12 months ago | Dallas Morning News Back to Enron

What America's most crooked executive can teach us about scammers

He's an awkward human being. Cold. Too calculating. Walled off.When he begins to speak to his audience, he is asked to move to center stage. He demurs and says he prefers to talk from a hard-to-see corner of the room.In his first moments before us, Andy Fastow lets you know he's one unusual dude.By far, he's the biggest crook I've seen up close. I've met mass murderers and common thieves - but never a businessman responsible for the loss of $40 billion in market value, someone who hurt thousands of people, who ruined so many families with his financial lies, who gave Houston and Texas such a black eye.Andy Fastow is the disgraced ex-chief financial officer of Enron, the company that led to a corporate scandal so monstrous that the company's name now evokes all that is wrong with American business.He worked for such luminaries as Ken Lay, now dead, and Jeffrey Skilling, still in prison.Fastow put in his time: five years in prison, including the first six months in solitary. He also agreed to forfeit $24 million.Now he teaches ethics and goes on a sometimes speaking tour.I'm at the University of Texas at Dallas listening to the Biggest Crook because I know I can learn something. Crooks make the best instructors. They brag about their tricks. The FBI hires hackers for a reason.In street terms, Fastow is a rat. He cut a deal with prosecutors, testified against his former bosses and served a reduced prison sentence. But he's in the opposite of the witness protection program. He's right there by the potted plant, speaking from the corner.I'm here to learn a few things that will make it easier for you and me to spot hucksters and hoaxers and crooks and corporate clowns. Hoping for some advice from someone who spent five years sitting on his prison bunk looking back at every deal he made.Fastow complies. His takeaways are helpful.Age of loopholesFastow says that every deal he ever led was approved by outside auditors, internal and external lawyers and a board of directors."It is possible to follow all of the rules - and commit fraud and be misleading," he says. "We have a word for this: loophole."Is the word 'loophole' a pejorative? No. We celebrate people who find loopholes. We give them a bonus."I was really chief loophole officer. I looked for ways to use rules, to undermine, to achieve corporate objectives. ..."We set up government systems to catch fraud, but we tend to define it as breaking rules. What if you're following the rules and committing fraud? We don't have many government structures that object to this thinking."Fastow says the find-the-loophole mentality is a dominant trait in business today."Whoever can best exploit the rule book gets an advantage. ... You can get big bonuses. ... It's systemic. If I don't do it, this company down the block is going to do it."Weak boardsFastow says stronger boards of directors would make a difference. Each board needs "a 10th man" whose job is to disagree."Every board seems to vote unanimously. It's safe. It doesn't matter if you're wrong because everybody is wrong. You're wrong together."Someone should be in charge of disagreeing - to make the opposite point and to make everyone feel uncomfortable about what they're doing. We didn't have one of those."So keep an eye on the loophole users. Look for boards with mavericks who challenge. Good stuff from the Biggest Crook.The Watchdog thanks the 14th annual Corporate Governance Conference at the Naveen Jindal School of Management for the opportunity to listen to Fastow.Coming Sunday: Latest on the all-important powertochoose.org.Check out The Watchdog Mondays on NBC5 at 11:20 a.m. talking about matters important to you.On Twitter: @DaveLieber

The DallasNews.com Watchdog Column was created by Dave Lieber to give Dallas Morning News readers the latest information, tips and tools to overcome the complexities of a life riddled with scammers, corporate sharks and double-talking government officials.

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