Andy Fastow - former CFO of Enron

[NextLevel]

EDIT: This post is partly a reminder that we have an off-topic section that facilitates quite a few topics. I know most of our discussions on this forum are TT related and most threads not related to TT will get no interaction. But it is a reminder that this is possible and can be used if user interaction supports it and the content does not spam or violate forum rules.

He talks about something important in ethics. It's a long topic so if you have time, you might get impressed by what gets discussed. I heard him speak live in a different forum. He makes an important point - being all about the rules and following the rules is not going to make things work if you do not follow the spirit of the ethics and the rules.

 

[SrSTT]

Convicted Felon. Massive, MASSIVE fraud. I'm old enough (and was living in Houston at the time) to remember the lives he all but destroyed.
I dont think this..........individual........is qualified to use the word 'ethics'.

 

[NextLevel]

Convicted Felon. Massive, MASSIVE fraud. I'm old enough (and was living in Houston at the time) to remember the lives he all but destroyed.
I dont think this..........individual........is qualified to use the word 'ethics'.

I think he would agree with you if moral qualification requires having done mostly good things and no irresponsibly bad things in your business past. What I find interesting is how he discusses the use of "rules" to absolve yourself of responsibility for evaluating risk and reality. If following the rules makes a business look more profitable than it really should look, is it right to just follow the rules? Many finance people would say yes. His point is that this kind of attitude is what leads to the Enrons even when people are not trying to be criminals.

 

[rbtitco]

Is this an April Fools day joke? They literally imploded a building on 9/11 to destroy the Enron files that would have landed them all in jail. Him. cheney and everyone involved are the scum of the universe.

 

[Snek]

How does this has anything to do with table tennis and this forum?

 

[Arkady]

How does this has anything to do with table tennis and this forum?

Exactly right.

 

[NextLevel]

How does this has anything to do with table tennis and this forum?

We actually have a forum for things completely unrelated to table tennis. Thats part of the reason why I posted this there. Most people do not care for its existence but it does exist.

 

[rbtitco]

Im glad they aggregate all the subforum new posts on the main page. I visited a german tt forum and the amount of subcategories was so ridiculous. I hope they keep this forum like this.

 

[NextLevel]

Im glad they aggregate all the subforum new posts on the main page. I visited a german tt forum and the amount of subcategories was so ridiculous. I hope they keep this forum like this.

I think this ia the best default way to keep recent discussions top of mind while making other things searchable. I wouldn't be surprised if there was a way to get this view at the forum whose presentation you didnt like. The problem is not making it the default because it makes it harder to the user to easily find what is capturing interest in real time especially if it is more than one topic in a subforum as most subforum will only spit out the most recent post to the main page (which no one cares about if it is really old, or might be hiding another active topic if the forum is really popular). But that said, maybe we shouldn't be encouraging formats that steal our valuable attention lol..

 

[NextLevel]

Is this an April Fools day joke? They literally imploded a building on 9/11 to destroy the Enron files that would have landed them all in jail. Him. cheney and everyone involved are the scum of the universe.

I dont know if this is any more than a conspiracy theory. But Fastow did time in jail, tried to help recoup some investors losses and just talks about the nature of why he initially thought what he did was defensible (it was approved by everyone he worked with, legal, auditors etc) and how his position as CFO was not the same as the head of accounting.

His main point is that very often, we are trained to believe as accountants and finance analysts that following the rules can absolve us of the responsibility to be truthful about underlying real risks. One example hr gave was how certain laws make you use the average price for the full year for oil but that the price in December could be much lower than that of previous month's and reflect a risky and lower value for the upcoming year. But because the rules allow you and maybe even force you to just use a higher price and reflect a higher value for your business, is that the right thing to do?

The issue of balancing following rules with higher level goals/purpose comes up in quite a few situations. Even in table tennis, we are still debating whether it is important to follow the spirit of the serve rules or the detailed prescription underlying every rule. As one example, people may not realize that the six inch toss rule was made six inches because they just wanted to force a toss and they felt makijg it 3 inches would make it hard to tell wherher thr ball was tossed or not. Now witn six inches, people are not just focused on toss or not, but now want the full six inches. And now with the toss height, we now have angles etc. So even the rules you choose can have unintended consequences.

Sorry if this bores you, but the main thing I wanted to fo was point out that this forum exists for people who want to use it to spend some time on none-TT topics with their TT friends. I don't think it will ever get popular, but it does exist. MyTT excluded the for-sale posts from the home page listing because the sales volume was massive. We dont do that here (or I don't think we do) because we don't have that volume but if we did, I could see that for sure.

