In the summer of 2000, I climbed into my rusty but trusty Mazda and drove to Houston to take in a baseball game. The Astros had just opened a new stadium, and I wanted to check it out. I vaguely recall that the opponent was the San Francisco Giants. The ballpark sparkled, as it should have given the price tag of $250 million. It was called Enron Field, as naming rights had been bought by the local energy and financial trading titan, then the seventh-largest company in the United States. The deal, supposedly for 30 years, was quickly negated because Enron was already in the process of going bankrupt. The company had lost its proverbial shirt, and anyway the Astros franchise could not cleanse itself of the Enron stain fast enough. (The stadium has since been re-named Minute Maid Park.) Other businesses had gone down before, but none quite like Enron. For most of the previous decade or longer, it had been the darling of Wall Street and was widely admired in the business world. Getting an MBA, being hired by Enron and making serious money—this was the goal of many a college student around the turn of the century.
I was not in that position. I was slogging away at a fairly boring, hum-drum job at a translation agency in Austin. I did, however, read headlines that seemed to get more alarming all the time. They went from the business page of the Austin American-Statesman to the front page, and I sensed that something really big and bad was happening. Several of the people in my office fancied themselves knowledgeable about the stock market, so Enron was a frequent topic of discussion.
Me, I do not claim to know much about big business. The terms, the concepts, the procedures are so far beyond me that there is little point in trying to grasp them. Ask my CPA and she will tell you just how hopeless I am; I could not possibly do my own taxes. Legitimate business baffles me, so you could quadruple that for a bogus corporation like Enron. The stock price dropped from $90.75 in the summer of 2000—about when I was sitting in the cheap seats at Enron Field—to less than $1 by November 2001. Shareholders lost $74 billion, more than half of which was due to various kinds of malfeasance. Not only did 20,000 employees lose their jobs, so did numerous others as collateral damage; when a big tree falls in the forest, it takes many smaller ones down with it.
The accounting shenanigans were breathtaking, made worse by the fact that the widely respected firm of Arthur Andersen was supposed to be watching the books. How the “special purpose entities” passed the smell test for as long as they did, I do not know but it seems they were successful in achieving their goals—hide debt, inflate profits and obscure how Enron really operated. It is shocking and a bit depressing to realize how twisted and corrupt some major companies are. When my Korean friends bemoan the latest business scandal here, I remind them that what Enron did trumps it easily.
A number of absurdly overpaid Enron executives were convicted and served time in prison. The big three were, of course, Ken Lay, Andy Fastow and Jeff Skilling. In 2006, Lay, who had started the company in 1985, was found guilty of 10 counts and was expected to get at least 20 years but he died of a heart attack before he could be sentenced. Fastow, the shamelessly corrupt chief financial officer, pled guilty to two counts, served six years and got out in December 2011. He has recently started to appear in public again, somewhat contrite and yet still seeking to justify his behavior. (His wife also did 14 months for money laundering.) And what of Skilling? Well, he got a white-chocolate-tofu cream pie shoved in his face by a woman in San Francisco just as the house of cards was collapsing. When Lay and Fastow were called to testify before Congress, both took the Fifth. But Skilling refused to do so. He went to Capitol Hill and was rather defiant, even if he sometimes answered questions with a weak, exculpatory “I don’t recall.” He was convicted of 19 counts of conspiracy, insider trading, securities fraud and lying to auditors. Skilling is still incarcerated in Littleton, Colorado and will be eligible for release in 2017.
Michael Kopper, Ben Glisan, Jr., Rick Causey and Kenneth Rice were also convicted and spent various amounts of time in the slammer.
Two big shots who left Enron just before its implosion did quite well. Lou Pai cashed in his stock and netted upward of $200 million, and Rebecca Mark got $75 million. Both had rather dirty hands but escaped indictment. An in-house attorney named Kristina Mordaunt made an investment of $5,800 on one of Fastow's deals and earned a cool $1 million.
The Enron story had a few heroes to go with its villains. Vice-president Sherron Watkins is usually the first such person to be honored since she wrote a memo to Lay in August 2001 detailing some of her concerns. But Watkins did not speak to the board of directors—and even if she had, they were a pretty sorry lot—, go public or resign in protest. She locked up incriminating files and hoped the scandal could somehow be managed. Still, Watkins had the guts to speak out, as did Vince Kaminski, a Polish-born man who worked as managing director for research. He earned a few enemies by raising strong objections to practices whose sole purpose was to conceal Enron’s burgeoning debt and avoid paying taxes. Margaret Ceconi was also an Enron whistle-blower. Bethany McLean of Fortune magazine, Tori Mack of Forbes magazine, and John Emshwiller and Rebecca Smith of the Wall Street Journal were among the first journalists to question the company's methods. Skeptical Wall Street guys and gals included John Olson, Carol Coale, Jim Chanos, Richard Grubman and Mark Roberts. To call out Enron in its high-flying days was a courageous act because the company had ways of making life uncomfortable for those who did. Enron has been defunct since late 2004, its assets having been sold to help repay creditors.
Enron, a financial catastrophe of the first order, had Houston as its headquarters. Texans were sometimes villified for what took place, but that seemed rather unfair to me. Yes, a few UT and Texas A&M grads were employed at Enron, and they probably got while the getting was good. Nonetheless, I feel compelled to point out that Lay was from a small town in Missouri, Fastow hailed from Massachusetts and Skilling was a Pittsburgh boy.
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