Written for the screen by director Alex Gibney, “Enron: the Smartest Guys in the Room” is based on the bestselling book of the same name by then Fortune magazine contributors Bethany McLean and Peter Elkind.
In the wrong hands (think Michael Moore), making a feature documentary about unrelenting greed, volatile stock manipulation, malfeasant accounting, and scatterbrain energy futures speculation could result in a disjointed, slanted, and vitriolic hit piece.
In addition to being one of the most talented documentarian filmmakers alive, Mr. Gibney was also wise enough to recognize there was no need for dramatic or comedic overcooked embellishment here. All he and editor Alison Ellwood had to do was present a collection of archival footage, still images, post-event interviews, and proven facts.
Most Innovative Company in America?
Founded in 1985 by Kenneth Lay, the Houston-based Enron Corporation had claimed revenues of over $100 billion and, at one point, was the seventh-largest company in the United States. Fortune named Enron the “Most Innovative Company in America” for six consecutive years, and for good reason—at least on the surface.Beginning as a natural gas provider, Enron would eventually expand into oil speculation, electrical grids, commodities trading, and, ultimately, internet bandwidth.
Enron’s industry diversification began in earnest around 1997 under the leadership of Jeffrey Skilling, a former consultant hand-picked by Lay who would serve as CEO under the condition the company began using something called “mark-to-market” accounting.
Mark-to-market (which also led to the 1994 Orange County, California bankruptcy) eschews traditional, mathematical-based (common sense) accounting, and replaces it with largely arbitrary declarations of the future value of certain goods or services. Technically, it can’t even be defined as accounting. Mr. Skilling falsely boosted the value of Enron’s assets as he saw fit. The big question isn’t how did he get away with it, but rather, how did he get away with it for so long?
The first chink in the amour came as a result of a 2001 article Ms. McLean wrote for Fortune titled “Is Enron Overpriced?” In the piece, Ms. McLean noted irregularities in Enron’s financial (publicly available) documentation, which questioned the value of Enron’s inordinately high stock price.
The article wasn’t an accusation of fraud, but rather a simple inquiry. Mr. Skilling took umbrage and requested a meeting with Ms. McLean, not for the purpose of answering the questions raised in the article, but berating her for merely bringing up the subject. Bad idea.
All Downhill From There
Through a combination of paranoia and a misplaced bulletproof mentality, Mr. Skilling practically invited further scrutiny, first by way of Congressional hearings, and ultimately criminal and civil prosecution.For the duration of the film, Mr. Gibney steadfastly avoids passing judgment on any of the principals, thus allowing the viewer to draw their own conclusions. The archival video and still image inclusions of Presidents George H.W. Bush and George W. Bush when the former was U.S. president, and the latter was governor of Texas in the company of or praising Lay and other Enron higher-ups, suggests some type of arrangement, but again it is only a suggestion, and not quite a smoking gun.
What Lay and Mr. Skilling temporarily pulled off required the willing assistance of three key underlings: CFO Andrew Fastow, Vice Chairman J. Clifford Baxter, and Enron Energy Services CEO Lou Pai.
It was Mr. Fastow who was in charge of creating dozens of generic splinter shell companies (mostly offshore) under the Enron umbrella that reported fabricated revenue and profits.
Cold-Blooded
A still photo of Mr. Pai sitting on huge blocks of ice provides the metaphor that it ran through his veins, and is a perfect presentation of his cool attitude and aloof, indifferent demeanor. A man whose weakness was his habitual patronage of strip clubs, Mr. Pai sensed impending collapse and abruptly resigned, but not before cashing in $250 million worth of Enron stock. Amazingly, Mr. Pai was never charged with any crimes, and only had to return a small fraction of his quarter-billion-dollar take.
The 2001 Enron bankruptcy remains the largest of its kind in American history and the ripples in its wake were many. Because of its working relationship with Enron, the nearly 90-year-old accounting firm Arthur Anderson went belly up in 2002, and tens of thousands of honest, hardworking Enron employees lost not only their careers, but also their stock holdings and future retirement accounts.
Although nothing exactly like this has happened since, a different form of fraud and deception was revealed in 2007 with the Global Financial Crisis where millions of people the world over lost their homes because of witchcraft accounting, bottomless greed, and a lot of wealthy but intellectually challenged white-collar types making really bad decisions. For more on that, check out Adam McKay’s tragicomedy “The Big Short” from 2015.
