95 of 103 people found the following review helpful
4.0 out of 5 stars Superbly written; hits the fear and greed concepts in spades
Anyone following the tragic Enron saga knows the plethora of books that have hit the streets. However, after reading many of them, CONSPIRACY OF FOOLS is probably one of my favorites. And, while I do agree with other reviewers' comments about Eichenwald's intense focus on Fastow as the puppet master, I can't help but think this is not too far from the truth. If, on the...
Published on April 13, 2005 by R. Shaff
24 of 26 people found the following review helpful
3.0 out of 5 stars The Fool Defense
The book expurgates Ken Lay. Two portraits of Lay emerge depending on Enron's fortunes. In one, he is an innovative and managerial genius who rose from a humble background to become one of the most powerful and celebrated CEO's in the world. In the other, he is a sheep among wolves; an honest fool betrayed by thieves. Fastow emerges as the King of the Thieves...
Published on July 31, 2005 by R. F. PELAEZ
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95 of 103 people found the following review helpful
4.0 out of 5 stars Superbly written; hits the fear and greed concepts in spades,
Anyone following the tragic Enron saga knows the plethora of books that have hit the streets. However, after reading many of them, CONSPIRACY OF FOOLS is probably one of my favorites. And, while I do agree with other reviewers' comments about Eichenwald's intense focus on Fastow as the puppet master, I can't help but think this is not too far from the truth. If, on the other hand, you haven't had the opportunity to catch up on this abomination, two other books are very worthy of mention: 24 DAYS by Rebecca Smith and John R. Emshwiller, and THE SMARTEST GUYS IN THE ROOM by Bethany McLean and Peter Elkind (by the way, Bethany McLean receives high mention in CONSPIRACY as the tenacious young reporter who was not afraid to take on these power brokers).
Very simply put, I love Eichenwald's style. He has taken a subject, which can be extremely complex and dry (i.e. special purpose entities), and has provided the reader with a basis to understand how they were initiated, what they were "designed" to do, and where they failed miserably. And, while a novice to structured finance and accounting may not walk away from the book totally schooled on SPEs, one cannot say Eichenwald failed to explain the general basics. Further, Eichenwald has not created a historical rendering of events; rather, he has created a historical novel, of sorts. The book reads more like a novel and less like a business/non-fiction book.
Two of the more interesting features in this book are Eichenwald's "Cast of Characters," and "The Primary Deals," both of which occupy the forward section of the book. The "Cast of Characters" is no less than six pages (I didn't count the actual characters, but I'd bet there are in excess of 100). This "Cast" is Eichenwald's attempt to shortcut the incredible level of descriptive detail it would take to introduce each new character, their place in relation to Enron, their role, and interaction with other characters. Although it is daunting as a precursor to beginning the first chapter, it is telling in the breadth of individuals and firms this fraud touched (not to mention the thousands of employees, many of whom lost all their retirement savings). Perhaps as, or more, important than the "Cast" is "The Primary Deals." These pages list the deals structured by Fastow et al, which effectively took Enron down. If I could impress upon a reader to focus on the "Deals" before starting the book, rest assured that the reader will have a greater comprehension of the schemes and internal cabals that took down a Fortune 50 company.
As the title of my review suggests, fear and greed dominate this book and the Enron story. This can be immediately evidenced by the incontrovertible activities inside (and outside) the company that are absolutely unethical and illegal (read: fraudulent). And, though these acts weren't totally hidden, the twin powers of fear and greed kept anyone/everyone from stepping up until it was too late (even whistleblower and ostensible heroine Sherron Watkins is not totally clean, in my opinion). The poster children for Fear: the Houston partners of Arthur Andersen (of course, greed was just as powerful here). The Houston AA partners were so fearful of losing Enron as a client that they turned the other cheek to obvious accounting infractions and fraud...even when their own Standards Group was telling them to run! As to the poster children for Greed: the cast is ponderous, but Andy Fastow and Michael Kopper are the Kings of Greed. Through their simple, yet complex collusion, they robbed Enron, its creditors, and investors of close to $100 million. Perhaps more egregious however, is their part in devising such incompetent and fraudulent SPEs, which ultimately were nothing more than shell games.
