This is not a
political documentary. It is a crime story. No matter what your politics, "Enron:
The Smartest Guys in the Room" will make you mad. It tells the story of how
Enron rose to become the seventh largest corporation in America with what was
essentially a Ponzi scheme, and in its last days looted the retirement funds of
its employees to buy a little more time.
There is a
general impression that Enron was a good corporation that went bad. The movie
argues that it was a con game almost from the start. It was "the best energy
company in the world," according to its top executives Kenneth Lay and Jeffrey
Skilling. At the time they made that claim, they must have known that the
company was bankrupt, had been worthless for years, had inflated its profits and
concealed its losses through bookkeeping practices so corrupt that the venerable
Arthur Anderson accounting firm was destroyed in the aftermath.
The film shows
how it happened. To keep its stock price climbing, Enron created good quarterly
returns out of thin air. One accounting tactic was called "mark to market,"
which meant if Enron began a venture that might make $50 million 10 years from
now, it could claim the $50 million as current income. In an astonishing
in-house video made for employees, Skilling stars in a skit that satirizes "HFV"
accounting, which he explains stands for "Hypothetical Future Value." Little did
employees suspect that was more or less what the company was counting on.
Skilling and Lay
were less than circumspect at times. When a New York market analyst questions
Enron's profit and loss statements during a conference call, Skilling can't
answer and calls him an "a-hole;" that causes bad buzz on the street. During a
Q&A session with employees, Lay actually reads this question from the floor:
"Are you on crack? If you are that might explain a lot of things. If you aren't,
maybe you should be."
One Enron tactic
was to create phony offshore corporate shells and move their losses to those
companies, which were off the books. We're shown a schematic diagram tracing the
movement of debt to such Enron entities. Two of the companies are named "M.
Smart" and "M. Yass." These "companies" were named with a reckless hubris: One
stood for "Maxwell Smart" and the other one ... well, take out the period and
put a space between "y" and "a."
What did Enron
buy and sell, actually? Electricity? Natural gas? It was hard to say. The
corporation basically created a market in energy, gambled in it and manipulated
it. It moved on into other futures markets, even seriously considering "trading
weather." At one point, we learn, its gambling traders lost the entire company
in bad trades, and covered their losses by hiding the news and producing phony
profit reports that drove the share price even higher. In hindsight, Enron was a
corporation devoted to maintaining a high share price at any cost. That was its
real product.
The documentary
is based on the best-selling book of the same title, co-written by Fortune
magazine's Bethany McLean and Peter Elkind. It is assembled out of a wealth of
documentary and video footage, narrated by
Peter Coyote, from testimony at congressional hearings, and from interviews
with such figures as disillusioned Enron exec Mike Muckleroy and whistle-blower
Sherron Watkins
It was McLean who
started the house of cards tumbling down with an innocent question about Enron's
quarterly statements, which did not ever seem to add up. The movie uses in-house
video made by Enron itself to show Lay and Skilling optimistically addressing
employees and shareholders at a time when Skilling in particular was coming
apart at the seams. Toward the end, he sells $200 million in his own Enron stock
while encouraging Enron employees to invest their 401K retirement plans in the
company. Then he suddenly resigns, but not quickly enough to escape Enron's
collapse not long after. Televised taking the perp walk in handcuffs, both he
and Lay face criminal trials in Texas.
The most shocking
material in the film involves the fact that Enron cynically and knowingly
created the phony California energy crisis. There was never a shortage of power
in California. Using tape recordings of Enron traders on the phone with
California power plants, the film chillingly overhears them asking plant
managers to "get a little creative" in shutting down plants for "repairs."
Between 30 percent and 50 percent of California's energy industry was shut down
by Enron a great deal of the time, and up to 76 percent at one point, as the
company drove the price of electricity higher by nine times.
We hear Enron
traders laughing about "Grandma Millie," a hypothetical victim of the rolling
blackouts, and boasting about the millions they made for Enron. As the company
goes belly up, 20,000 employees are fired. Their pensions are gone, their stock
worthless. The usual widows and orphans are victimized. A power company lineman
in Portland, who worked for the same utility all his life, observes that his
retirement fund was worth $248,000 before Enron bought the utility and looted
it, investing its retirement funds in Enron stock. Now, he says, his retirement
fund is worth about $1,200.
Strange, that
there has not been more anger over the Enron scandals. The cost was
incalculable, not only in lives lost during the power crisis, but in treasure:
The state of California is suing for $6 billion in refunds for energy
overcharges collected during the phony crisis. If the crisis had been created by
Al Qaeda, if terrorists had shut down half of California's power plants,
consider how we would regard these same events. Yet the crisis, made possible
because of deregulation engineered by Enron's lobbyists, is still being blamed
on "too much regulation." If there was ever a corporation that needed more
regulation, that corporation was Enron.
Early in the
film, there's a striking image. We see a vast empty room, with rows of what look
like abandoned lunchroom tables. Then we see the room when it was Enron's main
trading floor, with countless computer monitors on the tables and hundreds of
traders on the phones. Two vast staircases sweep up from either side of the
trading floor to the aeries of Lay and Skilling, whose palatial offices overlook
the traders. They look like a Stairway to Heaven, but at the end they only led down, down, down.
