Andrew Stuart Fastow (born December 22, 1961) is an American convicted felon and former financier who was the chief financial officer of Enron Corporation, an energy trading company based in Houston, Texas, until he was fired shortly before the company declared bankruptcy. Fastow was one of the key figures behind the complex web of off-balance-sheetspecial purpose entities (limited partnerships which Enron controlled) used to conceal Enron's massive losses in their quarterly balance sheets. By unlawfully maintaining personal stakes in these ostensibly independent ghost-entities, he was able to defraud Enron out of tens of millions of dollars.
The U.S. Securities and Exchange Commission opened an investigation into his and the company's conduct in 2001. Fastow was sentenced to a six-year prison sentence and ultimately served five years for convictions related to these acts. His wife, Lea Weingarten also worked at Enron, where she was an assistant treasurer; she pleaded guilty to conspiracy to commit wire fraud, money laundering conspiracy and filing fraudulent income tax returns, and was sentenced to 12 months in prison despite a plea bargain which proposed she serve five months in jail, and 5 months in home-detention.[1]
Fastow was born in Washington, D.C. He grew up in New Providence, New Jersey, the son of middle class Jewish[4][5] parents, Carl and Joan Fastow, who worked in retail and merchandising. Fastow graduated from New Providence High School, where he took part in student government, played on the tennis team, and played in the school band.[6] He was the sole student representative on the New Jersey State Board of Education.[7]
While at Continental, Fastow worked on the newly emerging "asset-backed securities". The practice spread across the industry "because it provides an obvious advantage for a bank", noted the Chicago Tribune. "It moves assets off the bank's balance sheet while creating revenue." In 1984, Continental became the largest U.S. bank to fail in American history until the seizure of Washington Mutual in 2008.[10]
Deregulation in the US energy markets in the late 1990s provided Enron with trade opportunities, including buying energy from cheap producers and selling it at markets with floating prices. Andrew Fastow was familiar with the market and knowledgeable in how to play it in Enron's favor. This quickly drew the attention of then chief executive officer of Enron Finance Corp Jeffrey Skilling. Skilling, together with Enron founder Kenneth Lay, was constantly concerned with various ways in which he could keep company stock price up, in spite of the true financial condition of the company.
Fastow designed a complex web of companies that solely did business with Enron, with the dual purpose of raising money for the company, and also hiding its massive losses in their quarterly balance sheets. This effectively allowed Enron's audited balance sheet to appear debt free, while in reality it owed more than 30 billion dollars at the height of its debt. While presented to the outside world as being independent entities, the funds Fastow created were to take write-downs off Enron's books and guaranteed not to lose money. Yet, Fastow himself had a personal financial stake in these funds, either directly or through partners amongst them Michael Kopper.
Kopper, Fastow's chief lieutenant, pleaded guilty to taking part in a scam with Fastow that defrauded Enron shareholders of many millions. While defrauding Enron in this way, Fastow was also neglecting basic financial practices such as reporting the "cash on hand" and total liabilities. Fastow pressured some of the largest investment banks in the United States, such as Merrill Lynch, Citibank, and others to invest in his funds, threatening to cause them to lose Enron's future business if they did not.
