Andrew S. Fastow

Andrew S. Fastow served as Enron’s Chief Financial Officer from 1998 until his removal on October 24, 2001. He was the principal architect of the off-balance-sheet special purpose entities (SPEs) that concealed billions of dollars in debt and hundreds of millions in losses from Enron’s investors. While serving as CFO, Fastow simultaneously controlled two private equity partnerships, LJM Cayman L.P. (LJM1) and LJM2 Co-Investment L.P., creating unprecedented conflicts of interest that allowed him to personally enrich himself by more than $30 million. His schemes – including the Chewco partnership, the four Raptor hedging vehicles, the Nigerian barges transaction, and the Cuiaba sham sale – constituted the financial engineering at the heart of what became the largest corporate bankruptcy in American history at that time.

On October 31, 2002, Fastow was indicted on 78 counts of wire fraud, money laundering, and conspiracy, later expanded to 109 counts. He pleaded guilty on January 14, 2004, to two counts of conspiracy and agreed to cooperate with prosecutors, providing testimony that helped convict Kenneth Lay and Jeffrey Skilling. He was sentenced on September 26, 2006, to six years in federal prison.

Fastow did not have a preserved PST email archive in the Enron corpus, likely because his communications were seized as criminal evidence and excluded from the FERC dataset. He is nonetheless one of the most referenced individuals in the collection: his name appears in 2,963 emails across the corpus, with 499 mentions of “Andrew Fastow” by full name. All evidence of his activities comes from other employees’ archives, which document his oversight of the SPE structures, his participation on Enron’s Executive Committee, and his dual role as CFO and LJM general partner.

Career at Enron

Background and Rise Through Finance

Fastow joined Enron in 1990 after working as a senior director in the asset-backed securities group at Continental Illinois National Bank and Trust Company in Chicago, where he had worked on leveraged buyouts and structured finance deals. He held a BA from Tufts University and an MBA from Northwestern University’s Kellogg School of Management, where he met his future wife Lea Weingarten. Jeffrey Skilling hired him at age 29, bringing him into Enron Finance Corp. for his expertise in securitization and the then-emerging field of asset-backed securities.

At Enron, Fastow rose through the finance organization. By 1996, he was leading the development of the company’s retail energy business. His technical skill in structured finance attracted the attention of senior leadership, and he was promoted to Senior Vice President of Finance before being named Chief Financial Officer in 1998 and Executive Vice President in 1999. In this role, he reported directly to Skilling and sat on Enron’s Executive Committee alongside Kenneth Lay, Skilling, Richard Causey, Rick Buy, Greg Whalley, and other C-level executives. Email records from January 2001 confirm Fastow listed among Executive Committee meeting recipients, and an August 2000 email from Cindy Olson shows his participation in mid-year Performance Review Committee (PRC) meetings, where he helped evaluate senior employees across the company.

The Dual Role

What made Fastow’s position unique, and ultimately criminal, was the board-approved arrangement that allowed him to manage private investment partnerships while simultaneously serving as Enron’s CFO. In 1999, Enron’s board of directors waived the company’s code of ethics to permit Fastow’s creation and management of LJM1 and LJM2. The arrangement required Fastow to negotiate on behalf of both Enron and the LJM partnerships in related-party transactions, an inherent conflict that the SEC later found he exploited systematically. What Fastow presented as an arrangement intended to benefit Enron became, in the SEC’s words, “a means of both enriching himself personally and facilitating manipulation of Enron’s financial statements.”

Email records from November 2000 make the dual role visible in operational detail. Raptor position reports sent by Enron analysts included “[email protected]” in the distribution list, meaning LJM staff received Enron internal financial data on the very structures where the two entities were counterparties. Fastow himself used a separate LJM email address for partnership business while serving as CFO. The two roles were not merely overlapping; they were operationally intertwined.

Relationship with Key Subordinates

Fastow built a small group of loyalists within Global Finance who executed his schemes. Michael Kopper, a Managing Director who reported directly to Fastow, served as the operational front man for Chewco and participated in the Southampton transaction. Ben Glisan, who Fastow promoted to Treasurer in May 2000, received daily Raptor position reports and was intimately involved in monitoring the SPE structures. An email from Inez Dauterive on November 13, 2000, illustrates the working relationship: “Andy Fastow and Ben Glisan would like to meet with Greg Whalley and Mark Frevert this week if possible regarding Global Finance Support.”