 

[thisisit]

How does this has anything to do with table tennis and this forum?

it generates back and forth. similar to how the ball moves in tt. ¯\_(ツ)_/¯

 

[DrBean]

It tracks that in the legal arena intent holds such importance. In more casual discourse I think Bill Burr (tragic) once mentioned on Green Room how some racists will use a roadmap of words some consider offensive as markers for things to avoid saying, like a verbal game of I'm not touching you.

Related to Enron - we had the pleasure of having one of the Special Agents (Paul Holdeman) who worked on the Enron case speak in our forensic accounting class. Nothing he talked about was news to us since at this point in time Enron was mandatory reading in a multitude of disciplines.

One interesting thing we did learn was that the most common pathway to the FBI was through their finance/accounting pipeline, which is how Paul got to the FBI. So you'll appreciate that at the time, many agents didn't want to work on the case at all since, by the numbers, a sizable portion had to have worked previously at Arthur Andersen, including Paul himself.

Anyway, the encounter I remember most from that lecture was a brief demonstration of one of the techniques agents use to persuade those they are interviewing. Now, hearing them described, you would think they'd never work on you, but he demonstrated a very rudimentary tactic, flattery, on a classmate, something along the lines of "you seem like a nice person... you don't like to see people get hurt..." etc. Nothing fancy, nothing you haven't seen on your weekly copaganda, but being in front of a charismatic, convincing professional interrogator, my classmate was ready to confess to whatever he wanted to accuse her of. Hell, I was ready to confess to whatever Andy did, a few rows back.

 

[mps]

Convicted Felon. Massive, MASSIVE fraud. I'm old enough (and was living in Houston at the time) to remember the lives he all but destroyed.
I dont think this..........individual........is qualified to use the word 'ethics'.

That smile disgusts me! While this is supposed to be a non–table tennis section, this fraudster should not have a spot on this forum. Tens of thousands of families suffered, and thousands lost their pensions. He served only five years, and his wife just one year. Now he’s making $10–20 thousand or more per paid speech and living the high life. I hope he is giving back his earnings to the thousands who are still suffering today. Until then, I will not be listening to him talk about rules or ethics. He should learn about karma first and give speeches for free, or at least channel everything he has earned toward helping the victims harmed by him and his wife.

 

[BlopChock]

What I find interesting is how he discusses the use of "rules" to absolve yourself of responsibility for evaluating risk and reality. If following the rules makes a business look more profitable than it really should look, is it right to just follow the rules? Many finance people would say yes. His point is that this kind of attitude is what leads to the Enrons even when people are not trying to be criminals.

How disingenuous of him, and either gullible or disingenuous of you. The man (as CFO) and his co-conspirators - including the CEO, many other fellow executives, and the accounting firm that went out of business as a result of their involvement - knowingly and willfully defrauded investors and employees, causing nearly immeasurable harm in the process.

.and just talks about the nature of why he initially thought what he did was defensible (it was approved by.everyone he worked with, legal, auditors etc) and how his position as CFO was not the same as the head of accounting.

His main point is that very often, we are trained to believe as accountants and finance analysts that following the rules can absolve us of the responsibility to be truthful about underlying real risks. One example hr gave was how certain laws make you use the average price for the full year for oil but that the price in December could be much lower than that of previous month's and reflect a risky and lower value for the upcoming year. But because the rules allow you and maybe even force you to just use a higher price and reflect a higher value for your business, is that the right thing to do?

The issue of balancing following rules with higher level goals/purpose comes up in quite a few situations. Even in table tennis, we are still debating whether it is important to follow the spirit of the serve rules or the detailed prescription underlying every rule. As one example, people may not realize that the six inch toss rule was made six inches because they just wanted to force a toss and they felt makijg it 3 inches would make it hard to tell wherher thr ball was tossed or not. Now witn six inches, people are not just focused on toss or not, but now want the full six inches. And now with the toss height, we now have angles etc. So even the rules you choose can have unintended consequences.

Sorry if this bores you, but the main thing I wanted to fo was point out that this forum exists for people who want to use it to spend some time on none-TT topics with their TT friends. I don't think it will ever get popular, but it does exist. MyTT excluded the for-sale posts from the home page listing because the sales volume was massive. We dont do that here (or I don't think we do) because we don't have that volume but if we did, I could see that for sure.

