It took Enron, once the seventh-largest company in the United States, only twenty-four days to go bankrupt. Twenty-four days to put 55,000 employees out of work, left with worthless retirement accounts. The high-flying company's slogan, for those who can't remember, was "ask why." Director Alex Gibney does just that in Enron: The Smartest Guys in the Room, a documentary as dazzling as the Houston skyline that's structured, appropriately enough, like a heist film.
Part of the answer to that cutesy question "ask why" can be found in Enron's corporate culture. These guys were smart, make no mistake. During the tech run-up in the 90s, investing in ideas was de rigeur, so the notion of an online energy futures market fit right in. Where Enron truly excelled was in its leaders' singular manifestations of arrogance, hubris, and grasping greed. Son of a preacher man, founder Ken Lay, preached the gospel of deregulation and cozied up to the government through the Bush family. When CEO and former nerd Jeff Skilling got Lasix, every glasses-wearer in the company followed suit. He lost weight and put together he-man corporate motocross retreats. And he also gleefully exploited loopholes in the law that drove the corporation's stock price into the stratosphere, beginning with a SEC-approved system of accounting called mark to market that essentially gave the company free rein to assign hypothetical value to its future profits from the moment a deal was made.
Why didn't the analysts catch Enron? Whenever an irregularity cropped up, instead of conducting independent research, they'd simply call Skilling and believe whatever he said. When an analyst actually had the temerity to question some of Enron's quarterly results during a conference call, Skilling audibly called the analyst an asshole and did not apologize. Signs sprung up around the company's Houston headquarters: "Ask why, asshole."
They were cowboys. Liu Pai, the former head of Enron Energy Services, was fascinated by strippers, and often expensed his trips to various strip clubs. He'd intentionally spill gasoline on himself before coming home to his wife to mask the smell of the dancers' perfume. An underling who joked that the wife would think he was fucking the gas station attendant was relocated. To Calgary. Pai later divorced his wife to marry his stripper girlfriend and left the company, cashing in $250 million in stock. Today he is the second-largest landowner in Colorado, while Enron Energy Services lost $1 billion under his leadership.
The sorcerer's apprentice was Andy Fastow, a guy who "didn't have a strong moral compass." He was the one who made Enron's burgeoning debt disappear into those Potemkin partner companies with the fuck-you names like Jedi and ChewCo. He was doing deals with himself, essentially, using overvalued Enron stock as collateral and skimming $40 million off the top. Investment bankers acted as "useful idiots," who "purchased" assets when they were actually making loans, which moved things off the books until Fastow "bought" them back.
Enron was a black box until Fortune reporter Bethany McLean asked the emperor has no clothes question: How does Enron make its money? The facade began to crumble; then came the California energy crisis. Or rather, "energy crisis." Director Gibney and his amazing researchers uncovered recordings of West Coast Enron energy traders cackling as they manipulated the deregulated California energy market, taking power plants offline "for routine maintenance" to create artificial shortages and drive up prices when the state's utilities came begging. Their callousness is chilling.
Ask why, indeed.
A personal note: The cinetrix had a day job with a company that, like Enron's employees, had drank deep of Jeff Skilling's Kool-Aid, hailing its new business model as revolutionary. The industry analysts I worked with were writing glowing advisory reports right up to the moment everything blew up. I was laid off the same week Enron was suspended from the New York Stock Exchange. It's good to know, finally, what happened.
UPDATE: The Enron Web site is pretty marvelous.
