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Andrew Fastow

Skilling officially sprung

There he goes.

Jeffrey K. Skilling, the former Enron CEO who spent the past 12 years in prison for his role in masterminding one of most notorious corporate fraud cases in history, was released from federal custody on Thursday, the Bureau of Prisons said.

In August, Skilling was released to a halfway house at an undisclosed location from a minimum security federal prison camp in Alabama.

Enron’s collapse cost investors billions of dollars and wiped out the retirement savings and jobs of thousands of employees. Skilling, 65, was convicted of 12 counts of securities fraud, five counts of making false statements to auditors, one count of insider trading and one count of conspiracy in 2006 for his role in hiding debt and orchestrating a web of financial fraud that ended in the Houston company’s bankruptcy.

He was sentenced to 24 years in prison and fined $45 million, the harshest sentence of any former Enron executive. Six years ago, Skilling’s sentence was reduced to 14 years by U.S. District Judge Sim Lake.

See here for more on Skilling’s release to the halfway house last year. One of the conditions of his release then was that he had to get a job, but I’m not able to find any information about what that might have been. If he eventually winds up on the speaking circuit like Andy Fastow, I won’t be surprised. In the meantime, I don’t know what there is to make of this news. He did his time and now he’s out, and we’re all that much older. I wonder how long it will be before we see his name in the news again.

Andy Fastow’s second act

I don’t know what to make of this.

Andrew Fastow

“I’m always surprised when people ask me to speak about business ethics; it’s like getting Kim Kardashian to speak about chastity.”

These words, from the lips of Andrew Fastow, elicit generous laughs from a roomful of bankers and attorneys at Dallas’s Belo Mansion this past September. Over the course of the next hour, he will give a talk on the subject of corporate ethics entitled “Rules Vs. Principles” to the local chapter of the Turnaround Management Association, a talk regularly punctuated with lines like the above, lines designed to show he is fully aware of the evening’s irony. Fastow is bluntly, emphatically apologetic throughout, regularly returning to a mantra he seems to genuinely embrace: “I went to jail because I was guilty.”

He is in his early 50s but looks younger, especially for a man who spent five years in federal prison following his indictment by a federal grand jury—and subsequent guilty plea—on 78 counts of money laundering, fraud, and conspiracy. He looks handsome in an Aaron Sorkin sort of way, charming and charismatic, brilliant and quick-witted. Watching Fastow in Dallas, it’s easy to see how he became Enron’s financial wunderkind, CFO of what would become the seventh-largest company in America, at 36.

And then, a month and a half after his Dallas engagement, his nationwide redemption tour makes a stop in Houston.

It is a cool, rainy night downtown, and the ballroom at the Magnolia Hotel is as packed as Belo’s was. The speaker and his talk are the same, and the resemblance between Houston’s well-groomed, besuited TMA members and Dallas’s is uncanny. Still, something seems different. We notice that Fastow doesn’t seem to have gotten a haircut in the intervening weeks. We notice that he appears a bit disheveled and fidgety as he ascends to the podium.

“This is very uncomfortable for me,” he begins after a short, pensive silence. “Every time I do one of these presentations it’s uncomfortable, but especially so in Houston. I apologize ahead of time if I seem nervous, but I am.” A few minutes later, he gains enough footing to address the scandal head-on: “It embarrassed Houston tremendously. The impact on Houston was substantial. I wake up to this every day. I am tremendously embarrassed, ashamed, and most importantly, I’m very sorry.”

Many people, even former Enron employees, don’t seem to realize that Fastow is back. Released from a Louisiana federal prison camp in 2011, he returned to the Bayou City, his wife, Lea, and the couple’s two sons. Lea spent only one year in prison for her small role in the Enron financial scandal—she pled guilty to income tax fraud—while Andrew served a year for nearly every one he spent as CFO, every year he spent concocting new special-purpose entities to mask Enron’s enormous debts and support the off–balance sheet financing and mark-to-market accounting schemes that finally brought the company down. Enron presaged later scandals at Wall Street’s “too big to fail” banks and ushered in the Sarbanes-Oxley act, aimed at preventing such failures and frauds from disrupting the American economy in the future.

Fastow has apparently been giving lectures on business ethics for awhile now. I’d have gone with a Willie Sutton analogy rather than a Kim Kardashian one, but props to him for keeping up with pop culture. As I said, I don’t really know what to think about this. He’s done his time, and he’s hardly living large these days. I can’t honestly say that I wish him well, but I have no reason at this point to wish him ill. I hope he can do something good with the rest of his life.

Enron, ten years after

Ten years ago today, on December 2, 2001, Enron officially collapsed. Apparently, you can buy some memorabilia cheap on eBay, which is fitting in a weird way. The Chron had a bunch of Enron look-back stories on Sunday to commemorate. Where are all of the defendants now? With the exception of Jeff Skilling, they’re all pretty much disentangled from the justice system. Even Andy Fastow‘s sentence is up this month. Employees who lost their retirement funds wish it were that neat for them. And of course, as a country we basically learned nothing from the Enron experience. Isn’t that usually how it goes?

Skilling conviction upheld

Some Enron news for you:

A U.S. Supreme Court decision does not undo any of the convictions against former Enron CEO Jeffrey Skilling, but his case should still be sent back to a Houston judge for resentencing, an appeals court said on Wednesday.

Last June the Supreme Court ruled that one of the theories behind Skilling’s 2006 jury conviction for conspiracy — the honest-services fraud theory — should not have been used in instructions given to the jury. The high court sent the issue back to the 5th U.S. Circuit Court of Appeals to determine if the use of the theory invalidated any of the charges.

In a ruling filed Wednesday afternoon the 5th Circuit said it found the error “harmless” and affirmed the convictions. See the document below.

Skilling will still be resentenced by U.S. District Judge Sim Lake, however, based on a prior ruling from the appeals court that the Houston judge applied federal sentencing guidelines improperly.

You can see the ruling here. Tom Kirkendall, who has followed the appeals process for Enron defendants a lot more closely than I have and who has been a consistent critic of their prosecution, was unimpressed.

What is most striking about the Fifth Circuit’s decision is its utter vacuity. For example, the decision contends that there was “overwhelming evidence” that Skilling committed securities fraud by engaging in fraudulent accounting in regard to several Enron units. But the decision fails to cite any of the supposedly “overwhelming evidence” and doesn’t even address the rather important point that the prosecution did not accuse Skilling of falsifying any of Enron’s accounting. In fact, the prosecution didn’t even put on any expert evidence that Enron’s accounting for the allegedly misleading disclosures was wrong, much less false. This tortured logic took this Fifth Circuit panel six months to generate?

Tom says that Skilling is now also able to pursue an appeal of his conviction on grounds of prosecutorial misconduct, so this matter is still far from settled. The news story says that former Enron CFO Andy Fastow is scheduled for release from prison later this year, which will be around the time of the 10th anniversary of Enron’s collapse.