Enron: the greediest guys in the room

Share with your friends










Submit

Enron: The Smartest Guys in the Room is the new documentary film by director Alex Gibney. His screenplay is based on a book by Bethany McLean and Peter Elkind, The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron. Gibney, whose credits include The Trials of Henry Kissinger and the TV miniseries The Blues, does an excellent job of bringing the story of Enron to life.

One need not be an economist to appreciate this film. Gibney makes what could otherwise be a dry, technical tale engrossing by capturing the real people involved. He skillfully uses everything from great pop songs to a Simpsons clip to illustrate this tragedy.

The amorality of profit. At its heart, this is the story of what happens when basic human survival needs are treated as mere commodities to be bought and sold for maximum profit.

We learn how Enron got its start during the natural-gas deregulation era of the mid-1980s. Ken Lay, the son of a poor southern preacher, takes full advantage of the opportunities for speculation opened up by the Reagan administration. The company later plays a major role in lobbying for deregulation of the electrical industry, and then buys Portland General Electric as its ticket into electricity trading.

The film documents how a brazenly aggressive corporate culture influenced many employees to become callous and unethical. In its heyday, Enron’s energy traders laughed derisively at the suffering caused by the rolling California power blackouts they created. (Tapes of their crude conversations and market manipulations became public thanks to a suit by the Snohomish County Public Utility District in Washington state.)

Enron executives Ken Lay and Jeff Skelling are shown straddling power transmission towers on the cover of Time magazine. Bosses play macho games in strip clubs and on motorcycles in Baja. A select handful becomes obscenely wealthy. Top executive Lou Pai quits the company and takes $250 million dollars with him.

We also see the flip side of this rampant greed — the misery of cynically gouged utility customers and rank-and-file employees of the behemoth who lost their retirement funds when Enron collapsed.

Sociopaths at the top. Enron, which at one point grew to be the seventh largest corporation in the United States, was “a house of cards built over a pool of gasoline,” according to the pastor of a Houston church that many employees attended. Enron obtained permission from the federal Securities and Exchange Commission (SEC) to use a phony bookkeeping method called “mark to market” accounting.

This scam allowed the company to enter into the books profits they said they would make from a given project when they started it. This bolstered the company’s financial statements and caused its stock price to soar.

As time went on, top executives created a maze of phony subsidiaries to hide growing actual losses. These men became tycoons by exercising huge stock options. Dazzled by the company’s quick growth on paper, Enron employees were persuaded to put their retirement money into company stock. The movie shows some of these workers at first jubilant at company pep rallies, then distraught after Enron stock “cratered.”

In the spring of 2001, book authors McLean and Elkind contributed to this crash with an article for Fortune magazine called “Is Enron Overvalued?” Their questioning of whether the company was actually making the profits it claimed, along with that of other skeptics, exposed that the emperor had no clothes. Stock prices plummeted by the end of 2001 as the truth of Enron’s huge losses emerged.

While many Enron workers were devastated, executives were paid over $744 million in cash and stocks in the company’s last year. Skelling, Lay, and others now face criminal charges and civil suits for unloading their own stock before the full truth became public, while freezing the retirement accounts of workers as prices bottomed.

Indictment of the system. In the movie, book author McLean emphasizes that top government, accounting, and banking officials were complicit in Enron’s misdeeds. The nation’s largest accounting firm, Arthur Anderson, was shut down for its collaboration with Enron. The SEC played its part. Banks thrived on Enron money. Bush and other Republicans were great buddies of Ken Lay and his company.

One weakness of the film is that it does not mention that Enron was also in bed with Democrats. Forbes magazine says Enron gave over $100,000 to Democratic politicians just in the weeks preceding its bankruptcy. Lay was on the board of Teresa Heinz Kerry’s environmental foundation, heading up its work on global warming!

In the film, McLean warns, “There is nothing to stop this from happening again.” But the knowledge of the inner workings of the profit economy that she and this film supply help to show just how rotten the system is as a whole. The Smartest Guys in the Room joins the recent film The Corporation and last year’s book Confessions of an Economic Hit Man in documenting the crimes that cry out for change.

Allen Thompson, a member of Stand Up Seattle!, can be contacted at allendt@ comcast.net.

Share with your friends










Submit