In January 2001, Enron stock was trading for about $90 per share. By the end of that year it was worth pennies and tens of thousands of lives were ruined. We heard about the scandal, daily, during that time but it wasn’t until the expose was succinctly revealed, first, in the book The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron by Bethany McLean and Peter Elkin, did the full scope of the corporate scandal come to light. For those of us who didn’t read the book, documentary filmmaker Alex Gibney gives us the scoop on the company’s fiscal misdeeds in “Enron: The Smartest Guys in the Room.”
Documaker Gibney brings us a straightforward, by the numbers work that tells the Enron story in simple, chronological fashion. He introduces us to the actors in this passion play of power – Enron corporate officers Ken Lay, Jeff Shilling, Cliff Baxter, Andrew Fastow and Tim Belden, the brokers of a company torn apart; journalist Bethany McLean and Enron VP Sherron Watkins, who blew the whistle on the defrauding execs; and Bill Lerach, the lawyer who took on Enron on the behalf of those stockholders ruined by corporate greed and stupidity – then tells the incredible story of corporate arrogance and greed.
We get the Enron corporate history with its rise to be the seventh largest corporation in the United States with assets nearing $70 billion. The heady time of expansion and unimaginable earnings, the Camelot years for Enron, began in 1985 as a gas and oil company based in Texas. As the nation’s energy demands grew, especially for electricity, and government deregulations kicked in, Enron expanded their business into the trading of electricity, gas and other energy commodities. The profits from this change of corporate direction were enormous and the company quickly became know as an innovator in the industry.
Not content with just buying and selling energy, the officers at Enron – Lay, Shilling et al – focused the business on the brokering of energy sales, secretly setting buy and sell prices and gleaning huge profits as a result. The Enron leaders took this creative financing a quantum leap as they developed ingenious schemes to show huge profits on paper that disappear in smoke when scrutinized. Hypothetical profit speculation for future earnings were treated as real and the complicated nature of Enron’s fiscal structure hid the fact that the company was “a house of cards built over a pool of gasoline.” All the while, as the roof caved in and the SEC got into the act, the Enron leadership maintained a smiling face and the promise to stockholders and employees that all was well. In fact, on the day the company declared bankruptcy, the Enron officers gave themselves over $50 million in bonuses and everyone else squat.
Alex Gibney keeps the staggering amount of information and inflated numbers under control as he lays out the malfeasances committed by Ken Lay, Jeff Shilling and company. Unfortunately, with all the big numbers and lofty corporate trickery bandied about, the documakers pays too little attention to the little people whose lives were ruined by the cavalier manipulation by the Enron officers and traders. He does spend some time with several of the Portland General Electric employees – that company was acquired by Enron and the workers were convinced to convert their 401K investments into the corporation’s stock. One driver for PGE tells how his retirement account, once worth over $340,000, dwindled to a mere $1200 after the Enron bankruptcy. This single, chilling fact is, in itself, an indictment against the Enron leaders and their greed.
Gibney has amassed a wealth of archival footage of Enron’s rise up the corporate power ladder from company meetings and news reports that show the smiling faces of the bosses as they assure the stockholders that all is well even as the corporate house of cards tumbles. These benign images are counter pointed by the facts uncovered when the scandal broke in 2001.
Besides the core story of the Enron scandal, Gibney spends far too much time on the California blackouts that led to governor Gray Davis’s recall and Arnold Schwartzenegger’s subsequent election to that post. Enron was one of several energy companies that gleaned profits from the manipulation of electricity availability, even when there was no shortage, but the documentarian leads us to believe that Enron was the sole perpetrator. He also makes reference/accusation, a la Michael Moore, that the Bush administration was complicit in the Enron scandal but does not follow up on these allegations.
Enron: The Smartest Guys in the Room” is solid, if routine, documentary making that lays out its case clearly and in great detail. It condenses years of information into one neat, well-told package. I give it a B.Laura:
In the year 2000 America's seventh largest company declared $53 million in earnings on a deal that not only hadn't made a profit, but had never come to fruition. They never turned over their actual sales figures to Wall Street, but stock analysts continued to rate the company a strong buy. Why? They were "Enron: The Smartest Guys in the Room."