When Enron Treasurer Jeff McMahon raised concerns about LJM conflicts of interest directly to Skilling in March 2000, McMahon was subsequently transferred to a different role and replaced by the more compliant Glisan. This personnel move sent a clear message within the organization about the consequences of questioning Fastow’s arrangements.

Board Ethics Waivers

The conflicts of interest at the center of Fastow’s fraud were not concealed from the board – they were formally authorized by it. On two occasions in 1999, Enron’s Board of Directors waived the company’s code of ethics to permit Fastow to run the LJM partnerships while serving as CFO.

On June 28, 1999, the board approved Fastow’s participation in LJM Cayman L.P. (LJM1), suspending the relevant provision of Enron’s code of conduct. The resolution stated that Fastow’s partnership participation “will not adversely affect the interests of the Company.” Dr. Robert Jaedicke, chair of the audit committee, seconded the motion.

On October 12, 1999, the board formally approved LJM2 Co-Investment L.P. with a set of oversight guidelines that were presented as safeguards:

1. There would be no obligation to execute transactions between Enron and LJM2
2. The Chief Accounting Officer and Chief Risk Officer would review and approve all transactions with LJM2
3. The Board’s Audit Committee would conduct an annual review of completed transactions
4. The Audit Committee would annually review the application of Enron’s code of ethics to Fastow’s involvement

These controls failed completely. The structures Fastow created were designed to route around them, and the executives nominally responsible for oversight – Richard Causey as Chief Accounting Officer and Rick Buy as Chief Risk Officer – received Raptor position reports alongside Fastow rather than serving as independent checks on his activity.

Chewco: The First Scheme (1997)

The Chewco partnership, formed in 1997, represented Fastow’s earliest major act of self-dealing at Enron. When CalPERS, the California public employees’ pension fund, wanted to cash out its investment in the JEDI partnership, Fastow and others at Enron formed a special purpose entity called Chewco to buy CalPERS’ interest. The name was a reference to the Star Wars character Chewbacca, consistent with a naming convention for JEDI-related entities.

Fastow initially planned to serve as Chewco’s general partner but was advised that his direct involvement would require public disclosure by Enron. Rather than abandon the scheme, he selected his subordinate Michael Kopper to serve as general partner while Fastow secretly controlled Chewco through Kopper. This arrangement allowed Fastow to receive a share of Chewco’s profits as undisclosed kickbacks.

Chewco was improperly kept off Enron’s balance sheet because it did not have the required 3% third-party equity at risk under applicable accounting rules. The effect was staggering: Enron used Chewco to report roughly $400 million in nominal profits while concealing approximately $600 million in debt from investors. When Chewco’s improper accounting treatment was finally disclosed in November 2001, Enron was forced to restate its financial results going back to 1997, a correction that accelerated the company’s collapse.

The LJM Partnerships (1999-2001)

LJM1: LJM Cayman L.P.

Fastow established LJM Cayman L.P. (LJM1) in 1999 as his first named partnership vehicle. The initials “LJM” stood for the first names of his wife Lea and their two children. LJM1 engaged in several fraudulent transactions with Enron designed to generate artificial earnings and move liabilities off the company’s balance sheet.

The Cuiaba transaction involved a power-plant project in Cuiaba, Brazil. Enron entered into a purported sale of its interest in the project to LJM1, but Fastow simultaneously entered into an unwritten side agreement requiring Enron to buy back the interest at a guaranteed profit to LJM1 regardless of the project’s actual risks or performance. Because the buyback was guaranteed, the transaction was not a true sale under accounting rules, yet Enron booked it as one.

The Nigerian barges transaction in December 1999 was even more brazen. Enron booked approximately $12 million in earnings through a sham “sale” of floating power-generating barges off the coast of Nigeria, based on Fastow’s oral promise to arrange Enron’s buyback of the interest within six months. The transaction had no legitimate business purpose; it existed solely to manufacture earnings for Enron’s fourth-quarter 1999 results. This deal later became the subject of a separate criminal prosecution involving Merrill Lynch bankers who participated in it.

LJM2: LJM2 Co-Investment L.P.

