The Webster definition of ethics is “conforming to accepted standards of conduct; moral, and principled.” A fascinating event occurred recently at the annual meeting of the Association of Certified Fraud Examiners in Las Vegas. One of their keynote speakers was Andy Fastow, the convicted Enron CFO who finished his five year prison term in 2011. The Association management and Fastow made it clear that he was not being paid for his appearance.
He began his talk by saying “First of all, let me say I’m here because I am guilty…I caused immeasurable damage…I can never repair that. But I try, by doing these presentations, especially by meeting with students or directors to help them understand why I did the things I did, how I went down that path, and how they might think about things so they also don’t make the mistakes I made.” He then said “the most egregious reason why I am guilty” is that I spearheaded the effort to “intentionally create a false appearance of what Enron was – it made Enron look healthy when it wasn’t.”
He then elaborated: “accounting rules and regulations and securities laws and regulations are vague. They’re complex…What I did at Enron and what we tended to do as a company was to view that complexity, that vagueness…not as a problem, but as an opportunity.” The only question was “do the rules allow it – or do the rules allow an interpretation that will allow it.”
Basically, they convinced themselves, and their accounting firm, that for each of the financially-sophisticated, off-balance-sheet entities they created, there was an interpretation of the accounting rules that could be assembled that made them legal and acceptable. The problem was that the net result gave the public an incorrect perception that Enron was financially healthy, and it wasn’t. They knew they were fooling the public and Wall Street. That is a crime and is unethical.
Today Andy Fastow lives a very humble life. He lives in Houston with his wife and two children and works 9-5 as a document-review clerk at the law firm that represented him in civil litigation. He has given 14 unpaid talks, mostly at universities, usually with no press allowed.
Fastow’s story is a great lesson in ethics. Great leaders take such lessons to heart.