Fastow: Enron's bosses knew of fraud
Former CFO unwittingly helped unleash reforms that help today's finance officers fight corruption.
In 2000, when Enron was still in its heyday, Andrew Fastow estimated he had created $800 million in income for the company - an accomplishment that won him praise at his performance review.
Enron CEO Jeffrey Skilling told him he had a "creative" financial mind, "because I came up with things other companies would not have come up with," said Mr. Fastow from the witness stand this week in one of America's most closely watched trials involving corporate fraud.
In dramatic testimony, Fastow is proving to be the key figure - not only in the trial here of Enron's two corporate chiefs but also in the chain of events that led to the Sarbanes-Oxley Act of 2002, the most sweeping accounting reform in decades. As a chief financial officer whose fraudulent deals were at the heart of one of corporate America's biggest collapses, Fastow has unwittingly helped strengthen the role of America's CFOs as guardians against corruption.
"Initially a lot of CFOs felt tarnished by Andy Fastow and other CFOs who committed fraud," says Julia Homer, editor in chief of CFO Magazine. "But to their surprise, Sarbanes-Oxley had the paradoxical effect of increasing their stature within companies."
At the trial itself, Fastow is the central figure for both the prosecution and the defense. In a deal with prosecutors, Fastow agreed to testify in exchange for a reduced sentence. He pleaded guilty in 2004 to two counts of fraud and agreed to 10 years in prison and a $24 million fine.
Prosecutors hope his testimony this week will prove that his bosses, Mr. Skilling and Enron founder Kenneth Lay, knew about and actively promoted his fraudulent activities.