In the end, Eichenwald is laser-focused on Fastow, and Kopper to a lesser degree. This has caused other reviewers a bit of heartburn in the sense that Ken Lay and Jeff Skilling are presented as intelligent, yet "empty-suited" lackeys. I'm not sure I agree with Eichenwald's overview of Lay and Skilling however, it doesn't detract from the story Eichenwald tells. And while Eichenwald's poisonous pen was aimed at Fastow, honestly, I couldn't agree more. Fastow was quite simply a con man. He wasn't qualified to be the CFO of a small, private company, much less a Fortune 50 company. He lied, manipulated, stole, and cheated...all this from an executive who has the trust of thousands of investors. There was nothing but failure in the cards.
CONSPIRACY is a great read and one much less stuffy than expected. The only reason I didn't lay 5 stars on this books was the perceived imbalance of blame that, in this reviewer's opinion, should have been laid at the feet of Lay and Skilling.
123 of 137 people found the following review helpful
4.0 out of 5 stars good storytelling,
Kurt Eichenwald provides an entertaining story for those of us who are familiar with the name Enron but unclear about the specifics .
Eichenwald presents his story as a Greek fable in the John Grisham and Scott Turow mold. The reader is introduced to protagonists Ken Lay and Jeffrey Skilling and the Andy Fastow as the story's villain.
Although the book makes good storytelling, anyone who has read earlier books about Enron has to be skeptical about Eichenwald's sympathetic portrayal of Lay and Skillings and their supposed lack of knowledge about the stealing, lawbreaking and abuse that occurred under their watch. One can't help but wonder how Lay, who has a Ph.D in economics, could be so clueless about all the things that came to light about his company as it imploded. Skilling comes off as a sobbing, emotional wreck. It's a mystery how he ever attained the rank of CEO at a Fortune 500 company. I strongly suspect that both men served as major sources for this work.
Fastow is only a too familiar character to anyone who has worked in an office as the imcompetent, dishonest but scheming employee who charms the higher ups and climbs on the back of others to achieve power. But as with most work environments, Fastow couldn't achieve his crimes without the arrogance, disorganization and willful ignorance of his supervisors.
Another problem with the book is the author's retelling of various conversations and thoughts of most of the principal characters. Unless each source was keeping journals of the events as they unfolded, it's highly unlikely that the author's interpretation could be totally accurate.
42 of 48 people found the following review helpful
5.0 out of 5 stars Finally, the real story,
As someone who lived through many of the events at Enron, and who also was subjected to one of Eichenwald's probing and seemingly endless interviews, all I can say is BRAVO. So much of what I have read about this company has been such a caricature, based on impressions and suppositions. This is the real story, and believe me, it is not a pretty one. Some of the revelations in this book horrified me. But, I now know from other former Enronites, all of whom seemed to have spoken to Eichenwald, that even the most shocking tale in here is true. And more that a few people are astonished that Eichenwald seems to have obtained records of their statements to the Feds.
This is a stunning book. The reviews are true: it does read like the best of corporate thrillers. More important to me, it is the real story about what happened. For the first time, at least every event I know about is recognizable, but more important, so is the company, in all of its twisted, psychotic and mismanaged ways.
24 of 26 people found the following review helpful
3.0 out of 5 stars The Fool Defense,
The book expurgates Ken Lay. Two portraits of Lay emerge depending on Enron's fortunes. In one, he is an innovative and managerial genius who rose from a humble background to become one of the most powerful and celebrated CEO's in the world. In the other, he is a sheep among wolves; an honest fool betrayed by thieves. Fastow emerges as the King of the Thieves.
Honesty is not a profit center in the business world. Managers do not receive bonuses for honesty. In a legal system that historically has been exquisitely soft on corporate criminals, the conflict between profits and honesty is resolved in favor of the former. If Ken Lay was so honest, why did he not emphasize the need for honesty within Enron during the many years when he could have done so. He had every opportunity to develop internal controls to ferret out managerial dishonesty and to instill a culture of honesty. We do not hear that the annual reviews even considered honesty; instead, the focus was on performance. Those who raised red flags received bad reviews. Clearly, all that mattered was for the rowers to make it possible for accounting earnings to meet or exceed analysts' expectations.