Using Fortune reporters Peter Elkind and Bethany McLean's book as a basis, director Alex Gibney ("The Trials of Henry Kissinger") traces back to the root problems that allowed the Enron scandal to come to fruition and presents the history from multiple viewpoints. Although both Ken Lay and Jeff Skilling refused to be interviewed for his film, Gibney got 'unofficial' access to company meeting videos and one jaw-dropping parody play and both men's presence is strongly felt throughout. Gibney's work would be a perfect double bill for the 2004 documentary, "The Corporation," as it is a textbook example of what that film set out to prove - that corporations, legally treated like people, were sociopaths.
The star of "Enron" is, without a doubt, Jeff Skilling, the CEO who believed that the only thing that motivated people is money. Yet it was Lay's lack of ethics all the way back in 1987 that foretold more recent events. When oil trader Louis Borget siphoned off $3 million of company money into personal bank accounts, he was making so much money for Enron that Kenneth Lay not only didn't fire or even reprimand him, he gave him higher stakes to gamble with! Borget almost bankrupt the company and Lay professed shock and ignorance. Sound familiar?
Lay brought Skilling in to revamp Enron and Skilling virtually created the business of trading oil and natural gas. He also came up with HFV, hypothetical future value, which is the basis of mark to market accounting. We get to see Skilling, playing himself in a video (presumably made for internal entertainment) explain with enthused wonderment that Enron can basically lie about their earnings with the sky as the limit. This was all ethical in Enron executives' minds, because it had been sanctioned by their accounting firm, Arthur Andersen. And therein lies the heart of the problem - it wasn't just one company's executives' greed that enabled all who worked for them to become gung-ho about ripping off their stockholders, it was all the accountants, banks and lawyers who looked the other way while taking their share. Even Alan Greenspan is seen accepting 'The Enron Prize' from its Chairman.
Still, it's hard not to be amazed by the brazen chutzpah of Skilling and his CFO Andy Fastow, who created new companies to hide billions in debt. Skilling admits that his best friend committed suicide because of a taint that would never wash off and in the next breath states that he does not believe he did anything wrong. In reference to Skilling's resignation, made after cashing in millions, whistleblower Sherrin Watkins puts it best - 'Jeff Skilling resigning was like Jim Jones convinced us to drink the KoolAid then wouldn't drink it himself.' Gibney paints Skilling as a man trying to repaint his inner nerd with machismo, creating a tough work environment with his rank and yank policy and forming groups to participate in extreme adventures like the Baja 1000 (recently featured in another documentary, "Dust to Glory"). Lay comes across as more of a head-in-the-clouds guy, mulling over upholstery swatches for his new private jet as Enron crumbled.
The most damning segment illuminates how Enron helped create the California energy crisis by exporting energy, then charging the state continually escalating prices to get it back. Enron's stock goes up while George W. Bush (a friend of Lay's who calls him Kenny Boy) refuses to allow the federal energy commission to cap prices. When FERC finally does just that, the energy crisis ends, but it's cost Democratic Governor Gray Davis his office. Gibney pairs news video of the time with the taped voices of Enron traders cackling with glee about robbing little old grandmothers.
While Gibney does an exemplary job analyzing how this corporate greed was enabled, he leaves us wanting to know more about the people Enron stomped on in the process. A blue collar guy relates how $348K in retirement savings is frozen while execs cash in tens of millions worth of stock and he ends up with $1,200, but how might he be helped with the upcoming trials of Enron's execs? Gibney instead stresses the wily antics of those who encouraged these people to plow their money into the company while they made it rich. One particularly lurid example is with quiet exec Lou Pei, who charged his strip club expenses to Enron, then divorced his wife and cashed out $250 million in stock to marry a stripper and retire in Colorado as the state's second richest man.
Gibney does a good job keeping his film visually interesting, even with a fair amount of talking heads. A sense of humor is evident in song choices like Billie Holiday's "God Bless The Child" (that's got his own) and Judy Garland's "That Old Black Magic."
A CFO whose policies were entirely gambled on the notion that his company's stock price would never fall. A CEO who tells his employees that their company is fundamentally strong while it is in freefall. The outside accounting firm hired to keep them honest shreds one ton of documents. With all this inherent drama, "Enron: The Smartest Guys in the Room" seems ripe for feature film treatment.
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