LJM2 was larger and more ambitious than its predecessor. Fastow raised substantial external capital from institutional investors who were drawn by the prospect of transacting with Enron on favorable terms negotiated by the company’s own CFO. The inherent absurdity of this arrangement – that investors were essentially betting Fastow would shortchange his employer on their behalf – was apparently lost on Enron’s board, which approved it.

LJM2 became the counterparty for the most damaging of Enron’s off-balance-sheet transactions, including the four Raptor structures that ultimately destroyed the company. It also served as a vehicle for the Southampton transaction, one of Fastow’s most lucrative personal schemes.

The Southampton Transaction

Fastow created Southampton L.P. for the purpose of purchasing an asset related to Chewco that three British bankers from NatWest were selling. The bankers advised their employer to sell the bank’s investment for $1 million, vastly undervaluing it. Southampton purchased this interest and resold it within weeks for $20 million. In May 2000, each of the three British bankers received approximately $2.83 million (totaling $7.3 million), while Kopper, Fastow, and others received approximately $12.3 million for their role in the scheme.

Ben Glisan also participated in the Southampton transaction, investing $5,800 and receiving approximately $1 million in return. This extraordinary windfall led to Glisan’s termination from Enron and was central to his criminal prosecution.

The Raptor Structures (1999-2001)

Creation and Design

The Raptor structures represented Fastow’s most elaborate financial engineering. Created in partnership with LJM2 during 1999 and 2000, the four Raptor vehicles – designated Raptor 1 through Raptor 4 – were designed to hedge Enron’s merchant investment portfolio, which included stakes in technology companies and other volatile assets. As these investments declined in value during the dot-com bust, the Raptors allowed Enron to avoid reporting the losses on its income statement, preserving the illusion of profitability.

The fundamental flaw in the Raptor design was that the vehicles were capitalized primarily with Enron’s own stock. This meant the Raptors’ ability to absorb losses depended on Enron’s stock price remaining high – a circular dependency that guaranteed collapse if the stock declined. The SEC found that Enron and LJM2 used the Raptor transactions “to manipulate Enron’s balance sheet and income statement and to generate profits for LJM2 and Fastow at Enron’s expense.”

Daily Position Reports and Fastow’s Direct Oversight

Email evidence shows that by late 2000, Enron analysts were sending daily position reports on all four Raptor vehicles to a distribution list that included Fastow, Ben Glisan, Richard Causey, and Rick Buy. On November 21, 2000, Gordon McKillop sent reports to Glisan, Fastow, Causey, and Buy with daily position data for the Raptor vehicles. These reports continued through at least September 2001, with analysts including Travis Winfrey, Ron Baker, Stinson Gibner, and David Port rotating responsibility for their distribution.

The complexity and uncertainty surrounding the structures is evident in internal communications. On January 3, 2001, Ron Baker noted: “One thing that I forgot to mention in our meeting yesterday is that there is considerable indecision as to whether or not Raptor 4 will be included in the cross-guarantees, so we will need to have a value with or without Raptor 4.” By February 2001, Stinson Gibner was distributing summary sheets that attempted to consolidate the assets and liabilities across all four vehicles.

Fastow’s Awareness of Masked Losses

Fastow’s involvement went beyond passive oversight of position reports. On April 3, 2001, he sent an email to John Lavorato that reveals his clear understanding that the Raptor hedges were masking actual economic losses in Enron’s investment portfolio.

Fastow’s concern was not about the propriety of hiding investment losses from shareholders. It was about the internal performance evaluation problem created when employees received credit for positions that were, in economic reality, losing value. He understood the Raptors were hiding real losses. He was worried about how to run PRC.

Structural Collapse

When Enron’s stock price declined through 2001, the Raptors lost their capacity to absorb losses from the merchant investments they were supposed to hedge. The cross-guarantees between the vehicles, which were meant to allow stronger Raptors to support weaker ones, only delayed the inevitable reckoning. In the third quarter of 2001, Enron was forced to recognize a $544 million after-tax charge to unwind the Raptor arrangements, revealing hundreds of millions in losses that had been hidden from investors.

The “Excellent” CFO

In 1999, CFO Magazine awarded Fastow its “CFO Excellence Award” for capital structure management – the same year he created the LJM partnerships that would destroy the company.

