would be unreasonable to hold any executive responsible for the crimes of an employee and neither Dr. Lay nor Jeff Skilling had any reason to insist on audits for every one of Enron’s employees.

Lastly, the company was not dishonest. Any fraud that happened at Enron was the result of a very small group of people in Andy Fastow’s group, Global Finance. It wasn’t endemic through the company.

Anyone who read the Skilling/Lay trial transcripts should have been able to see this. Perhaps her failing was simply… willful blindness.

Moronic Journalist Makes Up Crap About Jeff Skilling and Ken Lay

Another day, another idiot. This time, it is one shilling a book called “Willful Blindness” and it’s described thusly:

In “Willful Blindness” journalist and businesswoman Margaret Heffernan asks, “Why, as individuals, companies and countries, do we so regularly look at the mirror and ask how, ‘How could we have been so blind?’ “
When she asked people about the concept of ‘willful blindness,’ they gave examples on their own – abuse, divorce, Ponzi schemes, subprime mortgages. “Almost everyone mentioned the Iraq war and global warming: big public blunders caused or exacerbated by a reluctance to confront uncomfortable facts.”

So this book is basically a giant dumping ground for leftist politics. Got it. Oh and by the way, global warming? Not a man-made thing. Moving on.

She was first introduced to the term when writing a play for the BBC on the failed energy company, Enron.

I just want to savor that thought for a moment. Writing a play for the BBC about Enron. Hm. Has anyone ever seen this play? I can’t imagine why it isn’t a household name… which isn’t even mentioned in the article.

The legal description for the term “willful blindness,” as described by the judge, was: ‘You are responsible if you could have known, and should have known, something that instead you strove not to see.’

What judge? Judge Lake? In the jury instructions, Judge Lake said “willful blindness,” meaning ignorance of a conspiracy, doesn’t count as ignorance if it was intentional. “You may find that a defendant had knowledge of a fact if you find that the defendant deliberately closed his eyes to what would otherwise have been been obvious to him … Knowledge can be inferred if the defendant deliberately blinded himself to the existence of a fact.”

I am not sure that Lake used the explicit term “should have known” and I am almost certain he never said “strove not to see.” But this is just Enron, so I guess it’s okay for journalists to be sloppy with their work.

In the case of Enron, (Chief Executive Jeffrey) Skilling and (Chairman Kenneth) Lay could have known, and had the opportunity to know, just how rotten their company was.”

Really? How about some proof. How about actually giving us an example of “just how rotten their company was”? And for that matter, when was the opportunity to know given to Jeff and Ken Lay? Andy Fastow said that he kept his deceit hidden from Jeff Skilling. What was Jeff supposed to do, audit his own CFO for no reason whatsoever?

She doesn’t bother to give examples or proof. Why bother, it’s just Enron, right? Everybody “knows” that was rotten. No need for facts or anything.

My Enron Movie, Part One

A certain someone and I have been playing a game for almost three years now. Ever so often, we think about who we would cast to play various people in a limitless-budget production of the real Enron story.

Today, I’m coming clean with some of my choices (and his).

Ken Lay should be played by Jeff Bridges.

Jeff Skilling is a little more difficult to cast, but I think I’ve settled on Sean Penn. Sean Penn doesn’t have Jeff’s build, which bothers me because Jeff actually has a lot of physical presence, but Penn is a magnificent actor and I think he’d capture Jeff’s crystal-bright intelligence, and the hidden sadness. It should be noted that I chose an unconventional picture of Jeff Skilling. I could have found one of him smiling and non-threatening, but I like this one because it’s unguarded. He’s angry and sad as he leaves the court house — exactly as any reasonable person would be.

For Andy Fastow, Kevin Spacey. Kevin Spacey is edgy, I can’t get comfortable watching Kevin Spacey, he’s strange and unknowable, and I think he could bring that to a portrayal of Andy Fastow. I have never seen Kevin Spacey clown around in a movie and I think it would be vital to show that silly side of Andy. But I think Kevin Spacey can handle it.

Ben Glisan is the easiest one of all the Enron execs to cast. He shall be played by Ben Affleck. I decree it, thus it shall be so! They have more than just a passing resemblance, and I think Ben Affleck could capture Ben perfectly.

Ken Rice has to be played by Gerard Butler. They have the same physique and their faces have a passing resemblance, but more importantly and I think Gerard Butler can capture Ken’s coolness and complexity. We must work on getting rid of that Scottish accent, however.

These graphic things take forever to make so I’ll have to get to part two tomorrow.

