Word: fastows
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...Fastow and his investors got spe-deep in trouble. As the volume of deals increased to meet Skilling's aggressive growth targets, the returns got thinner and thinner, and the hard assets behind the first partnerships were later supplanted by stock or guarantees from Enron...
...Fastow worked hard to enrich himself and others who could be of use to him. One was Enron lawyer Kristina Mordaunt, who in March 2000 was invited into a Fastow venture called Southampton Place. She put down $5,800, expecting to make a little money over time, her lawyer Hayden Burns tells Time. Only a few weeks later, she got a call from Michael Kopper, a Fastow associate, who said the deal was winding down. When Mordaunt opened her bank statement in April, she saw a deposit for $1 million. The Powers report of Enron's special directors committee suggests...
...When Fastow and Skilling went back to CalPERS in 1997 with jedi ii, the natural gas projects had been replaced by unspecified energy projects. CalPERS pulled out of jedi ii in October 2000 to invest in something simpler and more transparent, and Fastow scrambled to set up an entity to take its place. Known as Chewco, it was a partnership controlled by Enron employees, including Kopper. According to the Powers report, Chewco and similar partnerships were engaged in shuffling assets to cover losses and create illusory profits. As a result, Enron overstated earnings by $1 billion from the third quarter...
...Fastow sat at the crossroads of Enron's duplicity, and Richard Buy, Enron's chief risk manager, found himself increasingly at odds with Fastow as the pressure to do deals mounted. "Rick's group and the dealmakers were constantly in conflict," says a former finance executive. In the past couple of years, the risk-evaluation structures that had been put in place were compromised, the former executive asserts. Challenging Fastow's deals got Buy, who reported to Fastow, a ticket to corporate Siberia. Similarly, Fastow had the power to overwhelm potential whistle-blowers like Jordan Mintz, a former Enron attorney...
...Fastow became so convinced of his own importance that he told the board of directors the partnerships couldn't exist without his working both sides of the table. He "presented his participation as something he did not desire personally but was necessary to attract investors," states the Powers report...