The book claims that Enron collapsed because it made too many bad investments. This is an amoral and simplistic view. Another view is it collapsed because decision-making took place within a culture of hubris and dishonesty. Ali Baba and the 400 Thieves pushed the envelope to the breaking point in the knowledge that they were too smart to be caught.
I give the book 5 stars for entertainment and 2 stars for depth, or in the spirit of charity, an average of 3.5.
19 of 22 people found the following review helpful
5.0 out of 5 stars Greed + Arrogance + Criminality = Folly,
The title of Eichenwald's brilliant book immediately raises three separate but related questions: What were the nature and extent of the Enron conspiracy? Also, which of those involved were "fools"? And what were their follies? He answers all three, doing so with surgical precision in combination with the narrative skills of a master storyteller. Clearly, he had a wealth of material to work with, much of it not previously shared with the general public.
This book will be especially valuable to those who have a keen interest in what is probably the greatest corporate scandal in recent years. I also commend to their attention McLean and Elkind's The Smartest Guys in the Room as well as Rebecca Smith and John R. Emshwiller's 24 Days: How Two Wall Street Journal Reporters Uncovered the Lies that Destroyed Faith in Corporate America. Whereas Smith and Emshwiller explored the same company as investigative reporters, McLean and Elkind seem (to me) to have approached their subject as corporate anthropologists. Both books reach many of the same (albeit somewhat tentative) conclusions as to what happened...and why.
Two significant differences are that Smith and Emshwiller limit their attention primarily to a period in 2002 extending from October 16th (when Enron announced huge losses caused by two partnerships) to December 3rd (when Enron filed for Chapter 11 bankruptcy); McLean and Elkind cover a two-year period of the company's "amazing rise and scandalous fall." Also, McLean and Elkind devote far more attention to each of the "smartest guys"; Smith and Emshwiller seem far less interested in them, except in terms of the impact of their mismanagement and corruption. Eichenwald adds substantially to what they and others have already revealed. I also appreciate the fact that he does not hesitate to share his own perspectives on who did and did not do what, what their motives were, and the lessons to be learned from their values, attitudes, and behavior. My guess (only a guess) is that it will be decades before all of the sordid and, for so many victims, tragic details have been revealed. Meanwhile, we owe a substantial debt of gratitude to Eichenwald as well as to Smith and Emshwiller and to McLean and Elkind.
15 of 17 people found the following review helpful
4.0 out of 5 stars this is worse than I would EVER have imagined,
The problems of Enron can be viewed as either extremely simple or overwhelmingly complex. What happened is an intersection of arrogance, greed, and stupidity that is unprecedented in my research and reading experience on business. That is easy to get. What is hard to comprehend is how it went on for so long - with so many willing accomplices in outside firms, from Andersen to Merrill Lynch - and the precise financial and accounting techniques that were employed. As such, I think this story is an indictment of the entire establishment of people who think and write about business, myself included. Let's admit that we didn't see this one coming and didn't ask the right questions!
As a first-rate reporter, Eichenwald takes us through the entire story, offering up personal details that allow the reader to imagine that they enter the heads of the people involved. It is a tour de force, with ample documentation to back up every reconstructed conversation, and beautifully written.
The story that emerges is that once Ken Lay left the confines of a stodgy business - natural gas pipelines - he got way way out of his depth. His company evolved into a trading conglomerate, and not even its competitors clearly understood how it was making money. At first, it did well, growing to become one of Wall Street's darlings and even a major political player.
But underneath, lots of things were going wrong. FOr starters, much of its profits came from an accounting redefinition (mark-to-market), in which the company was allowed to book profits for deals immediately - based on the company's own estimates (!) - and regardless of cash flow in subsequent years. That made dealmaking the road to profitability, creating what can only be described as an elaborate ponzi scheme: to show a profit, the company had to strike more and more deals, even as its cash position was precarious.
