Andy Fastow - former CFO of Enron

[NextLevel]

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.

I agree, and maybe I am too fact-finding focused to appreciate the damage he did to people's lives. The CFOs, directors and managers he spoke in front of didn't lynch him, and what he spoke about made a lot of us reflect on what it meant to hide behind following the rules when we put lipstick on our companies to sell them.

 

[RefereeNumber2]

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.

You'd have a good argument they were fraudulent, because he pled guilty to and served years in prison for fraud. Either he had the worst lawyers in the world, or at least some of the things he did were serious crimes.

I had no idea that Fastow has now reinvented himself as an ethics speaker. That is mildly interesting, although I have to admit I have next to no interest in hearing anything about ethics from him.

I think a lot of the reaction in this thread has to do with the way you posted this video in the OP, with absolutely no background/acknowledgement/context about this guy being at the head of one of the largest financial scandals in recent American history. Maybe that's a good way to stoke engagement with the thread. To me it came across as extremely jarring and, frankly, intentionally provocative. Whatever the merits of the specific point Fastow is making in this video, that does not seem like a conducive way to start a nuanced conversation about them.

 

[NextLevel]

You'd have a good argument they were fraudulent, because he pled guilty to and served years in prison for fraud. Either he had the worst lawyers in the world, or at least some of the things he did were serious crimes.

I had no idea that Fastow has now reinvented himself as an ethics speaker. That is mildly interesting, although I have to admit I have next to no interest in hearing anything about ethics from him.

I think a lot of the reaction in this thread has to do with the way you posted this video in the OP, with absolutely no background/acknowledgement/context about this guy being at the head of one of the largest financial scandals in recent American history. Maybe that's a good way to stoke engagement with the thread. To me it came across as extremely jarring and, frankly, intentionally provocative. Whatever the merits of the specific point Fastow is making in this video, that does not seem like a conducive way to start a nuanced conversation about them.

First of all, your position what a good starting point for a nuanced conversation would be is fair. I don't know the context from which many people relate to Enron and usually, I insult people like this for fun. But maybe it was hearing him speak or his well selected cases and the challenges I face presenting and selling things when I just want to call a pig a pig - maybe I should have focused on his crimes much more.

Fastow actually claims that he didn't believe he was guilty when he pled guilty. He felt he was playing games and working with loopholes that were legally permissible. It was when his rabbi made it clear to him that following the rules is not sufficient to be a good person if you do not also follow the spirit of the rules that he realized that he was clearly being evil.

Fastow has been in business for a while doing a ton of things related to ethics, teaching at business schools and discussing a lot of what got him into jail and how his Jewish faith gave him clarity into what he thought was wrong. Ethics means many things to many people, but if you are in finance/accounting, the devotion to following reporting rules regardless of the underlying reflected reality becomes a religion of sorts. It's unfortunate that it takes a convicted criminal to ask people the question of whether it is a good thing to use "I cannot find a rule that prevents this" as justification for why you can do what you want to do, but the fact that someone asked the question at a time when lots of people are all about the rules even when the spirit of the rules is being ignored was refreshing.

 

[RefereeNumber2]

First of all, your position what a good starting point for a nuanced conversation would be is fair. I don't know the context from which many people relate to Enron and usually, I insult people like this for fun. But maybe it was hearing him speak or his well selected cases and the challenges I face presenting and selling things when I just want to call a pig a pig - maybe I should have focused on his crimes much more.

Fastow actually claims that he didn't believe he was guilty when he pled guilty. He felt he was playing games and working with loopholes that were legally permissible. It was when his rabbi made it clear to him that following the rules is not sufficient to be a good person if you do not also follow the spirit of the rules that he realized that he was clearly being evil.

Fastow has been in business for a while doing a ton of things related to ethics, teaching at business schools and discussing a lot of what got him into jail and how his Jewish faith gave him clarity into what he thought was wrong. Ethics means many things to many people, but if you are in finance/accounting, the devotion to following reporting rules regardless of the underlying reflected reality becomes a religion of sorts. It's unfortunate that it takes a convicted criminal to ask people the question of whether it is a good thing to use "I cannot find a rule that prevents this" as justification for why you can do what you want to do, but the fact that someone asked the question at a time when lots of people are all about the rules even when the spirit of the rules is being ignored was refreshing.

It's impossible to know what is going on inside someone else's head, but to me Fastow's story seems plainly self-serving. I find it very hard to believe he didn't understand at the time he would get in very serious trouble if people discovered what he was doing.

Even if we accept his explanation that he thought he was following the letter of the law, there are other rules people are expected to follow. For example, the requirements of your job. He must have been aware he was violating standard responsible accounting practices, which -- illegal or not -- was clearly in negligence of his duties as CFO. That's not about ethics, but simple professional competence.

Maybe the guy has truly had a revelation and changed. But his story just rings incredibly hollow. It's very hard to explain his actions as taken by somebody who thought he was following all the rules but trying to be clever and lacking an ethical framework. He was intentionally stealing tens of millions of dollars from the company's shareholders. The only way he really believed this wasn't in violation of some (legal or professional) rules is if he was astonishingly incompetent.

Would learning about ethics earlier have stopped him from doing what he did? I'm a bit skeptical. He almost certainly would have already understood what he was doing was wrong at the time. He did it because he thought he'd be able to get away with it.

 

[NextLevel]

It's impossible to know what is going on inside someone else's head, but to me Fastow's story seems plainly self-serving. I find it very hard to believe he didn't understand at the time he would get in very serious trouble if people discovered what he was doing.

