Enron: The Smartest Guys in the Room--a 2005 Documentary

Based on the well-researched and highly-regarded 2003 book by Fortune magazine reporter Bethany McLean and editor Peter Elkind, this 2005 film portrays in fast-moving but hard-hitting interviews and film clips the rise, prominence, decline and fall of Enron, the Houston-based energy trading firm. Since its fall Enron has become more than a company to most Americans; it is now a symbol of the wildly greedy culture in America before the "dotcom" bubble burst in 2001. To make matters worse, the fall of Enron was attended by two distinct realities: the loss of pensions and jobs by thousands of loyal employees and the skimming of millions of dollars of Enron's resources by the top management, who exited with their cash before the big crash on Dec. 2, 2001. Though Enron is a company we now love to hate (its contemporary intonation resonates like the word "Nixon" resonanted in the 1980s), at one time it was the most admired company in America, and its fantastic increase in valuation added to the air of economic unreality in which many Americans lived in the late 1990s.

A Moralistic Tale

This documentary, directed by Alex Gibney, tries to "boil down" the Enron story into a film of 90 minutes. As a result it suffers from what most movies based on longer works experience: a condensation and simplification that only scratches the surface of what went awry. In this case the simplification makes Enron's story into an epic tale of greed and arrogance. It is the people, rather than the process, that is most interesting to Gibney. And, of course, he has a lot to work with in these outsized egos and seemingly amoral types who filled the top ranks at Enron. There is Kenneth Lay, the son of the Baptist preacher, who earned his Ph.D. in economics and became the prophet not of the savior Jesus but of the saving power of deregulation of energy markets. There is Jeffrey Skilling, the scintillatingly intelligent and creative Harvard Business School graduate, who reconceptualized what the company was about in the 1990s so that he could look at energy not as pipelines and flows but as any other commodity that could be traded (or withheld) from people. Then, there is Andy Fastow, a young man (born 1961) brought in as chief financial officer after leading an Illinois bank into tough times in the savings and loan crisis of the late 1980s, but one who was willing to take risks by creatively financing the company. He did this, in the late 1990s, by creation of many "spe's" or "special purpose entities" where Enron's debts were parked and not reported to shareholders or the press. These are the three villains of the movie.

The "heroes" are not as clearly or cleverly portrayed. There is Sherron Watkins, who wrote a long email to Lay in August 2001, laying out how the current financial realities with "spe's" may come back to bite the company. But she really shouldn't be seen as a corporate "whistleblower." She is just telling her boss what she sees as the bad news. Perhaps a whiff of honesty, even if she was also interested in protecting her back side, appears so stunning as to merit, for some, the designation of "whistleblower." There is also William Lerach, the attorney who ultimately sued Enron on behalf of a class of investors and won nearly $7 billion in a judgment, nearly 9% of which went to his law firm. His populist style, which rocketed him to the top of plaintiff class action lawyers in the 1980s and 1990s is clear to all. Yet, his legacy is ambiguous, as he was sentenced to two years in prison in Feb. 2008 for his role in paying plaintiffs to be "lead plaintiffs" in class action lawsuits over the years.

But, in fact, the story doesn't really need any 'heroes' since the 'villains' so nicely show their colors for us to see. We see Ken Lay's disengagement from the company even as he utters pious platitudes designed to calm people as the ship slowly sinks into oblivion. We have Jeffrey Skilling's cynicism and arrogance where he doesn't even deign to answer reporter's questions but, instead, calls one reporter an "asshole." We have a culture which lived on nothing but hype for years, as if the air that they breathed contained all the nutrients of a useful diet. In the end, we see a company which successfully deceived investors, banks, employees and the media for a decade as it surged to become one of the largest companies in America.

Critcisms

Though the film skillfully points out the human dramas that have enraged viewing audiences (such as the chortlingly cynical comments of Enron traders as they orchestrated the CA rolling blackouts of 2000 and 2001), it only skims the surface of the company's history, and this is its shortcoming. It mentions the "mark to market" accounting change in Jan. 1992, allowing the company to book projected revenue as current revenue, but I wanted to know a little more about that (was it just Enron who could do this? Was it an accounting profession change? Was it a statutory change which allowed this? How did Enron use it?). It also mentions Andy Fastow's multitude of offshore "spe's"--but it isn't very clear on how these operated. Then, it speaks of Enron's dizzying rise in the late 1990s, but we don't really get the sense of how they accumulated their money. Just using the word "deregulation" to cover all bases leaves me somewhat bewildered. Finally, the film doesn't explain well how the company got control of the CA energy market late in the decade. I think I may have to read the book in order to answer some of my questions in this regard.

Conclusion

Director Gibney wanted to present a modern morality tale in this movie. To that end, I thought I would end with two proverbial sayings from antiquity, one in Latin and one from the Bible, that seem to capture Gibney's presentation of Enron's situation. The first is from Juvenal's Satires (14.139),

"crescit amor nummi quantum ipsa pecunia crevit" (or "crescit"),

or, "The love of money grows as wealth itself grows." This truth is hard to believe; you would think that as money grows you would realize that you have enough with which to live or live well, but that isn't the way it is. Money is like a fuel that drives you to want more. This was, seemingly, the Enron "disease."

Second, you have a quotation from Proverbs 26 about foolishness and wisdom:

"Do you see a man wise in his own eyes? There is more hope for a fool than for him," Prov. 26:12.

Jeffrey Skilling didn't realize that what he was, in fact, was a fool. He was "wise in his own eyes." As such, he was hopeless....

3446