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Andrew Fastow

From Alfawiki
Andrew Stuart Fastow
Born (1961-12-22) December 22, 1961 (age 64)
Washington, D.C., U.S.
OccupationFormer finance executive
Known forChief financial officer of Enron Corporation; involvement in Enron scandal

Andrew Stuart Fastow (born December 22, 1961) is a former American finance executive and convicted felon who acted as the chief financial officer of Enron Corporation, a Houston-based energy trading firm, until his termination shortly before the company's collapse. Fastow played a key role in devising an intricate system of off-balance-sheet special purpose entities—limited partnerships under Enron's control—that masked significant losses from the company's quarterly financial disclosures. By unlawfully maintaining personal interests in these partnerships, he embezzled tens of millions of dollars from Enron.

In 2001, the U.S. Securities and Exchange Commission initiated an inquiry into both Fastow and Enron. He was ultimately sentenced to six years in prison and served five years for charges including conspiracy, wire fraud, securities fraud, making false statements, insider trading, and money laundering. His spouse, Lea Weingarten, who held the position of assistant treasurer at Enron, admitted guilt to conspiracy involving wire fraud, money laundering, and filing false tax returns. She received a 12-month prison sentence following a negotiated plea deal.

Early life and education

Born in Washington, D.C., Fastow grew up in New Providence, New Jersey as the son of Jewish middle-class parents Carl and Joan Fastow, who were employed in retail and merchandising sectors. He completed his studies at New Providence High School, where he participated actively in student government, played tennis, and was involved in the school band. Notably, he served as the only student member on the New Jersey State Board of Education.

Fastow obtained a B.A. degree in Economics and Chinese from Tufts University in 1983. During his time there, he met Lea Weingarten—daughter of former Miss Israel Miriam Hadar Weingarten—whom he wed in 1984. Both pursued MBA degrees at Northwestern University and secured positions at Continental Illinois bank located in Chicago. The couple were members of Congregation Or Ami, a conservative synagogue in Houston, where Fastow also taught Hebrew School classes.

Early career

While at Continental Illinois, Fastow specialized in asset-backed securities, a financial innovation that gained widespread acceptance for transferring assets off bank balance sheets while generating income streams. In 1984, Continental became the largest U.S. bank failure until Washington Mutual's collapse in 2008.

Given his proficiency in this area, Fastow was recruited by Jeffrey Skilling to join Enron Finance Corp in 1990 and advanced to become Enron's chief financial officer by 1998.

Rise in Enron

The deregulation of energy markets across the United States during the late 1990s created new trading prospects for Enron, allowing it to purchase energy at low costs and sell it at variable market prices. Utilizing his market expertise, Fastow devised strategies that benefited Enron financially and caught the attention of CEO Jeffrey Skilling and founder Kenneth Lay—who were focused on sustaining the company’s stock valuation despite underlying financial weaknesses.

Fastow engineered an elaborate array of entities that transacted solely with Enron; these were designed both to secure capital and to hide extensive losses. This arrangement enabled Enron’s audited balance sheet to appear free of debt even though its obligations exceeded $30 billion at their height. Although these entities were portrayed as independent parties, they functioned primarily to offload asset write-downs with assurances against losses. Fastow maintained personal financial interests in these entities either directly or via associates such as Michael Kopper.

Kopper pled guilty alongside Fastow for defrauding Enron shareholders. Concurrently, Fastow disregarded fundamental financial disclosures like reporting "cash on hand" and total liabilities. He also exerted pressure on leading investment banks—including Merrill Lynch and Citibank—to invest in his funds by threatening to withdraw Enron-related business if they declined.

Collapse

In August 2001, Jeffrey Skilling, Enron's CEO, unexpectedly stepped down after just six months in the role, citing personal reasons for his departure. Early news mistakenly identified Skilling as the senior executive who had divested interests in Enron-affiliated partnerships; the individual was actually CFO Andrew Fastow.

A confidential offering memorandum related to Fastow's partnerships, including LJM (named after his family), triggered intense media investigation. Following the September 11 attacks, renewed scrutiny emerged regarding Fastow’s earnings from LJM. By mid-October, reports brought to light conflicts of interest and the significant profits Fastow had earned.

