Man Without Qualities

Tuesday, July 29, 2003

Enron Game Called On Account of Reality II: Remembering Mr. Fastow

Remember Mr. Fastow? The architect of all - or, at least, most - of the supposedly fraudulent transactions that brought Enron down? Well, he's been indicted on charges mostly relating to his alleged corruption of some individual bankers, but also including charges of fraud against Enron and for taking kickbacks.

But when it comes to the main attraction, how does the reader think the settlements reached between J. P. Morgan Chase and Citigroup and government regulators will play in front of Mr. Fastow's jury?

The prosecutor presents the suspect transactions as obviously and egregiously fraudulent .....

... but admits that all possible charges against the banks that created, marketed and financed those very transactions were settled in agreements in which the banks admitted no wrongdoing.

And then the prosecutor can explain how everything depends on some weird distinction between "knowing" and "intending" fraud in a transaction which admittedly met legal and accounting requirements.

You see, ladies and gentlemen of the jury, it all has to do with the pineal gland!

And then there are the transactions in which the informal accounting rules-of-thumb would have been met, except for some essentially marginal pledge of a cash collateral account with a comparatively small amount of money in it. So Mr. Fastow is to go to prison in that case for breaking an informal rule of thumb.

Sure. O, yes. Sure.

The jury will buy all that.


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