Andrew Fastow

Q: How long did Andrew Fastow serve in prison?

Fastow was sentenced to 6 years in federal prison and served approximately 5 years, being released in December 2011.

Andrew Fastow
Born:	December 22, 1961; Washington, D.C.
Charges:	Conspiracy, wire fraud, securities fraud, false statements, insider trading, money laundering
Sentence:	6 years in federal prison, followed by 2 years of probation
Facility:	Federal Prison Camp, Pollock, Louisiana (served)
Status:	Released December 16, 2011

Andrew Stuart Fastow (born December 22, 1961) is an American convicted felon and former Chief Financial Officer of Enron Corporation who played a central role in the company's accounting fraud that led to one of the largest corporate scandals in U.S. history. Fastow was sentenced to six years in federal prison for his role in creating complex financial structures that concealed Enron's massive losses while personally profiting tens of millions of dollars.1(#cite_note-biography-1)

Since his release in 2011, Fastow has worked as a public speaker on business ethics, using his experience to warn others about the dangers of technical compliance without ethical consideration.2(#cite_note-ethics-2)

Early Life and Education

Andrew Stuart Fastow was born in Washington, D.C., and grew up in New Providence, New Jersey, the son of middle-class Jewish parents Carl and Joan Fastow, who worked in retail and merchandising. At New Providence High School, Fastow participated in student government, played tennis, and performed in the school band. He was the sole student representative on the New Jersey State Board of Education.3(#cite_note-education-3)

Fastow graduated from Tufts University in 1983 with a Bachelor of Arts in Economics and Chinese. While at Tufts, he met his future wife, Lea Weingarten, daughter of former Miss Israel 1958 Miriam Hadar Weingarten. They married in 1984 after both earned MBAs at Northwestern University.4(#cite_note-marriage-4)

Early Career at Continental Illinois

Both Fastow and his wife worked for Continental Illinois bank in Chicago after completing their MBAs. At Continental, Fastow worked on the newly emerging practice of "asset-backed securities," which the Chicago Tribune noted provided "an obvious advantage for a bank" because "it moves assets off the bank's balance sheet while creating revenue."5(#cite_note-continental-5)

Continental Illinois became the largest U.S. bank to fail in American history in 1994 (until Washington Mutual's seizure in 2008), providing early insight into the risks of complex financial structures that would later characterize Fastow's work at Enron.

Career at Enron

Joining Enron

Due to his experience with asset-backed securities at Continental, Fastow was hired in 1990 by Jeffrey Skilling at Enron Finance Corp. The deregulation of U.S. energy markets in the late 1990s provided Enron with trading opportunities, and Fastow's financial engineering expertise drew Skilling's attention as a way to maintain high stock prices despite the company's deteriorating financial condition.

Fastow was promoted to Chief Financial Officer at Enron in 1998, a position that would make him central to the company's eventual collapse.6(#cite_note-cfo-6)

Special Purpose Entities

Fastow designed a complex web of off-balance-sheet Special Purpose Entities (SPEs) that appeared to be independent companies but were actually controlled by Enron. These entities served the dual purpose of raising money for Enron while hiding the company's massive losses from quarterly balance sheets.

The SPEs allowed Enron's audited balance sheet to appear debt-free while the company actually owed more than $30 billion at the height of its debt. While presented to the outside world as independent entities, the funds Fastow created were designed to take write-downs off Enron's books and were guaranteed not to lose money.7(#cite_note-spe-7)

Personal Enrichment

Crucially, Fastow maintained personal financial stakes in these supposedly independent entities, either directly or through partners including his lieutenant Michael Kopper. This created massive conflicts of interest that violated basic principles of corporate governance.

Kopper later pleaded guilty to participating in schemes with Fastow that defrauded Enron shareholders of millions of dollars.

LJM Partnerships

The most notorious of Fastow's creations were the LJM partnerships, named for his wife Lea and sons Jeffrey and Matthew. When Wall Street Journal reporters discovered that an Enron "senior officer" had recently sold interests in partnerships that had done business with Enron, they initially assumed it was CEO Jeffrey Skilling. However, Enron spokesman Mark Palmer revealed the officer was actually Fastow.8(#cite_note-ljm-8)

During an October 23, 2001 conference call with Enron directors, Fastow revealed he had made $45 million from his work with LJM—a staggering amount, since he claimed to spend no more than three hours per week on LJM work.8(#cite_note-ljm-8)