It's not boring, but rather outrageously offensive to attempt to wave away what they did as a result of "following rules." Spending 5-10 minutes reading the Wikipedia pages of Enron, The Smartest Men in the Room, and the man himself should have prevented you from making such a preposterous post in the first place, or at a bare minimum aggravating the error by defending it once called on it.

Andrew Fastow - Wikipedia

en.wikipedia.org

"Fastow was one of the key figures behind the complex web of off-balance-sheet special 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."

Enron - Wikipedia

en.wikipedia.org

"At the end of 2001, it was revealed that Enron's reported financial condition was sustained by an institutionalized, systematic, and creatively planned accounting fraud, known since as the Enron scandal. Enron became synonymous with willful, institutional fraud and systemic corruption. The scandal brought into question the accounting practices and activities of many corporations in the United States and was a factor in the enactment of the Sarbanes–Oxley Act of 2002. It affected the greater business world by causing, together with the even larger fraudulent bankruptcy of WorldCom, the dissolution of the Arthur Andersen accounting firm, which had been Enron and WorldCom's main auditor, and coconspirator in the fraud for years."

Enron: The Smartest Guys in the Room - Wikipedia

en.wikipedia.org

"...using mark-to-market accounting, Enron is able to record non-existent profits for these ventures. CFO Andrew Fastow creates a network of shell companies designed solely to do business with Enron, for the ostensible dual purposes of sending Enron money and hiding its increasing debt. Fastow also pressures Wall Street investment banks into investing in these shell entities. However, Fastow has a vested financial stake in these ventures and uses them to defraud Enron of tens of millions of dollars in business deals that he effectively conducts with himself. All of this is done with the permission of Enron's accounting firm Arthur Andersen and Enron's corporate board."

 

[BlopChock]

If anyone would like to spend time watching quality videos on ethics featuring someone actually qualified to speak on the subject, I recommend the Harvard series taught by Michael Sandel:

Justice with Michael Sandel

Instructor Michael Sandel JUSTICE is the first Harvard course to be made freely available online and on public television. Nearly a thousand students pack Ha...

m.youtube.com

 

[NextLevel]

How disingenuous of him, and either gullible or disingenuous of you. The man (as CFO) and his co-conspirators - including the CEO, many other fellow executives, and the accounting firm that went out of business as a result of their involvement - knowingly and willfully defrauded investors and employees, causing nearly immeasurable harm in the process.


It's not boring, but rather outrageously offensive to attempt to wave away what they did as a result of "following rules." Spending 5-10 minutes reading the Wikipedia pages of Enron, The Smartest Men in the Room, and the man himself should have prevented you from making such a preposterous post in the first place, or at a bare minimum aggravating the error by defending it once called on it.

Andrew Fastow - Wikipedia

en.wikipedia.org

"Fastow was one of the key figures behind the complex web of off-balance-sheet special 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."

Enron - Wikipedia

en.wikipedia.org

"At the end of 2001, it was revealed that Enron's reported financial condition was sustained by an institutionalized, systematic, and creatively planned accounting fraud, known since as the Enron scandal. Enron became synonymous with willful, institutional fraud and systemic corruption. The scandal brought into question the accounting practices and activities of many corporations in the United States and was a factor in the enactment of the Sarbanes–Oxley Act of 2002. It affected the greater business world by causing, together with the even larger fraudulent bankruptcy of WorldCom, the dissolution of the Arthur Andersen accounting firm, which had been Enron and WorldCom's main auditor, and coconspirator in the fraud for years."

Enron: The Smartest Guys in the Room - Wikipedia

en.wikipedia.org

"...using mark-to-market accounting, Enron is able to record non-existent profits for these ventures. CFO Andrew Fastow creates a network of shell companies designed solely to do business with Enron, for the ostensible dual purposes of sending Enron money and hiding its increasing debt. Fastow also pressures Wall Street investment banks into investing in these shell entities. However, Fastow has a vested financial stake in these ventures and uses them to defraud Enron of tens of millions of dollars in business deals that he effectively conducts with himself. All of this is done with the permission of Enron's accounting firm Arthur Andersen and Enron's corporate board."