The award was not entirely without basis. Fastow had developed genuine expertise in structured finance, and his ability to move debt off Enron’s balance sheet was, from a purely technical standpoint, impressive. In April 2001, Rice University invited him to serve as a panelist at its National Forum on Corporate Finance, sitting alongside Dave Yermack from NYU on an “executive option/equity dilution” panel. Vince Kaminski also attended the event. At the time, Fastow’s reputation as a financial structuring expert was intact; within six months, it would be in ruins.

By November 2001, employees were circulating the CFO Magazine award as gallows humor. On November 16, 2001, Cara Semperger forwarded a link to the CFO.com article about Fastow’s award to colleagues in Enron’s London office with the comment “A laugh to start your day….” and the suggestion to “Check out who sponsored the award too.”

The Unraveling

Early Warnings Ignored

Concerns about Fastow’s arrangements surfaced well before the crisis became public. In March 2000, Jeff McMahon, then serving as Enron’s Treasurer, raised concerns about LJM conflicts of interest directly with Jeffrey Skilling. McMahon told Skilling that the dual role created impossible working conditions for finance employees who had to negotiate with their own CFO on opposite sides of transactions. Rather than address the conflict, Skilling moved McMahon to a different position. McMahon was replaced as Treasurer by Ben Glisan, who proved more willing to work within Fastow’s system.

The Watkins Memo

On August 15, 2001, the day after Skilling abruptly resigned as CEO, Sherron Watkins – a Vice President of Corporate Development who reported to Fastow – drafted a seven-page memo to Ken Lay warning that Enron “might implode in a wave of accounting scandals.” Watkins identified the Raptor structures and LJM partnerships as the sources of the company’s vulnerability. She warned that the Raptors were “under water” because they contained only falling Enron stock to cover their obligations, and she specifically flagged Fastow’s conflicts of interest.

Watkins met with Lay on August 22, 2001, and advised him not to involve the law firm Vinson & Elkins in any investigation because of the firm’s prior involvement in structuring some of the transactions she questioned. Lay disregarded this advice. Vinson & Elkins conducted a review and concluded that Enron had done nothing wrong. The day before Watkins wrote her memo, she had emailed Rick Buy asking whether Skilling’s departure could be an opportunity to “do some house cleaning – can we write down some problem assets and unwind raptor?”

October 2001: Removal

The crisis accelerated through October 2001. On October 16, Enron announced a $1.2 billion equity adjustment related to the unwinding of the LJM and Raptor transactions. On October 19, Jim Schwieger, a 22-year Enron employee, wrote to Ken Lay and David Delainey expressing what many felt:

On October 22, the SEC inquiry into the LJM partnerships was publicly disclosed. The next day, some employees still did not understand the scope of the fraud. Kayla Crenshaw sent an email to both Lay and Fastow urging them to “stay strong, stay the course and most importantly, lean on the Lord for wisdom.”

On October 24, Ken Lay removed Fastow from his position as CFO and appointed Jeff McMahon – the same executive who had tried to raise the alarm about LJM conflicts eighteen months earlier. Lay announced the decision in a company-wide email:

That same day, Jeffrey Fountain of Bank One – an investor who was actively buying Enron debt – sent Lay a blunt assessment of the company’s predicament. Fountain graded Enron’s recent investor conference call a “B-/C+,” called out “the angry exchange with the short seller” as “a blunder,” and told Lay what the market already knew:

The LJM Dissolution That Wasn’t

The day after Fastow’s removal, Sherron Watkins warned Mark Koenig in investor relations that the press was reporting the LJM partnerships had been fully dissolved. The reality was different: only the Raptor entities had been unwound. LJM itself still existed, its active deals with Enron remained in place, and control had passed to Michael Kopper – Fastow’s deputy.

Watkins’s fear that partial truth would backfire when the full picture emerged proved correct.

Resignation and Aftermath

By November 15, 2001, Fastow had resigned. Greg Whalley, who had succeeded Skilling as President and COO, confirmed the status in response to an employee question about whether Fastow would receive severance:

The next day, November 16, Robert C. Williams from Enron’s legal department notified several senior executives – Stanley Horton, Rick Causey, Rick Buy, and Mark Frevert – that they had been named as defendants alongside Fastow, Lay, Skilling, and Arthur Andersen in federal securities class action lawsuits.

