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Fastow has Jekyll and Hyde image, friends say
The last time Andrew S. Fastow got in a public brawl about money, it was with a cab driver and concerned a 70-cent tip. The cabbie got so upset he punched Fastow in the face.
This morning on Capitol Hill, Fastow will get slammed again. Members of Congress are lining up to lambaste Enron's financial genius for the collapse of a company worth $60 billion a year ago.
Fastow, who was subpoenaed to testify, is all but certain to stay silent, pleading his Fifth Amendment right against self-incrimination. He's kept quiet since his forced resignation from Enron at the end of October in the wake of disclosures that obscure partnerships he controlled had soured. It was an admission that led directly to Enron's Dec. 2 bankruptcy.
If Fastow has been unwilling to explain himself, a stream of further revelations are yielding a portrait. An internal Enron report released last weekend showed him bullying employees into giving his partnerships a better deal at the expense of Enron. Meanwhile, through just one partnership, Fastow was converting a $25,000 investment to $4.5 million in two months.
The picture that emerges is of a greedy, self-dealing executive whom others dare not cross. Friends say they find that image impossible to reconcile with the synagogue-going, happily married, stand-up guy they know.
It's as if there were two Andy Fastows.
"It certainly wouldn't be the first time someone was one way inside work and another way outside it," said Bobby Lapin, a Houston attorney and a longtime friend. "Jeffrey Dahmer's neighbors said he was such a sweet, friendly guy."
As Enron's chief financial officer, Fastow played a key role in transforming an old-fashioned pipeline company into a high-tech, highly leveraged trading company with few fixed assets. "Andy has the intelligence and the youthful exuberance to think in new ways," Jeffrey Skilling, then Enron's president, said in an interview two years ago.
Investigators are struggling to determine how much responsibility Skilling as well as former chairman Kenneth Lay bear for Fastow's "new ways," which ultimately proved highly destructive. Fastow, now 40, supercharged Enron's growth through a range of instruments that kept the company's debt off its balance sheet, where it might hobble its credit rating and scare away investors. Such devices aren't unusual; what was extraordinary is the way they entangled Enron's interests with Fastow's.
One of the partnerships that Fastow devised was named LJM, after his wife Lea and two sons. Some Enron employees worked for LJM or its successor, LJM2, where they sat next to Enron employees who were negotiating with them. Both groups reported to Fastow.
"I find myself negotiating with Andy on Enron matters and am pressured to do a deal I do not believe is in the best interests of the shareholders," Enron treasurer Jeff McMahon wrote in a note in March 2000, according to the Enron internal report completed by a special board committee led by Texas law school dean William Powers Jr.
Over time, the report indicates, Fastow increasingly favored the private partnerships over the public company.
In May 2000, for example, Enron Broadband Services needed to sell a portion of its fiber optic cable network to help the second-quarter bottom line. It decided to dispose of some unactivated "dark" fiber.
The negotiations between the broadband team and LJM2 didn't immediately bear fruit. Fastow complained directly to two of the Enron negotiators that they were putting LJM2 in a difficult position by selling it the dark fiber, which could take as much as a year to be certified for use.
Fastow's involvement caused "great distress" for the broadband team, the report says. "They understood that their job was to get the best possible deal for Enron, but driving a hard bargain for Enron drew the ire of Enron's CFO."
The deal was sweetened in LJM2's favor, just like Fastow wanted.
Overall, according to Enron, Fastow made about $30 million from LJM. That's in addition to the $23.4 million he made in stock sales in 1999 and 2000.
That's a lot of money even by the standards of the late '90s boom, especially to a guy who would be willing to confront a cabbie over pocket change. In that 1985 Chicago incident, which was confirmed by a Fastow spokesman, Fastow expected a driver to give him 70 cents in change. The driver claimed he couldn't, so Fastow took back $1 and replaced it with the 30 cents due. The cabbie, who had previously been suspended 14 times, threw a punch, for which he was suspended again.
As prominent members of the community, the Fastows have a number of ties to local nonprofit or religious groups. But a number of organizations say these relationships are sometimes being overstated in media reports.
Fastow headed the committee for an annual fund-raising dinner for Houston's Holocaust Museum, and also was involved in early organizational work for his synagogue. But neither group considers him a major benefactor.
"The reality is the Fastows have been members, supporters, but not uniquely philanthropic," said Rabbi Shaul Osadchey. But Fastow does stand out in one way, Osadchey noted. If you had told him a year ago that someone in his congregation would be involved in a major financial scandal, "of all the candidates, Andy would have been very low on the list."
Fastow was born in Washington, D.C., grew up in New Jersey and went to Tufts University in Boston, where he got a degree in economics and, in a common move at the time for prospective MBA students, took a number of courses in Chinese. China was the next great market, or so the investment bankers believed; they were eager to hire those who had proficiency in the language.
Fastow married his college sweetheart, Lea Weingarten, who comes from a wealthy Houston real estate family. In 1984, while Fastow got his MBA from Northwestern, they both went to work for Continental Bank in Chicago.
Continental was attempting to emerge from the shadow of the biggest financial scandal of the early '80s. A small Oklahoma Bank called Penn Square had made so many bad loans that it went under, nearly dragging its partner Continental down with it. With its lending operation still under a cloud, Continental tried to make money by branching into more complex financial businesses, including loan securitization -- one of several divisions where Fastow worked.
He earned a reputation as a hardened negotiator, but his occasional arrogance stood out. "It was like an athlete putting himself ahead of the team," said a former supervisor, who spoke on condition of anonymity.
When Fastow landed a job at Enron in 1990, bank officers said, they were just as sorry to see the departure of Lea, who also worked at the bank and who some say shone even brighter than her husband. She, too, went to work for Enron.
Eight years later, Fastow became Enron's chief financial officer, a position that often entails schmoozing with Wall Street. But Fastow kept a very low profile. One of his rare interviews was with CFO magazine, which gave him an award in 1999. In a quote that didn't make the interview but was released by the magazine this week, Fastow says, "We probably do our fair share of first-of-their-kind transactions, which is usually good and sometimes isn't but don't quote me on that."
Rep. James Greenwood, R-Pa., chairman of the House Energy and Commerce subcommittee on oversight and investigations, said he expects Fastow to exercise his Fifth Amendment right against self-incrimination at today's hearing.
"I never like to judge people harshly before they're given a chance to talk," Greenwood said. "But this guy won't talk. I just think if somebody says that they take the Fifth Amendment, it's pretty hard to escape the notion that they feel they've committed crimes."