October 31: Andrew Fastow and Enron

A federal grand jury in Houston indicted Andrew Fastow, former chief financial officer of Enron, on 78 counts of wire fraud, money laundering, conspiracy and obstruction of justice related to the company’s collapse on this date in 2002. Fastow would plead guilty and be sentenced to four years in prison and two years of supervised release, a light sentence granted in exchange for his testimony against Kenneth Lay and Jeffrey Skilling, the top two Enron ganovim (crooks). Before declaring bankruptcy on December 2, 2001, Enron had 20,000 employees as one of the world’s largest energy, communications, and paper companies, and Fortune had named it “America’s Most Innovative Company” for six consecutive years. Fastow’s role had been to establish “limited liability special purpose entities” that enabled Enron to transfer liabilities off its books, which kept its stock prices and credit ratings high while the company was wallowing in fraud and debt. Fastow also successfully pressured investment houses and analysts to invest in his web of “entities” and to ignore warning signs about Enron’s corrupt practices.

“The question I should have asked is not what is the rule, but what is the principle.” —Andrew Fastow