Enron CFO to plead guilty!

[TCO]

Not any more. Left a year after we had dinner. Still it is like being in the mafia...

[JohnT]

Still it is like being in the mafia...

So I've read. Skilling came to Enron by way of his work at McKenzie, which apparently is a common occurance at that firm. And I can understand it: a job that allows you to evaluate potential employers at their expense, while at the same time allowing you to ooh and ahh them with your wizardry? Almost too good an opportunity to pass up.

In chapter 3 of The Smartest Guys in the Room, the culture of McKinsey is described as follows:

Operating on the belief that intellectual brawn is more important than practical experience, McKinsey prefers to hire new consultants straight out of places like Harvard Business School rather than from industry itself. In fact, it's hard to think of a place that believes in the value of brainpower more than McKinsey. The firm spends a great deal of time sorting out stars from the merely superbright; perhaps not surprisingly, those who prosper there often develop a smug superiority. A McKinsey partner once told Forbes: "We don't learn from clients. Their standards aren't high enough. We learn from other McKinsey partners."... Indeed, the firm likes to think of itself as bringing enlightenment to the business world. McKinsey ideas often sound incredibly compelling, even pure, in a way that makes it impossible to believe they could ever be corrupted. But like Skilling himself, McKinsey partners tend to be designers of ditches, not diggers of ditches. When it comes to executing their lofty theories, well, consultants lean toward leaving those messy realities to the companies themselves.

Sound familiar?

[MichaeltheGreat]

Originally posted by Cruddy


But Fastow could not have acted without the go ahead from his superior - sure, he could have embezzled a mountain of dough, but to actually structure a whole company takes more than just being the Chief Financial Officer.

I mean, you sound like "The S.D killed all the Jews in the Holocaust" and then totally ignoring Hitler's role. Factually it's true (Hitler didn't work light his own gas ovens) but it over simplifies responsibility.

Ken Lay (I've known him casually since the mid-'80s) is a very hands-off type of manager - like it or not, you don't put a lot of scrutiny on CFO's and COO's, most likely because there's an implied issue that if you have to scrutinize those positions extensively, you have the wrong people in them.

Fastow's deal is a sweetheart deal - although the announcement said 10 years without parole, that will still translate to around 7-8 years served. He is estimated to have gotten about 45 million directly out of these bogus offshore company deals, not counting other money (salary, bonuses, past stock options) that he got while engaged in these criminal activities. He will forfeit less than 24 million, so he's 20+ million ahead, (country club prison time at more then 3 mil per year served, not bad, not bad) again not counting his other earnings during that time period.

He's not going to be hurting, compared to the cost of trial, a much stiffer minimum sentence even with a Motion for Downward Departure under the FSG, and trial would provide evidence for a much greater asset forfeiture.

Lay and Skilling's lawyers (and Lay would have a much better chance with this) will try to skin Fastow alive as a dirty witness, precisely because he got such a good deal for his testimony - and the picture their defenses will paint is that Fastow only got that deal because he promised to deliver his higher ups. Unless there's a lot of corroboration, I'd expect Lay, and possibly Skilling as well, to beat any charges that result primarily from Fastow's testimony, unless they plead to a Lea Fastow style handslap because it's cheaper than trial and runs less jury risk.

[The Mad Monk]

From what I heard this morning, Fastow is going to deliver a lot more than just his higher-ups, and the Fed have reserved the right to prosecute him in a number of other felonies worth a couple of centuries more in prison time, if he dosen't continue cooperating -- enough.

[TCO]

John, the real McK is both better and worse than what that kind of book says. But the nuclear navy is a way more special subculture.

[MrFun]

Originally posted by TCO
Still it is like being in the mafia...

The gay mafia??

[Imran Siddiqui]

Hmmm.. I wonder where Sava and his loony left ilk are now... you know the ones that said Enron was getting away with everything because they were connected to Bush (while ignoring the money they gave to the Dems as well, btw..)