Even if we accept his explanation that he thought he was following the letter of the law, there are other rules people are expected to follow. For example, the requirements of your job. He must have been aware he was violating standard responsible accounting practices, which -- illegal or not -- was clearly in negligence of his duties as CFO. That's not about ethics, but simple professional competence.

Maybe the guy has truly had a revelation and changed. But his story just rings incredibly hollow. It's very hard to explain his actions as taken by somebody who thought he was following all the rules but trying to be clever and lacking an ethical framework. He was intentionally stealing tens of millions of dollars from the company's shareholders. The only way he really believed this wasn't in violation of some (legal or professional) rules is if he was astonishingly incompetent.

Would learning about ethics earlier have stopped him from doing what he did? I'm a bit skeptical. He almost certainly would have already understood what he was doing was wrong at the time. He did it because he thought he'd be able to get away with it.

I don't think learning about ethics would have stopped him, and I don't think he always describes it as ethics - he makes it more about a form of risk management. There are lots of incentives short of getting put into jail that reward short term corporate decision making over longer term investment and business building, just not all such decisions are deemed fraudulent and not all of them can or do get you in jail. Being able to mark asset values to market and report earnings in the absence of cash flow and also to hide operating leases from the balance sheet were examples of things that were used to manipulate profitability. What does often happen and the example he gave here resonated with me is when a rule mandates presenting a value, yet that value underestimates the true risk of the business. As an analogy, say you are told to report the average of your results your last 10 100m runs. On your very last run, you stub your toe and your time goes up by 3 seconds. You are required to report the average of your last 10 runs but not mandated to report your last run time, even though that might be a better indicator of your current run time than your last 10. Are you ethically obligated to report your very last run time even though it is not required?

Usually, in accounting and finance circles, you are sometimes castigated for doing anything other than reporting just the average because doing more than that would hurt the perception of your business even though it is a better predictor of your future times.

In any case, I appreciate the perspective and the skepticism towards Fastow. After all, he is getting paid for these engagements.

 

[ShakehandJpenCpenEnjoyer]

I have a question: can i hide threads unrelated to table tennis in my homepage? If i want to read random topics i will go to reddit, not here.
Thank you 😊

 

[NextLevel]

I have a question: can i hide threads unrelated to table tennis in my homepage? If i want to read random topics i will go to reddit, not here.
Thank you 😊

Yeah, I picked a really unpopular topic. Will stick to equipment junkie posts.

 

[ShakehandJpenCpenEnjoyer]

Yeah, I picked a really unpopular topic. Will stick to equipment junkie posts.

Your topic is fine bro. Look at the replies, people were engaged in the conversation. One person even said he liked it that random topic thread was shown in his homepage.
But also it looks like some people including me wants to keep our homepage only tt related. So it would be a feature to keep everyone happy 😁

 

[NextLevel]

Your topic is fine bro. Look at the replies, people were engaged in the conversation. One person even said he liked it that random topic thread was shown in his homepage.
But also it looks like some people including me wants to keep our homepage only tt related. So it would be a feature to keep everyone happy 😁

That would be an interesting functionality. Will propose it and see how it goes. It might already be avaliable, sometimes all these forum software comes with bells and whistles that no one ever learns about.

 

[Tyce]

So what's next, a video of Samson Dubina on how to handle personal contact with students?

Pretty much the same, but more TT related.

 

[NextLevel]

So what's next, a video of Samson Dubina on how to handle personal contact with students?

Pretty much the same, but more TT related.

The weird thing is that lots of business schools and businesses have a very different sentiment from the predominant one expressed on the forum about whether it is worth listening to Andy about risk and ethical topics.

That said, I understand that his being a criminal and what he was charged for as well as the plausibility of him being remorseful make this a cut and dried case for most people. And I find that position very reasonable.

 

[DrBean]

I agree, and maybe I am too fact-finding focused to appreciate the damage he did to people's lives. The CFOs, directors and managers he spoke in front of didn't lynch him, and what he spoke about made a lot of us reflect on what it meant to hide behind following the rules when we put lipstick on our companies to sell them.

Interesting contrast, as I interpret from your first sentence the principle and ethics seem to be more important than the practical effects. Something like people should strive to uphold ethics and morality because it is by definition ethical and moral, rather than ethics and morality exist to serve individuals.

 

[NextLevel]

Interesting contrast, as I interpret from your first sentence the principle and ethics seem to be more important than the practical effects. Something like people should strive to uphold ethics and morality because it is by definition ethical and moral, rather than ethics and morality exist to serve individuals.

Maybe my intended meaning isn't properly communicated - I am not the most precise writer on most days so forgive me. He told the story of the Jewish rabbi equivalent of the supreme court and how one of them proposed a question for discussion - if you took all the laws/rules prescribed by Judaism and you excluded the imprecise, overarching law asking you to "be holy/good", could you live a good life by following all rules without also considering the requirement to be good (or following the spirit of the rules)? He said the rabbis unanimously ruled no.

I wouldn't say that the practical effects stand apart from the rules (that I think is a different argument in philosophy) but the main issue is whether it is possible to be a good person if you follow rules to the letter while trying to violate the spirit of the rules (find loopholes). So saying that he followed the rules or that what he did was legal was not the same as saying that what he did was right. But he carried it further to show that many finance/accounting people tend to excuse misleading information when it is shown to plainly follow the rules.

Is it ethical to not disclose negative things about you that increase the value of what you are selling because it is legal to do so? And should you go out of your way to find rules that enable you to avoid disclosing negative things?