Post-Prison, Former Enron CFO Hits Speaking Circuit

Andrew Fastow acknowledged the irony in the situation: Here he was, the former chief financial officer of Enron and a convicted felon, on stage to give the ethics speech at an oil and gas conference in Houston.

“I’m always surprised when I’m asked to speak at an ethics symposium,” he said. “That’s like asking Kim Kardashian to lecture your daughters about chastity.”

Fastow, the former chief financial officer of Enron Corporation, spent six years in federal prison for money laundering, fraud and conspiracy before being released in 2011. His off-balance sheet financing and accounting methods eventually helped bring the company down.

Now, he travels to business schools and conferences, giving a canned speech about the gray area between ethics and law. Fastow admitted that he was never asked to speak as CFO, but he now is asked to speak every week.

On Thursday, at the 67th annual oil and gas conference held by the Center for American and International Law, the moderator and Fastow said everything he did as Enron CFO was approved by in-house and external counsel, the executive leadership team as well as the company’s board of directors.

He even pulled out a damaged and taped up trophy he received in 2000 from CFO magazine, naming him CFO of the year. Then, he pulled out a small red card — his ID from federal prison.

“I got both of these for doing the same deals,” Fastow said of his trophy and ID card. “How does that happen?”

Fastow explained how he ended up in the situation at Enron and how others might find themselves in similar situations. Not as an excuse, he kept repeating, what he did was wrong.

“As a CFO, you have two tools to meet your goals,” Fastow said. “The first tool is accounting assumptions. The second tool is structured finance. Using those two tools, a CFO can transfer fundamentally what a company looks like.”

Accounting rules, tax laws and security rules are complex and ambiguous, Fastow said. Those ambiguities cause confusion for many companies. They prevent them from taking action.

“I looked at that situation, Enron as an institution looked at that situation, and said, ‘When there’s ambiguity, when there’s complexity, when the rules don’t exist, that’s not a problem, that’s an opportunity,” Fastow said. “By using the law to your advantage. It didn’t matter it was ethical or unethical.”

He said whoever could best exploit the rules, find the loopholes, had the competitive advantage.

While Fastow’s speeches are free, he said that some hedge funds, specifically short-sellers, and sometimes plaintiff attorneys, hire him to look for weaknesses in a company.

Last year, he was asked to look at oil companies. Reading 10-K’s, he noticed early last year that every company showed massive increases in economically recoverable reserves. He later realized that they were all valuing their reserves using the price of oil at $95 per barrel, though at the time the price of oil was around $50 per barrel. While, this seem unethical, the companies, it turns out, were simply following SEC rules about how to calculate the price.

While technically legal, it’s misleading, Fastow said. Using the current price would mean that the companies were overstating their reserve by more than 100 percent.

He reiterated that these examples aren’t to condone his actions but to show that these ethical dilemmas are still present today. And while they might be technical lawful, when something goes wrong the Justice Department might not agree.

After his speech, you could hear mixed reviews mumbling from the crowd. Most admitted it was entertaining, while one woman said it was the best ethics speech she ever heard because most were boring. Another man said while the speech was entertaining, he felt uncomfortable that the man behind the destruction of so many lives could just go up there and speak. Another attorney wondered if speaking publicly was part of his plea deal.