“In the Titanic, the Captain went down with the ship. In Enron it looks to me like the Captain first gave himself and some friends a bonus, then lowered himself and the top folks down in the lifeboat and then hung it up and said, ‘By the way everything’s going to be just fine.’” – US Senator Byron Dorgan
At the time of its bankruptcy filing in November of 2001, Enron was the largest chapter 11 filing in history. Just one year earlier, the company had reported revenues of over $100 billion. Due to its collapse, Enron shareholders lost some $11 billion. Enron employees lost $1.2 billion in retirement funds, and retirees lost $2 billion in pension funds. 20,000 employees lost their jobs. Arthur Anderson, the nation’s oldest accounting firm and one of the largest accounting firms in the world, was destroyed in its wake. Their complicity in the scandal destroyed their reputation and ruined their business. An additional 85,000 employees nationwide lost their jobs due to their collapse.
“Enron: The Smartest Guys in the Room” is a 2005 documentary by Alex Gibney which details the reckless corporate culture, the terrifying lack of ethics, and the outright fraud involved in one of the most famous corporate scandals in history.
“I think the Enron story is so fascinating because people perceive it as a story that’s about numbers, that it’s somehow about all these complicated transactions, but in reality it’s a story about people. And it’s really a human tragedy.” – Bethany McLean, Co-Author, “Enron: The Smartest Guys in the Room”
The film puts the company and its executives’ utter lack of ethics on plain display. These people, and the company as a whole, are clearly shown to be making millions while the fraud is perpetuated. Jeffrey Skilling is shown joking about issues that in hindsight are clearly no laughing matter. Watching these smug, arrogant people in film clips and archival footage is absolutely astonishing. Seeing Ken Lay giving Alan Greenspan an award, looking back now at it from the middle of the “Great Recession” is just… flabbergasting.
The movie does an excellent job of simplifying the complicated issues involved. These include: the use of “Mark to Market Accounting”, a subjective accounting technique which allowed to the company to book potential future profits; creating off the book partnerships which existed solely to hide loses; and shamefully manipulating their own stock price to meet projections. The auditors, investment banks, lawyers, government regulators and market analysts who might have been in position to expose the wrongdoing all looked the other way without fail, and each took their cut.
But perhaps the most audacious affront to society was the way Enron took advantage of the deregulated energy environment of California by tampering with California’s power supplies in order to drive up the cost of energy. They deliberately created artificial shortages and rerouted power out of the state. This resulted in the infamous “rolling brown outs”, which caused untold disruptions to the lives of Californians and damaged the Californian economy. The state was forced to declare a state of emergency. Reportedly it cost the state $30 billion. It wound up being a pivotal factor in costing then Governor Gray Davis his job (which then went to Arnold Schwarzenegger).
Theft. Greed. Pride. Arrogance. “Enron: The Smartest Guys in the Room” shows how a handful of unethical, self interested individuals perpetrated a large scale crime at the highest level of corporate America, and then couldn’t keep the cover-up illusion intact. When their misdeeds came to light, the seventh largest corporation in America crumbled like a house of cards.