Fastow Thoughts

Posted on March 25, 2012


Last night, I went to a talk by Andrew Fastow, hosted by the Leeds Business School’s Center for Education on Social Responsibility. For the students in the audience, the message was important: following the rules is not enough. He acknowledged that he should do more: “The question I should have asked is not what is the rule, but what is the principle.”

I had a personal interest in the talk. While Fastow was creating Byzantine financial structures to hide Enron’s debt, I was working at Qwest, where similar financial manipulations would land its CEO in jail. I was much farther down in the company, and I was fortunate to be assigned to regulatory issues that had nothing to do with any unsavory activities. But some of the things Mr. Fastow talked about reminded me of Qwest. He talked about the nasty relations among senior executives and the continual sense of panic about meeting the numbers every quarter. That atmosphere at the , which was certainly true at Qwest.

I would add another thing: an unwillingness to accept no for an answer. Most senior executives want employees with a “can-do” attitude, and they will challenge people who tell them they can’t do what they want. A good executive has the judgment to stop when he is convinced that his people are right. At Qwest, Joe Nacchio and his team never showed that kind of judgment. They would continue to pose increasingly-absurd hypotheticals until you had to admit that if hundreds of unlikely things all came to pass, the answer could be yes. Mr. Fastow did not fess up to this (although he did admit a lot), but there are numerous reports of him badgering accountants and lawyers, threatening to cut off all Enron business unless they found a way to say yes.

While Skilling, Nacchio, et al. claim that they were following the rules and just lost sight of the larger picture, in reality, they deliberately created an environment where questioning whether they were actually following the rules was not allowed.

Posted in: Ethics