This post is part of a feature in which he wonder whatever happened to some notorious financial felons. See all 17.
There was one company that I believed in during my journalism career. It was a scrappy underdog challenging the establishment and made scads of money. Back in the day, it was sure easy to root for Enron, and Andrew Fastow was one of the reasons why.
Fastow was not suave like his boss Jeffrey Skilling -- whom I met several times -- and lacked the people skills of President Bush's pal Chief Executive Ken "Kenny boy" Lay. No, Fastow was a humorless number cruncher. His importance to Enron can not be overemphasized. As Time magazine notes, "Fastow had a skill Skilling needed; he did asset 'securitization,' a means for banks to sell off risk in the form of securities backed by mortgages or other obligations."
Wow, the roots of today's financial difficulties can be traced back to Enron!
There is nothing evil. about special-purpose entities. At first, Enron's initial investors did well because the deals were straightforward. CalPERS, put $250 million into an spe called jedi i, which invested in natural gas projects. Four years late, the California State Pension Plan CalPERS got back $433 million, a 73% return over four years.
But Fastow and his investors got deep in trouble. As the volume of deals increased to meet Skilling's aggressive growth targets, the returns got thinner and thinner, and the hard assets behind the first partnerships were later supplanted by stock or guarantees from Enron.
Fastow worked hard to enrich himself and others who could be of use to him. One was Enron lawyer Kristina Mordaunt, who in March 2000 was invited into a Fastow venture called Southampton Place. She put down $5,800, expecting to make a little money over time, her lawyer Hayden Burns told Time.
Only a few weeks later, she got a call from Michael Kopper, a Fastow associate, who said the deal was winding down. When Mordaunt opened her bank statement in April, she saw a deposit for $1 million, the magazine said. Burns says his client did nothing in return for the windfall. She wasn't the only winner in Southampton Place: Fastow and Kopper each turned a $25,000 investment into $4.5 million, Time said.
In May 2004, his wife, Lea Fastow, a former Enron assistant treasurer, pleaded guilty to submitting a fraudulent income tax return that did not include profits her family had received from her husband's off-the-books partnerships. She served one year in a federal prison in Houston, and an additional year of supervised release. Fastow currently is in prison.