The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron (77 page)
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Authors: Bethany McLean,Peter Elkind
Maybe it’s worth a different kind of comparison between Enron and the financial crisis. The difference between the way Enron executives behaved and the way highly paid people at so many of our financial firms behaved isn’t the difference between black and white. If it’s anything, it’s a shade of grey—the difference between a prosecutable lie and deliberately looking the other way, the difference between Enron’s illusory profits and the profits of many financial firms, which quickly turned into huge losses.
In a way, seen through the lens of the housing bubble, Enron even has some redeeming qualities. It genuinely was an innovative company that was trying to change and create businesses. It may well even have succeeded if its executives hadn’t been so intent on making profits appear in the company’s reported financial statements long before they actually appeared in its coffers. Energy trading, which Enron pioneered, is very real today, as is video on demand—which was supposed to be part of Enron’s broadband business. Corporate energy-efficiency retrofitting—the intended business of EES—is all the rage today.
Compare all that to the making of loans to people who couldn’t pay them back and the packaging of those loans into securities to be sold to clueless investors. The former was genuinely creative; the latter was simply opportunistic and destructive. Or to put it a different way, there was so much possibility in Enron, and there could have been a different ending. There was never going to be anything but a bad ending to the inflation of home prices. By some measures, maybe the Enron guys really
were
the smartest guys in the room.
Despite all the scandals, there is plenty that is right with American business today. Silicon Valley continues to create companies that change the way we live. Technical innovations are transforming the energy business. And, across the country, tens of thousands of people whose names we’ll never know regularly make tough decisions to behave ethically in the face of constant temptation to do otherwise. But if there’s anything that’s become clear in the last ten years, it’s that what can go wrong with business is something that can’t be isolated to Enron—or fixed by the simple act of making one man our pariah. In the end, that’s why the Enron story will always be relevant: It’s a tale of human nature, a morality play for our age.
Still, it’s hard not to wish for that naïve time when Enron was shocking, when we believed President Bush when he said that Sarbanes-Oxley would rein in greed, and when we really, truly thought that the act of putting Jeff Skilling and Ken Lay behind bars would solve everything.
Bethany McLean
Peter Elkind
August 2013
Ken Lay in late December 2000, when Enron was on top of the world and Lay was widely viewed as a business visionary.
(Pam Francis, Sipa Press)
Jeff Skilling at the height of his power and fame, outside Enrou’s gleam ing headquarters in downtown Houston.
(Wyatt McSpadden)
Rebecca Mark was Enron’s most glamorous executive—and Skilling’s fiercest rival.
(Barron Claiborne, CORBIS—Outline)
Andy Fastow, the mastermind behind the financial schemes that helped bring the company down, made more than $60 million from the two private funds he ran.
(Gamma)
The “crooked E”—Enron’s famous logo outside its headquarters.
(Gamma)
Enron’s massive trading floor. In 2001, trading profits covered up huge losses in EES.
(Paul S. Howell, Liaison)
Skilling deputy Ken Rice ran the ill-fated broadband division—and was later charged with fraud and insider trading.
(Brett Coomer, GettyImages)
Lou Pai, another trusted Skilling lieutenant, was best known for two things : cashing out of Enron at the top of the market and his infatuation with strippers.
(Wyatt McSpadden)
Cliff Baxter was Enron’s moody, hypersensitive deal maker and Skilling’s closest friend at the company.
(Gamma)
A storage tank in Dahbol, India, under construction in 2001. It was part of Enron’s most audacious, and most troubled, power project ever.
(Sherwin Crasto, AP)
Rebecca Mark, who struck the $3 billion Dahbol deal, lights a ceremonial candle at the plant in early 1997.
(Pablo Bartholomew, Liaison)
Fastow lieutenant Ben Glisan created many of Enron’s most fiendishly complex financial structures.
(David J. Phillip, AP)
Michael Kopper, Fastow’s other top deputy, was involved in many of Fastow’s sleaziest deals.
(Mark Wilson, GettyImages)
