Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron
Book from Portfolio Hardcover
Release date: 13 October, 2003
In this worth-seeing documentary Enron: The Smartest Guys in The Room, cliches
and metaphors are bandied about like candy. The Emperor Has No Clothes.
Turning Hay into Gold. Jeff Skilling used Andy Fastow like Kathleen Turner
used William Hurt in Body Heat. These phrases would be comical if they weren't
so darn apt.
I finally dragged my husband and some friends to see the Enron documentary.
Overall, I thought it told the story the best way that it could be told. (As
I've mentioned on my blog Conglomerate, I practiced law and was a law
professor in Houston from 1994-2003, and Enron was my client in 1997-98).
Instead of focusing on the structured finance vehicles and conflicts of
interest that merely covered up losses, the documentary begins by looking at
the culture and personality of the company that may have resulted in the
losses themselves. The interesting part of the Enron story that makes it
different from every other accounting fraud story is the risk-taking culture
there that resulted in such hubris-filled business risks that backfired, such
as (my project) the Dabhol, India power plant, the Azurix water plant, and the
dreams of broadband. The documentary begins by examining that personality that
enabled Enron to create markets and industries that did not exist beforehand
but that would ultimately be its downfall.
If you are an expert on any piece of the puzzle, you will be able to criticize
that piece of the puzzle in the documentary. For example, the documentary
describes "mark-to-market" accounting in about 3 sentences, so of course, the
description is not entirely apt. Of course, the movie could have tried to
describe mark-to-market in 300 sentences, but then everyone would walk out of
the movie. When the narrator tells the audience that Merrill-Lynch bought a
barge from Enron, the audience chuckles because what would ML need a barge
for? But, in 1999, many financial firms were buying assets, but that detail is
omitted. The documentary describes the California power crisis and details how
Enron called "the Power Plant" (words on the screen) to tell it to shut down
in order to increase demand for electricity. But, the documentary does not
mention that Enron did not own that power plant (or any in California) and
does not mention the big power company that did.
Many people come off easy in the documentary. Gray Davis, for instance, and
the California legislature that created such a stupid PX system. Vinson &
Elkins and Arthur Andersen are named a couple of times, but no individual is
named and there is no footage of their buildings or logos. No Enron director
is named. The documentary focuses on Ken Lay, Jeff Skilling, and to some
extent, Andy Fastow. Lea Fastow's name is never mentioned, nor is her picture
The movie relies heavily on taped conversations of power traders and on
emails, taped employee meetings, and taped investor conference calls. Of
course, some of the statements are shocking to hear now. Part of that reason
is that not everyone, and certainly few of the rank-and-file people, knew the
entire picture and that what they were doing was illegal. The power traders,
for instance, were following the rules of the California power exchange. If
you had asked them whether they were manipulating the market, they would have
said, "Of course. That's my job." The line between legal manipulation and
illegal manipulation is very unclear, which probably explains why all the
federal indictments for manipulating the power market during that time have
languished for years.
The most interesting footage in the documentary was of Sherron Watkins
testifying in front of Congress. I never picked up on this, but she had to sit
at the same table as Jeff Skilling, with only Skilling's lawyer in between
them. So, Watkins would say that Skilling knew about something, then two
people down, Skilling would call her a liar. That kind of whistleblowing takes
a lot of bravery, I think.
C-SPAN Q AND A
June 19, 2005
Fortune Magazine Senior Writer
Enron: The Smartest Guys in the Room:
Info: She discusses her reporting on the investigation of Enron. She is the
co-author of "Smartest Guys in the Room: The Amazing Rise and Scandalous Fall
of Enron" (2003). The movie, Enron: The Smartest Guys in the Room, which was
released in April, is based on her book.
The untold story of how Citi, J.P. Morgan Chase, and Merrill Lynch helped
Enron pull off one of the greatest scams ever. The complicity of so many
highly regarded Wall Street firms in the Enron scandal is stunningly
documented in internal presentations and e-mails, many of which have never
before been published. So far, six banks embroiled in the scandal have agreed
to pay out a total of nearly $3 billion to investors and regulators to settle
charges of wrongdoing.
Bethany McLean and Peter Elkind, co-authors of The Smartest Guys in the Room,
talk about the amazing Enron saga in an exclusive Q&A.