Neglect of Basic Financial Controls

Fastow became so focused on creating SPEs that he neglected fundamental aspects of corporate finance. Under his watch, Enron operated only on a quarterly basis without implementing procedures for tracking the company's cash flow or debt maturities. When Jeff McMahon replaced Fastow as CFO, he and a "financial SWAT team" discovered Enron had almost no liquidity.8(#cite_note-ljm-8)

Departure from Enron

On October 24, 2001, several banks informed Enron they would not issue loans as long as Fastow remained CFO. The Enron board accepted CEO Ken Lay's recommendation to remove Fastow on October 25, officially placing him on leave, though the board determined it had grounds to fire him for cause.8(#cite_note-ljm-8)

The removal of Fastow revealed the extent of Enron's financial problems. Within weeks, merger talks with rival Dynegy collapsed, and Enron declared bankruptcy on December 2, 2001.

Federal Prosecution

Indictment

On October 31, 2002, Fastow was indicted by a federal grand jury in Houston on 78 counts, including fraud, money laundering, and conspiracy. The charges centered on his role in creating the off-balance-sheet partnerships that concealed Enron's true financial condition while allowing him to profit personally.

Plea Agreement

On January 14, 2004, Fastow pleaded guilty to two counts of wire and securities fraud as part of a plea agreement with federal prosecutors. He agreed to serve a ten-year prison sentence and cooperate with authorities in prosecutions of other former Enron executives.9(#cite_note-plea-9)

The cooperation agreement required Fastow to testify against former colleagues, including Skilling and Lay, providing crucial insider testimony about Enron's fraudulent practices.

Sentencing

On September 26, 2006, U.S. District Judge Ken Hoyt sentenced Fastow to six years in prison followed by two years of probation—four years less than the original plea agreement. Judge Hoyt cited Fastow's cooperation with prosecutors in several civil and criminal trials involving former Enron employees as justification for the reduced sentence.10(#cite_note-sentencing-10)

As part of the plea agreement, Fastow also forfeited $23.8 million in assets.

Judge Hoyt recommended that Fastow serve his sentence at the low-security Federal Correctional Institution in Bastrop, Texas, though he was ultimately incarcerated at Federal Prison Camp near Pollock, Louisiana.

Wife's Conviction

Fastow's wife, Lea Weingarten, who worked as an assistant treasurer at Enron, pleaded guilty to conspiracy to commit wire fraud, money laundering conspiracy, and filing fraudulent income tax returns. Despite a plea bargain proposing five months in jail and five months in home detention, she was sentenced to 12 months in prison, serving her time in 2004.11(#cite_note-wife-11)

Incarceration

Fastow was incarcerated at Federal Prison Camp Pollock in Louisiana from 2006 to 2011. On May 18, 2011, he was released to a Houston halfway house for the remainder of his sentence before his full release on December 16, 2011.12(#cite_note-release-12)

The relatively low-security facility reflected both his status as a white-collar offender and his cooperation with prosecutors. During his incarceration, Fastow reportedly spent time reading and preparing for his eventual return to society.

Life After Prison

Employment

Soon after his release in December 2011, Fastow began working as a document review clerk for Houston law firm Smyser Kaplan Veselka LLP. The position involved reviewing legal documents, representing a significant step down from his previous executive role.13(#cite_note-job-13)

Public Speaking Career

Fastow has developed a career as a public speaker focusing on business ethics and corporate responsibility. In his presentations, he reflects on his crimes at Enron and accepts responsibility for the harm caused:

"I found every way I could to technically comply with the [accounting] rules... But what I did was unethical and unprincipled. And it caused harm to people. For that, I deserved to go to prison."2(#cite_note-ethics-2)

Notable speaking engagements include:

University of Colorado Boulder Leeds School of Business (March 2012)
Association of Certified Fraud Examiners 24th Annual Global Fraud Conference (June 2013)
Miami University business ethics presentation (April 2014)
Multiple universities including University of St. Thomas, University of Minnesota, University of Texas at Austin, University of Houston Bauer College of Business, USC Leventhal School of Accounting, and University of Missouri School of Accounting (February 2015)
Ivey Business School (March 2017, 2018, 2019)
University of Tampa Center for Ethics (October 2017)
National Investor Relations Institute New York Chapter (March 2022)

Investment in KeenCorp

In 2016, Fastow became principal and investor in KeenCorp, a Netherlands-based company that offers analytics and artificial intelligence products monitoring workplace communications including emails, Microsoft Teams chats, Google Suite, and Slack to analyze employee sentiment and engagement.14(#cite_note-keencorp-14)

Fastow's connection to KeenCorp began when the company beta-tested its software using a digital database of Enron emails, providing an ironic full-circle connection to his criminal past.