MY position is not quite what you describe. It is possible that Andy is a psychopath but I don't think he is. I think (and I say this as a finance professional) he has identified something interesting about American business culture and lots of game strategy. Just about everything he did was signed off on by other people from the CEO, CAO, other experts and not just Arthur Andersen but other law firms etc. Having financial interests in side ventures is not criminal and depends on corporate ethics. And some of the issues that Enron brought to light had not been tested in the American financial system prior to it (hence a lot of the Sarbanes Oxley regulation that came after). He did hide losses and risks with SPEs, but all that was legal at the time because you did not need to declare operating leases on the balance sheet.

In fact, mark-to-market value accounting, which was one of the tricks that was used by Enron back then, was one of the causes of the 2008 bank bailouts.

The issue is that many people still play finance using this "exploit every possible loophole" strategy.

By the way if you have watched this movie, "Catch me if you Can", and you know the fate of the main character, you will see that it isn't necessary to dismiss the POV of every criminal because they are a criminal.

 

[BlopChock]

I'm not mischaracterizing what you posted - it's (at least at the time I'm writing this) still there for all of us to read. And your latest post is continued minimization of the crimes he and the others involved committed. And to be clear: they were not convicted for violating laws that were passed post facto.

How fitting that you cite "Catch Me if You Can" as if it somehow supports your promotion of Fastow. Much like him, Frank Abagnale was a handsomely paid speaker post-conviction, and tried to rewrite his own history:

Frank Abagnale - Wikipedia

en.wikipedia.org

"Abagnale claims to have worked as an assistant attorney general in the U.S. state of Louisiana, served as a hospital physician in Georgia, and impersonated a Pan American World Airways pilot who logged over two million air miles by deadheading.[4] The veracity of most of Abagnale's claims has been questioned, and ongoing inquiries continue to confirm that they were fabricated.[7][8] In 2002, Abagnale admitted on his website that some facts had been overdramatized or exaggerated, though he was not specific about what was exaggerated or omitted about his life.[9] In 2020, journalist Alan C. Logan claimed to have found evidence that proves the majority of Abagnale's story was invented or at best exaggerated.[5]"

And that's just a taste of his bs; the vast majority of his entry there is dedicated to the [lack of] "veracity of his claims", including lies he told about his "relationship" with the FBI.

While I certainly agree that "it isn't necessary to dismiss the POV of every criminal because they are a criminal," you'd be well-advised to choose better examples than a couple of inveterate liars and fraudsters who served their time in "Club Fed." Funny how those white collar criminals (who caused far greater harm than someone who robbed the corner store) serve less and easier time - and are subsequently not only platformed, but well remunerated speakers, isn't it? How the impoverished mother compelled to shoplift formula from WalMart in order to feed an infant suffers far greater consequences for her actions than said retailer/their leadership does for wage theft on an almost infinitely grander scale?

Rather, it's not funny at all - but gross testament to the immorality of the "justice" system, and an indictment of those who choose to whitewash or even venerate and enrich the likes of Fastow and Abagnale.

 

[DrBean]

I don't think NL was saying that Fastow did nothing wrong, rather that criminals can at times feign ignorance by saying "well I was within the rules... the accountants said this was above water..." etc. Kind of the "I was just following orders" defense. The problem with this defense, for him anyway, is that he was one of the people giving the orders.

I do not believe Fastow when he tries to paint himself in whatever light this is, and his seemingly scared straight act. He simply found a way to make money from his misfortunes. You can separate the message from the messenger, but (ironically here) you should also consider intent, and whether it is worth the effort.

 

[BlopChock]

I don't think NL was saying that Fastow did nothing wrong, rather that criminals can at times feign ignorance by saying "well I was within the rules... the accountants said this was above water..." etc.

From citation in post #14:

Fastow was one of the key figures behind the complex web of off-balance-sheet special 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."

Then from NL's most recent #16:

"Having financial interests in side ventures is not criminal and depends on corporate ethics."

And:

"He did hide losses and risks with SPEs, but all that was legal at the time..."

Compare and contrast.

 

[NextLevel]

From citation in post #14:

Fastow was one of the key figures behind the complex web of off-balance-sheet special 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."

Then from NL's most recent #16:

"Having financial interests in side ventures is not criminal and depends on corporate ethics."

And:

"He did hide losses and risks with SPEs, but all that was legal at the time..."

Compare and contrast.

Yes, all that was legal at the time. He did a lot of wrong things, very immoral things, I would argue fraudulent things, but most of them were very legal. And regardless, even if he did illegal things, my point is that very often, it takes a thief to catch a thief, immorality is not the first intellectual reason you dismiss what someone is saying about ethics.