ENRON:  The Smartest Guys in the Room

An Illusion Review by Joan Ellis


 

                From 10 billion to 64 billion in assets in 10 years – a growth spurt fueled by arrogance, intolerance, greed, and deliberate criminal behavior – that’s the Enron story.  It is presented in this responsible documentary with clips of the company officers speaking first for public consumption and later under oath.  Be warned that about half way through this genuinely frightening journey, you may feel your throat tightening with rage.

                It took only ten days for the whole corrupt pyramid to collapse in the largest corporate bankruptcy in history.  This is a story about people and greed, not primarily about the numbers that were manipulated with cunning until executive pockets were lined with gold.  The real scandal lies in the behavior of the ravenous officers as their company began to implode - every man for himself, no voice for the employees or investors.

                The smartest guys in this room are Andrew Fastow, CFO, who devised the partnership schemes that won approval from the company’s prestigious law and accounting firms, Jeffrey Skilling, president and willing accomplice, and CEO, and Kenneth B. Lay who founded Enron in 1985 to capitalize on the deregulation of the natural gas industry. 

                Skilling set the tone for Enron’s macho culture – “Rank and Yank,” a ratings system that regularly caused the firing of 15% of the employees;  “Pump and Dump,” pump the stock and dump it to take your own profits.  When Skilling had lasix surgery; the lemmings followed.  When Skilling encouraged a culture of extreme adventure, the boys followed him on motorcycle trips.  Stitches, crutches and broken bones became merit badges.

 Enron quickly grew to be the country’s biggest wholesaler of natural gas, creating a contained market. To deal in that market, you had to deal with Enron.  When the rotten core began to ooze, the captains of the company ships sold out fast.  While Enron plunged into $30 billion of debt, they still reported profits.  Fastow’s partnerships were buried in debt and losses, and the lawyers, bankers, and accountants never called a halt.  They just took the money. 

                When the smartest guys in the room learned how to create artificial shortages of power in the California energy crisis, they “yanked California on its leash.”  And while California forest fires raged, the men in the Enron control room watched it on TV and gloated, “Burn, baby, burn.”  The criminal quagmire was finally discovered by Sharon Watkins who blew the whistle that started the quick collapse of the company.  The company froze stock sales to employees, giving the executives time to take their own profits, reopening the market to the employees at $9.00 per share.  More than 20,000 people lost jobs and benefits.   Executives got 55 million in bonuses and the high value of their stock.

                The venerable Arthur Andersen and Co. went down; Fastow and Skilling were convicted; Lay will be tried this fall, and 29,000 employees are jobless, 20,000 of them without health insurance.  

 


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