[Cruddy]

Originally posted by MichaeltheGreat


Ken Lay (I've known him casually since the mid-'80s) is a very hands-off type of manager - like it or not, you don't put a lot of scrutiny on CFO's and COO's, most likely because there's an implied issue that if you have to scrutinize those positions extensively, you have the wrong people in them...

Possible guilt by ommission then... but I'm not going to comment further on Enron until the court cases are finished.

Thanks very much for you comments and insights MtG.

To be honest, Brit media coverage of Enron has been coloured mostly by the cash figures involved and no real focus on responsibility (because of sub judice media restrictions - they're not supposed to comment on ongoing trials, even in other countries).

[JohnT]

Originally posted by TCO
John, the real McK is both better and worse than what that kind of book says. But the nuclear navy is a way more special subculture.

It's a typical business profile, written by two senior-writers for Fortune magazine, about a story with a definite ending and a cast of good and bad guys.

Actually, there are very few good guys in this book, I'll grant. But then - Enron cooked their books for well over a decade and nobody on either side of the aisle (business or government) bothered to take notice, so there aren't that many good guys to begin with.

If this book favors anybody it favors the press, which should be a given since it is written by the woman who claims to have broken the Enron story open in March 2001. A couple of whistle-blowers get favorable mention as well.

[MichaeltheGreat]

Originally posted by Imran Siddiqui
Hmmm.. I wonder where Sava and his loony left ilk are now... you know the ones that said Enron was getting away with everything because they were connected to Bush (while ignoring the money they gave to the Dems as well, btw..)

Enron is still getting away with everything. For the simple magnitude of his crimes, Andy Fastow should never see the outside of a prison again. 10 years is about right for Lea Fastow and most of the others, and the asset forfeitures are peanuts compared to the scale of the frauds committed.

Separate from the screwing of the worker bee level employees and the investor fraud, there are tens of billions in losses by Enron customers and contractors who got hung out to dry without warning.

What is happening is nothing more than the level of token handslapping necessary to bury Enron from widespread public consciousness.

And most of the few *******s who will do any time will still be multimillionaires when they're done with their time, while everyone else on the receiving end just get to suck wind.

[JohnT]

Precisely, Mike.

[Sava]

Hmmm.. I wonder where Sava and his loony left ilk are now... you know the ones that said Enron was getting away with everything because they were connected to Bush (while ignoring the money they gave to the Dems as well, btw..)

I'm still here Imran... oh yeah, Andrew Fastow... the patsy... I'm sure he's the only one who did something illegal. When Ken Lay is burnt at the stake, then maybe you can open your mouth...

crony capitalists

[Imran Siddiqui]

When Ken Lay is burnt at the stake, then maybe you can open your mouth...

Like MtG said:

Ken Lay (I've known him casually since the mid-'80s) is a very hands-off type of manager - like it or not, you don't put a lot of scrutiny on CFO's and COO's, most likely because there's an implied issue that if you have to scrutinize those positions extensively, you have the wrong people in them

So keep crowing how Lay has to go to jail for a long time or else Bush has gotten him off... we all know this is partisan bashing by you anyway .

[Sava]

Yes, MtG knows Ken Lay... riiiiiggghhhttt

I got a bridge I'd like to sell you Imran...

[MichaeltheGreat]

Originally posted by Sava
Yes, MtG knows Ken Lay... riiiiiggghhhttt

I got a bridge I'd like to sell you Imran...

Savita - Half the industry knows Ken Lay - he's a big conference and industry groups and shmoozer guy, especially during the gas dereg days of the 80's when he was proselytizing open access and transitional cost settlements and I was analyzing transitional costs for a lot of clients. So he was interested in everyone and everything relating to transitional costs, since that was the major focus of implementing gas supply deregulation in the mid-80's.

If he ever stops in your neighborhood, even you might have the chance to ask him "Would you like fries with that?" He's just that kind of guy.