On October 23, Fastow revealed that he had made $45 million from LJM despite spending only about three hours per week managing it. The following day, multiple banks declined to extend credit to Enron if Fastow remained in his CFO position. As a result, the board accepted CEO Ken Lay’s recommendation to remove Fastow on October 25 and appointed Jeff McMahon as his successor. Fastow was placed on administrative leave, with the board subsequently determining grounds for dismissal.

Fastow’s emphasis on special purpose entities (SPEs) resulted in a disregard for fundamental corporate finance controls. Enron lacked systematic procedures for monitoring cash flow and debt maturities, which left the company with virtually no liquidity when McMahon and a financial recovery team assumed control.

Although Enron’s stock had peaked at $90 per share the year before its bankruptcy, the company was already experiencing severe financial difficulties and pursued a merger with competitor Dynegy. This deal collapsed on November 28 after liquidity problems surfaced following Fastow’s exit. Three days later, Enron filed for bankruptcy, with its stock value plummeting to 40 cents per share—despite many employees having been encouraged to invest their retirement funds in Enron shares.

Sentencing and incarceration

On October 31, 2002, a federal grand jury in Houston, Texas indicted Fastow on 78 charges including fraud, money laundering, and conspiracy. On January 14, 2004, he pled guilty to two counts of wire and securities fraud and agreed to serve a ten-year prison term. Additionally, he cooperated with federal prosecutors by acting as an informant to assist in convicting other former Enron executives in exchange for a reduced sentence.

Under a plea agreement that involved a maximum sentence of ten years and forfeiture of $23.8 million in assets, Fastow was sentenced on September 26, 2006, to six years imprisonment followed by two years probation. U.S. District Judge Ken Hoyt granted leniency due to Fastow’s cooperation in both civil and criminal proceedings and recommended placement at the low-security Federal Correctional Institution in Bastrop, Texas. Fastow served time at the Federal Prison Camp near Pollock, Louisiana. On May 18, 2011, he was transferred to a Houston halfway house to complete his sentence.

Life after incarceration

Shortly after his release on December 16, 2011, Fastow took a position as a document review clerk with Houston law firm Smyser Kaplan Veselka LLP.

Speaking engagements

Since regaining his freedom, Fastow has dedicated himself to public speaking focused on ethics and corporate responsibility. He candidly acknowledges his involvement in Enron’s downfall:

“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.”

In March 2012, he delivered an ethics lecture at the University of Colorado Boulder Leeds School of Business. In June 2013, he addressed over 2,000 attendees at the Association of Certified Fraud Examiners' 24th Annual Global Fraud Conference. Later presentations included Miami University (April 2014), several universities during February 2015 (University of St. Thomas; University of Minnesota; University of Texas at Austin; University of Houston Bauer College of Business; University of Southern California Leventhal School of Accounting; University of Missouri School of Accounting), along with repeated engagements at the Ivey Business School from April 2016 through March 2019. The Center for Ethics at the University of Tampa hosted him in October 2017. In March 2022, he spoke about business ethics and regulatory challenges at an event organized by the National Investor Relations Institute New York Chapter.

KeenCorp Investment

In 2016, Fastow took on the role of principal and investor at KeenCorp. This Netherlands-based company specializes in analytics and artificial intelligence solutions designed to track workflows—including communications via E-mails, Microsoft Teams, Google Suite, and Slack—to evaluate employee mood and engagement levels.

Fastow’s initial involvement with KeenCorp dates back to its beta stage when it utilized a digital archive of Enron emails for testing purposes.

Media Coverage

Numerous publications and media have documented the Enron saga alongside Fastow’s involvement. In 2003, he was a central figure in 24 Days: How Two Wall Street Journal Reporters Uncovered the Lies that Destroyed Faith in Corporate America, authored by Rebecca Smith and John R. Emshwiller, which depicted him as a formidable negotiator.

That same year, Bethany McLean and Peter Elkind released The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron, a work that was subsequently adapted into the 2005 documentary Enron: The Smartest Guys in the Room.

Kurt Eichenwald’s 2005 publication Conspiracy of Fools portrays Fastow as the primary antagonist.

In 2009, Lucy Prebble’s theatrical production Enron featured Fastow prominently as one of the main characters.

External links

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