White Collar Crime Part 3 -- Former Enron CFO Andy Fastow on the Problem of "Legal Fraud"

Real Vision: Finance & Investing

Real Vision

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🗓️ 8 March 2021

⏱️ 94 minutes

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Summary

Real Vision Live Replay. Former Enron CFO Andy Fastow is infamous for his role in Enron's collapse; however, since serving his time and reflecting on his actions, he has turned over a new leaf, speaking about ethics and the problem of "legal fraud". In this interview with Quinton Mathews, managing member at QKM, Fastow argues that the biggest problem is the incredible number of loopholes that exist, allowing executives like himself to mislead and misrepresent without ever breaking a specific law and even having these misleading statements signed off on by corporate lawyers and auditors. Using poignant examples from Enron and other companies, Fastow highlights many of these loopholes and makes the case that closing them alone could not prevent the problem. Since leaving prison, Fastow has also began investing in a potential solution—Keen Corp's natural language processing software, which he believes if implemented could help corporations to avert white collar crime and detect problems in their ranks before gaining too much momentum. Andy Fastow can be contacted at FormerEnronCFO@gmail.com and KeenCorp can be contacted at NorthAmerica@KeenCorp.com. Recorded on December 16, 2020. Key Learnings: "Fraud" is not always a question of breaking a specific law, and there will always be routes for executives to "legally" mislead and misrepresent. Investors conducting fundamental analysis must be cognizant of this and do their homework when examining financial statements. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Transcript

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0:00.0	Hello again, my name is Quinten Matthews with QKM and today I am going to continue my investigation
0:22.8	into the youth around white collar crime, their effect on our capital markets and potential
0:30.0	solutions to the problem. Today we have a treat we are looking at the problem in a whole different
0:38.3	light and a very intriguing solution from an unexpected source, Mr. Andy Fasta. For most of you you
0:50.0	Mr. Fasta needs no introduction but for those of you who are unaware with who he is, he was the
0:56.4	CFO of Inron Corp which is arguably the largest and most famous financial fraud in recent history.
1:06.0	Inron ushered in a new paradigm of aggressive accounting shenanigans including
1:12.9	artificially inflating revenues and hiding debts and off-balance cheap vehicles that they
1:19.5	called special purpose vehicles. As the CFO Andy really was the architect of the financials and
1:27.7	those dealings. In 2004 he pleaded guilty to two counts of conspiracy to commit
1:37.8	security fraud and wire fraud I believe for which he pleaded guilty and was sentenced to six years
1:44.3	in prison getting out in 2011. Today Andy speaks in consults on matters regarding accounting and
1:53.2	accounting frauds and is invested in a company called the Keane Corp which has a very intriguing
2:01.2	technology on how you can sniff out light-caller crime before it happens. So with that very
2:09.0	pleased to present Mr. Andy Fasta and Andy thank you for being here.
2:15.2	I'm sorry I haven't been acquitted. So you know you obviously have very
2:21.2	personal opinions and views on the issue surrounding light-caller crime and in particular
2:27.7	accounting fraud and interestingly they're actually very aligned with the short sellers who
2:35.0	uncovered a lot of the shenanigans that were occurring in inron and what is now often referred to
2:42.2	as inron's legal fraud. So I was hoping we could start by looking at what you believe the problem is
2:50.1	as you see it and kind of this concept of what legal fraud is. Okay but before I do that Quentin
2:59.2	I'd like to make one thing clear really and it's important that people remember what I'm going to
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