Collapse
In August, Skilling, who had been promoted to CEO of the entire company in February 2001, abruptly resigned after only six months, citing personal reasons. When reporters for The Wall Street Journal discovered an Enron "senior officer" had recently sold his interest in several partnerships that had done business with Enron, they initially thought that officer was Skilling. However, Enron spokesman Mark Palmer revealed that the "senior officer" was actually Fastow.[12]
After a former Enron executive leaked a copy of the offering memorandum for one of Fastow's partnerships, LJM–named for Fastow's wife and two sons–to the Journal, reporters bombarded Enron with further questions about the partnerships. The scrutiny died down after the September 11 attacks, but ramped up anew two weeks later with pointed questions about how much Fastow had earned from LJM. This culminated in a series of stories that appeared in the Journal in mid-October detailing the "vexing conflict-of-interest questions" about the partnerships, as well as the huge windfall he had reaped from them.[12][13]
On October 23, during a conference call with two directors delegated by the board, Fastow revealed that he had made a total of $45 million from his work with LJM–a staggering total, since he claimed to spend no more than three hours a week on LJM work.[12][13] On October 24, several banks told Enron that they would not issue loans to the company as long as Fastow remained CFO. The combined weight of these revelations led the board to accept Lay's recommendation to remove Fastow as CFO on October 25, replacing him with industrial markets chief and former treasurer Jeff McMahon.[12] He was officially placed on leave of absence, though the board subsequently determined that it had grounds to fire him for cause.[13]
It was later revealed that Fastow had been so focused on creating SPEs that he had neglected the most rudimentary aspects of corporate finance. Under his watch, Enron merely operated on a quarterly basis. Fastow never implemented procedures for tracking the company's cash or debt maturities. As a result, McMahon and a "financial SWAT team" put together in the wake of Fastow's ouster discovered Enron had almost no liquidity.[12][13]
Fastow's approach to hiding losses was so effective that the year before Enron declared bankruptcy, the Enron stock was at an all-time high of $90. As it turned out, the company was already well on its way to financial collapse, to the point that it was all but forced to seek a merger with rival Dynegy. By then, Enron's financial picture had declined so rapidly that the prospect of the Dynegy merger was the only thing keeping it alive. Dynegy tore up the merger agreement on November 28 in part due to the liquidity problems revealed after Fastow's ouster, and Enron declared bankruptcy three days later. By then, Enron's stock had dwindled to 40 cents per share, but not before many employees had been told to invest their retirement savings in Enron stock.
Sentencing and incarceration
On October 31, 2002, Fastow was indicted by a federal grand jury in Houston, Texas, on 78 counts, including fraud, money laundering, and conspiracy. On January 14, 2004, he pleaded guilty to two counts of wire and securities fraud, and agreed to serve a ten-year prison sentence. He also agreed to become an informant and cooperate with federal authorities in the prosecutions of other former Enron executives in order to receive a reduced sentence.[14]
After entering into a plea agreement with a maximum penalty of 10 years in prison and the forfeiture of $23.8 million in assets, on September 26, 2006, Fastow was sentenced to six years in prison, followed by two years of probation. U.S. District Judge Ken Hoyt believed Fastow deserved leniency for his cooperation with the prosecution in several civil and criminal trials involving former Enron employees. Hoyt recommended that Fastow's sentence be served at the low-security Federal Correctional Institution in Bastrop, Texas.[15] Fastow was incarcerated at the Federal Prison Camp near Pollock, Louisiana.[16] On May 18, 2011, Fastow was released to a Houstonhalfway house for the remainder of his sentence.
On May 6, 2004, his wife, Lea Fastow, a former Enron assistant treasurer, pleaded guilty to a tax charge and was sentenced to one year in a federal prison in Houston, and an additional year of supervised release. She was released to a halfway house on July 8, 2005.[17]
Life after incarceration
Soon after his release on December 16, 2011,[18] he began working as a document review clerk for law firm Smyser Kaplan Veselka LLP in Houston.[19]
Speaking engagements
Since his release, Fastow has worked the public speaking circuit with presentations on ethics and business. In one such speech, Fastow recounts his crimes at Enron and reflects on his guilt:
“I found every way I could to technically comply with the [accounting] rules... But what I did was unethical and unprincipled. And it caused harm to people. For that, I deserved to go to prison.”[20]
In April 2014, Fastow spoke at Miami University in Oxford, Ohio, regarding business ethics.[21]
In February 2015, he spoke at: the University of St. Thomas, the University of Minnesota, the University of Texas (Austin campus), the University of Houston Bauer College of Business, the University of Southern California's Leventhal School of Accounting, and the University of Missouri School of Accounting.