Then things got worse. Many of the deals that Enron made were simply bad and not checked out in any serious way (with proper "due diligence"). In other words, decisions involving hundreds of millions and then billions were made off the cuff in areas that the executives were almost entirely ingorant, like electricity plants in India, water futures, and of course, the broadband internet. This resulted in a huge array on non-performing assets. In spite of this, the way to advance in the company remained to make deals regardless of their quality.
SOmewhere along the line - possibly when Rich Kinder, one of the original top execs, left - management lost control of the situation. This is where Andy Fastow - the great villain of the book who was also catastrophically stupid, to put it mildly - was appointed CFO, turning an oversight office into a profit center! No one thought to question him as he created accounting schemes that allowed the company to report huge profits by shunting non-performing assets into secretive "partnerships", all while enriching himself and several conspirators.
To keep banks and accountants on board, Fastow played hardball, threatening to cut them out of hugely profitable deals if they refused to play along, and most of them did play along while complaining that it was sleazy and then doing nothing to stop him. (FOr this complicity, many of them paid later in prison sentences as well as the demise of Arthur Andersen.) Fastow also got dissenting analysts and even Andersen acountants off the Enron account if they dared question the company's postion, ruining their careers. It is only the beginning of the human suffering that resulted from the company's eventual collapse.
Skilling and Lay, according to Eichenwald, kept themselves blissfully unaware of this situation as they went about their roles as corporate celebrities at the highest level. This is a failing so blatant that it is beyond catastrophe. They are the fools of the title, if you can believe that they weren't in on the whole thing. Indeed, the company had no business strategy or business model! In retrospect, there appear, according to the author, to have been many in the organization who worried about its practices, but their advice was eith systematically ignored or dismissed by those who were compromised. But in my view, even the most self-serving fool should have recognized the blatant conflicts of interest - Fastow was CFO as well as the manager of off-account funds, which meant that Enron often did business with itself, as customer and purchaser, with all transactions booked as profits for hefty fees for Fastow and his helpers!
As told, the story is truly rivetting and a fascinating look into the roaring 1990s. However, Eichenwald refrains from both adding analytical context and offering his opinions on the protagonists. That means that this book strives for pure reporting rather than the eloquent moral commentaries of a David Halberstam. I think that that lessens the import of the book significantly, though others may prefer it that way. Moreover, occasional value judgments did slip in, in such comments as Eichenald's assertions that "even a baboon could have made money on the deal." After all the work he did, he cannot but have reached his own conclusions, which by force influenced his writing - so why not be open about them?
In spite of these criticisms, this is wonderful reporting and lively writing. Warmly recommended.
25 of 30 people found the following review helpful
5.0 out of 5 stars I could not put this book down,
I purchased this book last Monday, after reading an excerpt in the Sunday New York Times. While I am a big fan of these kind of business books, I had expected, given its length, to spend a couple of weeks reading this. It was not to be. I wrapped up reading this book around 3 in the morning on Thursday and, despite having gone through some 700 pages, was still hungry for more. For me to read that much in a little more than two days means this a page-turner, bit time.
The story is about the Enron scandal, which I fear may keep people from reading it. I have raved about it to friends, occassionally hearing responses that they find Enron confusing and think they know all they need to about this story. Nothing in this book is confusing, and it truly does read like a novel, a top-notch corporate thriller. I had followed the story carefully in the paper, but it's only now that I feel like I really understand what happened. Read this book. You'll love it.
47 of 59 people found the following review helpful
5.0 out of 5 stars An AMAZING story,
I was lucky enough to get one of the early copies of this book, passed to me by a friend who insisted I would enjoy it. I was skeptical, to say the least. The Enron collapse was never a story that I found all that interesting and I seriously doubted I would want to read a book this long about it. Then, I read the first page. And the next. And the next.
Boy, was I wrong. It is so hard to explain what this book is. It is a thriller, like a Grisham novel. It is exciting and intriguing and outrageous and funny and tragic. The only thing I disliked about it was that I lost several nights sleep as I tried to race to the end. I cannot praise this book enough. It is an amazing accomplishment.
