Kelly Hofer
April 16, 2019
Former Enron CFO: From accounting hero to convict
In one hand, Andrew Fastow held the trophy given to him as the chief financial officer of the year from Enronâs heyday when it was hailed as one of Americaâs most innovative companies. But in the other hand, he showed the prison card he received after finishing his six-year sentence for his role in helping to orchestrate fraud of epic proportions. Â
âI got both of these for doing the same deals,â says Fastow, the former CFO of Enron.
âHow is it possible to be the CFO of the year and commit the greatest corporate fraud in American history for doing the same deals? Every single deal I did was approved by Enronâs accountants, by the outside auditors, by Enronâs attorneys, by Enronâs outside attorneys, by the bankâs attorneys when appropriate and by Enronâs board of directors,â he said.
âIf I had to sum it up in one word, the word I use is âloopholes.â A loophole means youâre technically following the rules, but youâre intentionally going around the principle of those rules.â
Fastow, the keynote speaker at the âs (CCAL) annual year-end celebration on April 11, addressed the audience of students, faculty, staff and community members via webcast from Houston. He began the presentation taking full responsibility for his actions describing them as wrong, unethical and illegal.
âIn fact, I consider myself probably the person most responsible for Enronâs downfall.â
Fastowâs remarks focused on what he was thinking while in the role. He became renowned for studying the rules and finding ways to make deals that could take advantage of accounting assumptions and structured financing practices.Â
âWhen I was CFO, I believed that if Iâm getting permission and following the rules that by definition my behaviour was reasonable, what a reasonable person under normal circumstance would do. But I am the poster boy to prove thatâs not the case that in fact you can find ways and will come across ways to be the hero but violate the principles of the rules.
âIf the only standard you use to make a decision, like me, is whether or not youâre following the rules, why wouldnât you do the next more aggressive transaction? Why would you ever stop?â
After his remarks, a panel of experts including Gina Campbell, partner at Deloitte, weighed in. As a forensic accountant, Campbellâs role is to investigate fraud and said some of the cases sheâs investigated also lasted for a decade before being detected.Â
Kelly Hofer
âWhat happens is over time they have to keep getting bigger and bigger because generally the underlying operations of the business tend not to get better and once you start perpetuating fraud on the financials, you have to keep making those journal entries or transactions bigger and bigger, riskier and riskier and ultimately they get caught or somebody blows the whistle,â she said. Â
Haskayneâs CCAL was launched in 2012 with a mandate to help develop the next generation of ethical business leaders as a result of the global financial crisis of 2008 and its lack of ethical leadership.
âWe chose this speaker deliberately after much debate and discussion,â says CCAL director Glenda Reynolds. âEven though it may seem odd to bring a convicted felon to speak about ethics, we think it is important to understand and learn about ethics from real cases, including failure at the top.â
°Őłó±đÌę has been taught in business schools for years now and with Thursdayâs event, students were given the same opportunity as students at Harvard,Ìę,Ìę and Stanford to hear from Fastow, who has also recently spoken at conferences organized by CPA Canada, the United Nationsâ Principles of Responsible Management Education Conference and the FBIâs Advanced Financial Crimes Seminar.
According to Fastow, because of rules like  that came into effect as a result of Enronâs collapse, many people believe Enron was a failure of compliance. He disagreed.
âWhat Enron was was a culture failure. It was a culture of loopholes where the principles didnât matter, only technical adherence to the rules,â said Fastow.
Mac Van Wielingen, the Calgary business leader who helped found CCAL, closed the evening stressing the importance of culture.
âThe reality is that culture is incredibly powerful, not just with respect to ethics, but with respect to performance,â said the founder of ARC Financial.
âItâs not just about wrongdoing, great culture will implicitly embrace learning, commitment transparency, accountability, trust and reliability. That creates support and collaboration and you can all move together towards common goals and that creates performance.â