On December 2, 2001, Enron filed for Chapter 11 bankruptcy protection, at that time the largest corporate bankruptcy in American history. The collapse wiped out roughly $60 billion in shareholder value and destroyed the retirement savings of thousands of employees who had invested heavily in Enron stock through company-encouraged 401(k) plans.

Employee Reactions: Information Asymmetry

The email corpus captures a wide range of employee responses to the Fastow revelations during October and November 2001, revealing deep information asymmetry about what had actually occurred. Reactions fell into three broad categories.

A small number of employees defended Fastow and saw the criticism as unfair or premature. Kayla Crenshaw’s October 23 email encouraging both Lay and Fastow to “stay strong” was typical of this group, which tended toward faith-based appeals and assumed the best about management.

A larger group blamed Fastow and Skilling but maintained trust in Lay. Sheila Jones from Enron Broadband Services captured this view on November 29, 2001: “I personally feel you are doing all you can to salvage what is possible,” she wrote to Lay. “I do believe in my heart of hearts that once Jeff Skilling and Andy Fastow were in the positions they were, greed took over. Unfortunately, they took advantage of your position.”

The largest and angriest group blamed the entire leadership structure. Robert S. Smith, a 60-year-old employee with 33 years at Enron, wrote to Lay on November 8:

Neal Shaw, from competitor U.S. Energy Services, dispensed with the niceties entirely: “I can only say that I hope you, Enron’s Board of Directors, Jeff Skilling, Andy Fastow and Stan Horton spend some real quality time in jail.”

Corpus Mentions

Fastow did not have a preserved email archive, but his presence is documented throughout the corpus in other employees’ files. The following table shows the ten archives where Fastow appears most frequently, based on 2,963 total mentions.

The concentration in Steven Kean’s archive – 720 of the 2,963 mentions – is explained by Kean’s role as VP of Government Affairs, which made his files a collection point for news clips, board materials, SEC correspondence, and external communications in which Fastow was discussed. The next-highest concentration, in Skilling’s archive, reflects his role as Fastow’s direct supervisor.

Key distribution patterns include daily Raptor position reports sent to Fastow, Glisan, Causey, and Buy from November 2000 through September 2001; Executive Committee meeting notifications; and LJM transaction communications that crossed between Enron and LJM email domains.

Personal Enrichment

Scale of the Self-Dealing

According to SEC enforcement documents, Fastow received more than $30 million from LJM1 and LJM2 through transactions that were supposed to benefit Enron but that he structured to benefit himself and his partnerships at the company’s expense. The specific sources of this enrichment included:

• Southampton transaction: Approximately $12.3 million shared with Kopper and others
• Chewco kickbacks: Undisclosed payments received through Kopper’s nominal control of the partnership
• LJM management fees and returns: Profits from LJM1 and LJM2 transactions with Enron
• Cuiaba guaranteed buyback: Returns from the sham sale of the Brazilian power plant interest
• Nigerian barges: Returns from the $12 million sham sale of Nigerian power-generating barges

His wife, Lea Fastow, was also involved in LJM activities. Email chains from November 2000 show her corresponding with Enron executives Mike McConnell and Jeff Shankman, with Andrew Fastow copied at his LJM email address. Lea Fastow later pleaded guilty to a tax crime related to unreported income from the RADR special purpose entity and served one year in federal custody.

Criminal Prosecution

Initial Indictment (October 2002)

On October 31, 2002, Andrew Fastow was indicted by a federal grand jury in Houston on 78 counts of wire fraud, money laundering, and conspiracy. The Department of Justice charged that Fastow had devised and executed schemes to defraud Enron and its shareholders through the creation of partnerships that allowed him to profit personally while manipulating the company’s financial statements.

Expanded Charges (May 2003)

In May 2003, the DOJ expanded the indictment with additional charges, bringing the total count to 109. The superseding indictment added further detail about Fastow’s self-dealing and the scope of the conspiracy.

Kopper’s Cooperation

Michael Kopper had already pleaded guilty in August 2002, becoming the first Enron executive to admit criminal conduct. Kopper’s cooperation provided prosecutors with an inside account of Fastow’s control over Chewco and the mechanics of the Southampton transaction. Kopper’s testimony was instrumental in building the case against Fastow and, ultimately, against Ken Lay and Jeff Skilling.

