Andrew Fastow draws on Enron failure in speech on ethics at CU
By Mark Jaffe
The Denver Postdenverpost.com
Posted: 03/20/2012 01:00:00 AM MDT
Updated: 03/20/2012 03:53:21 PM MDT
Andrew Fastow, former chief financial officer of Enron, speaks Monday to Leeds School of Business students, faculty and staff at Macky Auditorium at the University of Colorado at Boulder. (Patrick Campbell, University of Colorado)
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Andrew Fastow, the former Enron chief financial officer who went to prison for securities fraud, told an audience at University of Colorado-Boulder Monday night that following the rules isn't enough.
"When I was initially charged I still thought I was not guilty because I had followed the rules," Fastow told more than 1,000 students at the Leeds School of Business session at Macky Auditorium.
Fastow told the more than 1,200 students that it took him a couple of years to realize he had "used the rules to subvert the rules."
"Therefore I am guilty," said Fastow, who completed a six-year prison sentence in December.
The complex off-balance sheet that Fastow created to funnel tens of millions of dollars into executives' pockets and hide corporate losses contributed to the collapse in 2001 of the energy trading giant, which had once been valued at $60 billion.
"I didn't think I was committing fraud," Fastow said. "But the net effect of all these deals was to create a misrepresentation of the company."
The key problem, Fastow told the students, was that when rules are vague and complex it creates "a business opportunity."
"There are people who look at the rules and find ways to structure around them. The more complex the rules, the more opportunity," Fastow said.
That was what Enron was doing, Fastow said, with the approval of the board of directors, attorneys and accountants. "I thought we were freakin' geniuses," he said.
"The question I should have asked is not what is the rule, but what is the principle," Fastow said.
Fastow contacted the university and asked if he could speak to students. He had read an op-ed column, published by Bloomberg BusinesWeek in January, written by Leeds Dean David Ikenberry and Donna Sockell, director of the school's Center for Education on Social Responsibility. The piece was about the need for deeper ethics training in business schools.
"Enron was an incredible corporate failure," Ikenberry said. "And this was a unique teaching opportunity."
Fastow fielded questions from CU students for about 40 minutes tonight. They asked him if he thought his punishment was adequate for the harm he had done. Fastow said he had served the sentence the court gave. One student asked how much money Fastow still had. The former Enron executive said that it was none of the student's businesses.
One asked what Fastow thought about mark-to-market accounting, which allows the value of an asset to be changed as its market value fluctuates. It was another accounting device Enron used to inflate value.
"Mark-to-market accounting is like crack," Fastow replied. "Don't do it."
Mark Jaffe: 303-954-1912 or mjaffe@denverpost.com
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