In April 2016, March 2017, March 2018, and March 2019 Fastow spoke at the Ivey Business School.[22] The University of Tampa's Center for Ethics hosted him in October 2017.[23] In March 2022 the National Investor Relations Institute New York Chapter hosted Fastow as guest speaker for a discussion on business ethics, and the ambiguity and complexity of laws and regulations.[24]
Investment in KeenCorp
Fastow became principal and investor in KeenCorp in 2016.[25] KeenCorp is a Netherlands-based company that offers analytics and artificial intelligence products that monitor "day-to-day workflow: E-mails, Microsoft Teams chats, Google Suite, and Slack" in order to analyze employee sentiment and engagement.
Originally, Fastow connected with KeenCorp when the company was beta testing its software using a digital database of Enron emails.[25]
In the media
A number of books have been written about Enron and Fastow.
In 2003, Fastow was a prominent figure in 24 Days: How Two Wall Street Journal Reporters Uncovered the Lies that Destroyed Faith in Corporate America by the reporters who had broken some of the key stories in the saga, Rebecca Smith and John R. Emshwiller. They painted Fastow as in their words "a screamer, who negotiated by intimidation and tirade".
Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. It was founded by Kenneth Lay in 1985 as a merger between Lay's Houston Natural Gas and InterNorth, both relatively small regional companies. Before its bankruptcy on December 2, 2001, Enron employed approximately 20,600 staff and was a major electricity, natural gas, communications, and pulp and paper company, with claimed revenues of nearly $101 billion during 2000. Fortune named Enron "America's Most Innovative Company" for six consecutive years.
MCI, Inc. was a telecommunications company. For a time, it was the second-largest long-distance telephone company in the United States, after AT&T. WorldCom grew largely by acquiring other telecommunications companies, including MCI Communications in 1998, and filed for bankruptcy in 2002 after an accounting scandal, in which several executives, including CEO Bernard Ebbers, were convicted of a scheme to inflate the company's assets. In January 2006, the company, by then renamed MCI, was acquired by Verizon Communications and was later integrated into Verizon Business.
Chewco Investments L. P. was a limited partnership associated with the Enron scandal, which resulted in the bankruptcy of Enron. It was named after the Star Wars character Chewbacca, because it was created to hide losses from the Joint Energy Development Investment Limited, known by its acronym "JEDI". Like Chewbacca, the Jedi Knights were prominent characters in Star Wars.
Jeffrey Keith Skilling is an American businessman who in 2006 was convicted of federal felony charges relating to the Enron scandal. Skilling, who was CEO of Enron during the company's collapse, was eventually sentenced to 24 years in prison, of which he served 12 after multiple appeals.
Dynegy Inc. is an electric company based in Houston, Texas. It owns and operates a number of power stations in the U.S., all of which are natural gas-fueled or coal-fueled. Dynegy was acquired by Vistra Corp on April 9, 2018. The company is located at 601 Travis Street in Downtown Houston. The company was founded in 1984 as Natural Gas Clearinghouse. It was originally an energy brokerage, buying and selling natural gas supplies. It changed its name to NGC Corporation in 1995 after entering the electrical power generation business.
Conspiracy of Fools is a 2005 book by Kurt Eichenwald detailing the Enron scandal.
Enron: The Smartest Guys in the Room is a 2005 American documentary film based on the best-selling 2003 book of the same name by Fortune reporters Bethany McLean and Peter Elkind, who are credited as writers of the film alongside the director, Alex Gibney. It examines the 2001 collapse of the Enron Corporation, which resulted in criminal trials for several of the company's top executives during the ensuing Enron scandal, and contains a section about the involvement of Enron traders in the 2000-01 California electricity crisis. Archival footage is used alongside new interviews with McLean and Elkind, several former Enron executives and employees, stock analysts, reporters, and former Governor of California Gray Davis.