Ebbers and Fastow

For a time, Andy Fastow, the former CFO of Enron, and Bernie Ebbers, the former CEO of WorldCom were housed in the same prison camp in Oakdale, Louisiana. I sometimes wonder if they ever met or became friends, and if so, that pleases me. I think Andy must be quite unique in prison, like all of the Enron men, and I wish for him to have someone intelligent and with whom he might reasonably establish a friendship.

We Owe Andy Fastow A Huge Apology

It would appear Enron-haters (including the DOJ) should be eating crow right now because as of today, Andy Fastow has been proven to be the visionary beyond anything we could have predicted in 2000 and 2001. Today, the Fed bought $600 billion government bonds in an effort to stimulate the comatose economy, thereby validating many of the most-criticized transactions that Fastow undertook while at Enron. (Sidebar: it might be valuable to think why the Fed is having to buy such massive bonds. Our last few bond auctions have been dismal failures. Nobody wants our debt – not even China, or largest creditor, or Japan, our second largest creditor. Thus, our own government is forced to step in to supply the “demand” that is missing in the marketplace. This is not good economic policy.)

Fastow is often accused of using Enron stock as a guarantor of LJM’s investments, then generally buying and selling products to himself (dark fiber springs to mind) using LJM to keep bad debt off the books.

If this was illegal or unethical, I ask why the Fed is doing it. The Fed is, obviously, the federal government. This would be the Enron actor. The Treasury is also the Fed. This would be LJM. The Fed is basically buying a worthless product – bonds – on the promise that they will be worth more in the future. Meanwhile, the Treasury gets to say that it has “sold” $600 billion of bonds – it looks excellent on the balance sheet. (Incidentally, they do this all the time. It’s only caught our attention because the amount is enough to make even governments blush.)

Granted, Fastow’s transactions were a little more complicated than that but that’s the gist of them.

To add a piquant twist to all this, consider: Andy Fastow is in prison. The DOJ – also part of the government – put him there. The same government that is playing numbers games and saying hocus pocus, abracadabra, while it steals from us put Andy Fastow in prison for doing something similar on a much smaller scale. Fastow never had the power to cause inflation, or the power to depress job creation, as the Treasury and Fed can.

Why is this kind of fraud okay when the government does it? Who is going to put them in jail?

Andy Fastow was apparently a visionary financier. We owe him an apology.

An Example of Conflict of Interest

I found this in a public filing today:

Related party transactions
At June 30, 2010, the Company owed (amount deleted) to (deleted) (purchased by deleted in 2009), a former related party with common directors and officers. These fees relate to general and administrative expenses for the purposes of sharing the same office space and equipment.

A director of the Company is a partner at a law firm that provides legal services to the Company. For the six months ended June 30, 2010, no fees (June 30, 2009 – nil) were charged for services provided from the firm.

All related party transactions are conducted in the normal course of business operations and are measured at the exchange amount, which is established and agreed to based on standard rates, time spent and costs incurred.

And yet nobody seems too concerned about this. It did make me think about Andy Fastow and how people make such a huge big deal out of the fact that he was both an officer at Enron and LJM – a relationship that some may think was a conflict of interest.

But in this modern example, he’s a LAWYER providing legal advice to a company where he is also the director. That seems to me much more problematic.

I guess if anything happens at Enron, it’s automatically controversial. But if it happens anywhere else, it’s just business.

Hypocritical much?

Go Away

Yesterday some wacky conspiracy site found my blog and directed a bit of traffic to a post about Andy Fastow’s Jewishness:

If you read that post and believe that I’m somehow advocating your worldview, which appears to be that “Jews run the world”, then you’re very much mistaken about the context and the content.

Andy’s religion only interested me because Judge Hoyt, when sentencing him, seemed to make a big deal out of it, which I thought was bizarre.

Please, anti-semetic moosefuckers, go somewhere else.

Today In Enron History

When Andy Fastow pleaded guilty, he stated as an example of how the Raptors were improperly used involved a hedge of an investment called Avici. He stated:

I and others, including Enron’s Chief Accounting Officer, agreed to date the AVICI hedge August 3, 2000 in order to locking in the value of AVICI (a volatile stock) at its all-time high and not incur the known and quantifiable loss from the AVICI stock having declined after August 3, 2000.

An intriguing contradiction: it is legal to back-date stock options as part as compensation, yet apparently backdating documents which result in basically the same outcome is illegal.

In any case, the Avici stock on that date was $162.50. If they’d used September 30 as the reporting date, Enron would have reported a loss of $65,500,000.

Nigerian Barge Documents: Part Two

Part One

Fastow’s Brady Letter June 1, 2004

Brady Letter July 30, 2004