|Andrew Stuart Fastow|
|Born||December 22, 1961
Washington, D.C., U.S.
|Charge(s)||conspiracy, wire fraud, securities fraud, false statements, insider trading, and Money laundering|
|Penalty||six years, followed by two years of probation|
Andrew Stuart Fastow (born 22 December 1961) was the chief financial officer of Enron Corporation until the U.S. Securities and Exchange Commission opened an investigation into his conduct in 2001. 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 their massive losses. He is currently serving a six-year prison sentence for charges related to this conduct.
Fastow was born in Washington, D.C. He grew up in New Providence, New Jersey, the middle of three sons. His parents, Carl and Joan Fastow, worked in merchandising. Andy graduated from New Providence High School, where he took part in student government, played on the tennis team, and played in the school band. He was the sole student representative on the New Jersey State Board of Education.
Fastow graduated from Tufts University in 1983 with B.A.s in economics and Chinese. While there, he met his future wife, Lea Weingarten, whom he married in 1984. He and his wife are both Jewish and have 2 children. Her family had founded a grocery store chain in Houston and later entered the real estate business. Fastow and Weingarten both earned MBAs at Northwestern University and worked for Continental Illinois National Bank and Trust Company in Chicago.
While at Continental Illinois, Fastow worked on the newly emerging "asset-backed securities" - a system of raising capital by selling notes backed by risky loans. The practice spread across the industry "because it provides an obvious advantage for a bank," noted the Chicago Tribune. "It moves assets off the bank's balance sheet while creating revenue." Continental became the largest U.S. bank to fail in American history until the seizure of Washington Mutual in 2008.
While working with Enron, Andrew Fastow proved himself to be extraordinarily intelligent, and an asset to the company. He was familiar with the market and knowledgeable in how to play it in Enron's favor. This quickly drew the attention of then chief executive officer of Enron Finance Corp Jeffrey Skilling. Skilling, together with Enron founder Kenneth Lay, was constantly concerned with various ways in which he could keep company stock prices up, in spite of the true financial condition of the company.
Fastow was more than ready for the job. He was able to design a complex web of companies that solely did business with Enron, with the dual purpose of raising money for the company, and also hiding its massive losses in their quarterly balance sheets. This effectively allowed Enron to appear debt free to investors and analysts, while in reality it owed more than 30 billion dollars at the height of its debt. While presented to the outside world as being independent entities, in fact the funds Fastow created to take write-downs off Enron's books were guaranteed not to lose money in side handshake deals and Fastow himself had a personal financial stake in them, either on his own or through a partner. Fastow made tens of millions of dollars defrauding Enron in this way, while also neglecting CFO basics such as knowing cash on hand and total liabilities. Fastow reportedly pressured some of the largest investment banks in the United States, such as Merrill Lynch, Citibank, and others to make investments in his funds or lose Enron business, and the banks readily complied. Fastow also reportedly got analysts fired who dared to give Enron negative ratings. (see Conspiracy of Fools)
Fastow's approach to hiding losses was so effective that the year before Enron actually declared bankruptcy, a year in which the company was already well on its way to financial collapse, the Enron stock was at an all time high of 90 dollars per share. Ultimately it would drop down to 40 cents per share, but not before many employees had been told to invest their savings in Enron stock.
On October 31, 2002, Fastow was indicted by a federal grand jury in Houston, Texas on 78 counts including fraud, money laundering, and conspiracy. On January 14, 2004, he pled guilty to two counts of wire and securities fraud, and agreed to serve a ten-year prison sentence. He also agreed to become an informant and cooperate with federal authorities in the prosecutions of other former Enron executives in order to receive a reduced sentence.
Prosecutors were so impressed with his performance that they ultimately lobbied for an even shorter sentence for Andy Fastow. He was finally sentenced to six years at Oakdale Federal Correctional Complex in Oakdale, Louisiana.
On May 6, 2004, his wife, Lea Fastow, a former Enron assistant treasurer, pleaded guilty to a misdemeanor tax charge and was sentenced to one year in a federal prison in Houston, and an additional year of supervised release. She was released to a halfway house on 8 July 2005.
After entering into a plea agreement with a maximum penalty of
10 years in prison and the forfeiture of US$23.8 million in family
assets, on September 26, 2006, Fastow was sentenced to six years,
followed by two years of probation. U.S. District Judge Ken Hoyt
believed Fastow deserved leniency for his cooperation with the
prosecution in several civil and criminal trials involving former
Enron employees. Hoyt recommended that Fastow's sentence be served
at the low-security Federal Correctional Institution in Bastrop,
Texas. As of February 2009, Fastow is Inmate #14343-179 at the ADX Florence near Florence,
Colorado with a projected release date of December 17,
In 2003, Fastow was a prominent figure in 24 Days: How Two Wall Street Journal Reporters Uncovered the Lies that Destroyed Faith in Corporate America,, by the reporters who had broken some of the key stories in the saga, Rebecca Smith and John R. Emshwiller. They painted Fastow as in their words "a screamer, who negotiated by intimidation and tirade."
Also in 2003, Bethany McLean and Peter Elkind wrote the book The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron ISBN 1591840082. In 2005, the book was made into a film Enron: The Smartest Guys in the Room.