Impact and Legacy

Enron Collapse

Fastow's financial engineering was central to Enron's collapse, which resulted in:

Bankruptcy of a company once valued at $70 billion
Loss of approximately 20,000 jobs
Destruction of employee retirement savings invested in Enron stock
Dissolution of Arthur Andersen, one of the "Big Five" accounting firms
Passage of the Sarbanes-Oxley Act of 2002 to prevent similar corporate fraud

Legal Precedent

The Enron prosecutions, including Fastow's case, established important precedents for prosecuting complex white-collar crime involving off-balance-sheet financing and special purpose entities. His cooperation was crucial in securing convictions of other Enron executives.

Reform Impact

Fastow's case highlighted the dangers of conflicts of interest in corporate finance and contributed to:

Stricter regulations on special purpose entities
Enhanced disclosure requirements for off-balance-sheet arrangements
Increased penalties for securities fraud
Greater emphasis on corporate ethics in business education

Cultural References

Fastow has been featured prominently in numerous books and documentaries about the Enron scandal:

"24 Days: How Two Wall Street Journal Reporters Uncovered the Lies that Destroyed Faith in Corporate America" (2003) by Rebecca Smith and John R. Emshwiller
"The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron" (2003) by Bethany McLean and Peter Elkind, later adapted into a 2005 documentary film
"Conspiracy of Fools" (2005) by Kurt Eichenwald, which features Fastow as the book's antagonist
The play "Enron" (2009) by Lucy Prebble featured Fastow as a lead character

Personal Life

Fastow and his wife Lea have two sons, Jeffrey and Matthew, whose names were used for the LJM partnerships that became central to the Enron scandal. The family attended Congregation Or Ami, a conservative synagogue in Houston, where Fastow taught Hebrew School.15(#cite_note-personal-15)

Despite the public nature of their legal troubles, the family has maintained a relatively low profile since completing their respective prison sentences.

Lessons and Reflections

In his post-prison speaking career, Fastow emphasizes several key lessons:

1. **Technical Compliance vs. Ethical Behavior**: Following rules technically while violating their spirit can cause tremendous harm 2. **Conflicts of Interest**: Personal financial stakes in corporate transactions create incentives for abuse 3. **Complexity as Concealment**: Overly complex financial structures often hide rather than reveal true economic reality 4. **Corporate Culture**: Pressure to meet earnings targets can lead to increasingly desperate measures 5. **Personal Responsibility**: Individual choices matter, regardless of corporate or legal environments

Frequently Asked Questions

Q: What was Andrew Fastow's role at Enron?

Andrew Fastow served as Chief Financial Officer (CFO) of Enron Corporation from 1998 until October 2001. In this role, he was responsible for the company's financial reporting and created the complex web of off-balance-sheet Special Purpose Entities that concealed Enron's true financial condition while allowing him to profit personally.

Q: How much money did Fastow make from the LJM partnerships?

During an October 23, 2001 conference call with Enron directors, Fastow revealed he had made $45 million from his work with the LJM partnerships. This was a staggering amount considering he claimed to spend no more than three hours per week on LJM-related work.

Q: How long did Andrew Fastow serve in prison?

Fastow was sentenced to 6 years in federal prison in September 2006. He served approximately 5 years, being released to a Houston halfway house in May 2011 and achieving full release in December 2011. He was incarcerated at Federal Prison Camp Pollock in Louisiana.

Q: What happened to Fastow's wife?

Lea Weingarten Fastow, who worked as an assistant treasurer at Enron, pleaded guilty to conspiracy to commit wire fraud, money laundering conspiracy, and filing fraudulent income tax returns. She was sentenced to 12 months in prison and served her sentence in 2004, despite a plea bargain that initially proposed only 5 months in jail plus home detention.

Q: What does Andrew Fastow do now?

Since his release from prison in 2011, Fastow has worked as a public speaker focusing on business ethics and corporate responsibility. He also worked as a document review clerk for a Houston law firm and became an investor in KeenCorp, a company that analyzes workplace communications. He uses his speaking engagements to warn others about the dangers of technical rule compliance without ethical consideration.

Q: How much money did Fastow forfeit as part of his plea agreement?

As part of his plea agreement, Andrew Fastow forfeited $23.8 million in assets. This represented a portion of the money he had made through his illegal activities involving Enron's off-balance-sheet partnerships, though it likely did not capture the full extent of his ill-gotten gains.

References