Guilty Plea (January 2004)

On January 14, 2004, Fastow pleaded guilty to two counts of conspiracy to commit securities and wire fraud, resolving all 109 counts in the superseding indictment. In his plea agreement, Fastow admitted that he violated his duty of loyalty and honest services to Enron’s shareholders. He agreed to cooperate fully with the government’s ongoing investigation, providing testimony and evidence against other Enron executives.

The plea agreement called for a maximum sentence of 10 years in prison. Fastow also agreed to forfeit $29.8 million in assets.

Cooperation and Testimony

Fastow’s cooperation proved critical to the government’s case against Enron’s top leadership. He testified at the criminal trial of Kenneth Lay and Jeffrey Skilling in 2006, providing jurors with a detailed insider account of how the fraud was structured and how it was concealed from Enron’s board, its auditors, and the public. His testimony helped secure convictions of both men on multiple counts of fraud and conspiracy.

Ben Glisan, who had pleaded guilty in September 2003 and gone directly to prison without initially cooperating, later also provided testimony that corroborated Fastow’s account.

Sentencing (September 2006)

On September 26, 2006, Andrew S. Fastow was sentenced to six years in federal prison by U.S. District Judge Kenneth Hoyt. The sentence was below the 10-year maximum permitted under his plea agreement, reflecting what the court found to be substantial cooperation with prosecutors.

Fastow was also permanently barred from serving as an officer or director of a public company. He served his sentence at a federal prison in Louisiana and was released in 2011.

Timeline

Legal Status

Andrew Fastow pleaded guilty on January 14, 2004, to two counts of conspiracy to commit securities and wire fraud. He was sentenced on September 26, 2006, to six years in federal prison. He forfeited $29.8 million in assets. He served his sentence and was released in 2011. He is permanently barred from serving as an officer or director of a public company. His wife, Lea Fastow, pleaded guilty to filing a false tax return related to income from the RADR partnership and served one year in federal custody.

See Also

• Kenneth Lay – Enron Chairman and CEO; convicted of fraud and conspiracy in 2006
• Jeffrey Skilling – Enron CEO who approved the LJM arrangement; convicted in 2006
• Michael Kopper – Managing Director of Global Finance; first Enron executive to plead guilty
• Ben Glisan – Enron Treasurer; first Enron executive imprisoned
• Lea Fastow – Andrew Fastow’s wife; pleaded guilty to tax fraud
• Richard Causey – Chief Accounting Officer; co-recipient of Raptor reports
• Rick Buy – Chief Risk Officer; received Raptor reports
• Jeff McMahon – Treasurer who raised early LJM concerns; replaced Fastow as CFO
• Sherron Watkins – VP who warned Ken Lay about Fastow’s structures
• Greg Whalley – President and COO; handled Fastow’s removal
• Mark Frevert – Vice Chairman; briefed on Global Finance matters
• John Lavorato – Recipient of Fastow’s April 2001 email about Raptor-masked losses
• LJM Partnerships – The off-balance-sheet vehicles Fastow created and controlled
• Raptor – The four hedging vehicles that collapsed in Q3 2001
• Special Purpose Entities – The corporate structures at the center of the fraud

References

This article draws on 2,963 mentions of Fastow across the Enron email corpus, with particular focus on the October-November 2001 removal period, Raptor position reports distributed from November 2000 through September 2001, and Executive Committee communications from 2000 to 2001. Fastow does not have a personal email archive in the corpus; all evidence comes from other employees’ preserved files. Seven emails authored by Fastow were identified in other people’s archives.

Secondary source verification was conducted using:

• U.S. Department of Justice Press Releases: #627 (October 2002 indictment), #268 (May 2003 superseding indictment), #019 (January 2004 guilty plea), #06-647 (September 2006 sentencing)
• SEC Litigation Release LR-17762 (enforcement action and complaint against Fastow)
• DOJ Press Releases regarding related prosecutions: NatWest bankers (#07-949, #08-135), Michael Kopper guilty plea, Lea Fastow sentencing
• University of Chicago Law School Enron case study (board approval and ethics waiver details)
• NYU Stern School Enron audit committee analysis

Cross-references to existing wiki articles for Sherron Watkins, Michael Kopper, Ben Glisan, Lea Fastow, Jeff McMahon, and Richard Causey provide additional context from those individuals’ perspectives.