Lea Weingarten Fastow is a former Enron assistant treasurer who pleaded guilty to tax evasion and filing fraudulent Income Tax returns. The wife of former Enron executive and convicted felon Andrew Fastow, she was the second former Enron executive to go to prison after Enron collapsed due to fraud in December 2001.
Vincent Julian Kaminski was born in Poland and is currently a Professor in the Practice of Energy Management at Jones Graduate School of Business of Rice University. He the author of several books on risk management and energy trading.
The trial of Kenneth Lay, former chairman and CEO of Enron, and Jeffrey Skilling, former CEO and COO, was presided over by federal district court Judge Sim Lake in the Southern District of Texas in 2006 in response to the Enron scandal.
The NatWest Three, also known as the Enron Three, are the British businessmen Giles Darby, David Bermingham and Gary Mulgrew. In 2002, they were indicted in Houston, Texas, on seven counts of wire fraud against their former employer, Greenwich NatWest, as part of the Enron scandal.
Jordan H. Mintz was the former Managing Director for Corporate Tax at Enron and a whistleblower during the Enron scandal.
Kenneth Lee Lay was an American businessman who was the founder, chief executive officer and chairman of Enron. He was heavily involved in Enron's accounting scandal that unraveled in 2001 into the largest bankruptcy ever to that date. Lay was indicted by a grand jury and was found guilty of 10 counts of securities fraud at trial. Lay died in July 2006 while vacationing in his house near Aspen, Colorado, three months before his scheduled sentencing. A preliminary autopsy reported Lay died of a heart attack caused by coronary artery disease. His death resulted in a vacated judgment. Conspiracy theories regarding Lay's death surfaced, alleging that it was faked.
LJM, which stands for Lea, Jeffrey, Matthew, the names of Andrew Fastow's wife and children, was a company created in 1999 by Enron Corporation's CFO, Andrew Fastow, to buy Enron's poorly performing assets and bolster Enron's financial statements by hiding its debts.
The Enron scandal was an accounting scandal involving Enron Corporation, an American energy company based in Houston, Texas. When news of widespread fraud within the company became public in October 2001, the company filed for bankruptcy and its accounting firm, Arthur Andersen—then one of the five largest audit and accountancy partnerships in the world—was effectively dissolved. In addition to being the largest bankruptcy reorganization in U.S. history at that time, Enron was cited as the biggest audit failure.
David Hittner is a senior United States district judge of the United States District Court for the Southern District of Texas. He also has served by temporary assignment on the United States Court of Appeals for the Fifth Circuit, as well as the U.S. District Courts for the Southern District of New York and the District of Arizona. His tenure as a federal judge began in 1986, when he was nominated for the lifetime position by President Ronald Reagan and unanimously confirmed by the United States Senate. Prior to his appointment to the federal bench in 1986, Hittner served from 1978 to 1986 as the elected judge of the 133rd Judicial District Court of Harris County, Texas, based in Houston.
Enron is a 2009 play by the British playwright Lucy Prebble, based on the Enron scandal.
LJM can stand for:
The Federal Prison Camp, Bryan is a minimum-security United States federal prison for female inmates in Texas. It is operated by the Federal Bureau of Prisons, a division of the United States Department of Justice.
"Tone at the top" is a term that originated in the field of accounting and is used to describe an organization's general ethical climate, as established by its board of directors, audit committee, and senior management. Having good tone at the top is believed by business ethics experts to help prevent fraud and other unethical practices. The very same idea is expressed in negative terms by the old saying "A fish rots from the head down".
↑ Iwata, Edward. "Fastow's fast track to infamy", USA Today. Accessed May 25, 2007. "The son of a buyer for a drug store chain, Fastow was born 40 years ago in Washington and raised in New Providence, N.J. The popular Fastow played the trombone in the New Providence High School Pioneers marching band and was active in student government."
↑ Trail '80, the Yearbook of New Providence High School, 1980, p. 27.
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Andrew_Fastow [2] 