11 of 12 people found the following review helpful
4.0 out of 5 stars Highly recommended,
This review is from: Conspiracy of Fools: A True Story (Paperback)
A fascinating, detailed, chronological exploration of the rise and fall of Enron. I came away from it feeling both depressed and angry that supposedly smart guys could screw up their lives and the lives of so many others, through greed, perfidy, and arrogance. As Eichenwald puts it: "Ultimately, it was Enron's tragedy to be filled with people smart enough to know how to maneuver around the rules, but not wise enough to understand why the rules had been written in the first place."
What will you learn from this book? Among other things, you'll meet a large cast of characters. The central three are these:
Ken Lay, chairman and CEO, will soon (as of January 2006) go to trial, accused of misleading investors about Enron's prospects in the months before it went bankrupt.
Jeff Skilling, president and (briefly) CEO, will also soon go on trial, on much broader charges, accused of participating in various illegal schemes that eventually brought down the company.
Andy Fastow, chief financial officer, has pleaded guilty to fraud in those schemes and has agreed to surrender $23.8 million in assets and serve ten years in prison.
Fastow, the book makes clear, is the central criminal in the enterprise, aided and abetted by a number of his friends and underlings. What is not clear from the book is whether Lay and Skilling understood the incredibly stupid and dangerous Enron financial structures that Fastow had set up for his personal gain, to Enron's detriment and eventual demise. The book leaves us with the impression that Lay may have been truly ignorant of the illegal machinations going on in his company and that he actually believed, right up to the end, that Enron merely had a public relations problem, and that outsiders were driving down Enron's stock unfairly. What seems undeniable is that Lay should have known. Here is how one of the good guys in Enron put it frankly to Lay after the collapse, when Lay asked what he thought would happen to him: "There are two possible outcomes here. One is you look incredibly stupid and look like you did a bad job. And the other is they try to put you in jail." A jury will soon decide in Lay's case: mere stupidity or criminality?
Nor can I tell from the book how much Skilling understood of the mess that Fastow was making. Skilling was certainly much more deeply involved in the day-to-day operations of the company than was Lay. Is it possible that he was so incompetent that he didn't recognize what Fastow was up to? With Skilling's reputation for brilliance and hands-on management, it's hard to believe. Stupidity or criminality? A jury will soon decide in Skilling's case, too.
Fastow, of course, was both foolish and criminal, as is thoroughly documented in the book. He set up complex financial arrangements for Enron that not only siphoned tens of millions of dollars of Enron's money into the personal accounts of his friends and family but also put Enron's very existence at risk. Despite his cleverness at stealing Enron's money, he lacked an understanding of the basics of accounting---a surprising thing for a CFO of a Fortune 50 company. How is it possible for someone like him to attain such a position? Chalk it up to the Enron culture that Lay and Skilling set up: Enron was run by arrogant executives who thought they knew more than anyone else, hard-charging deal-makers, running a system that rewarded flashy deals and fast growth, and that used accounting tricks to make this quarter's results look good while risking the financial health of the company, a culture that ignored the boring aspects of business such as actually making real profits. Incredibly, Enron's financial system, after years of mismanagement and malfeasance by Fastow, could neither track how much cash Enron had nor show when its debts were coming due.
As Enron spiraled toward total collapse, the new CEO called Fastow in and asked a basic question: how much liquidity do we have? Fastow answered, "We're in a very good position. We've got $3.8 billion in available lines of credit." The treasurer then interjected that they'd already drawn down $500 million of that. The CEO had "just asked his CFO for the most important financial number of them all and got an answer that was off by half a billion dollars." Worse: a minute later it became clear that the correct answer was only $1.5 billion, not $3.8 or $3.3 billion. Fastow was not only a liar and a crook, he was incompetent.
And one has to wonder about the board of directors of Enron. It is almost beyond comprehension that supposedly savvy businessmen, charged with the overall direction of a company, could be blindsided by wide-ranging financial malfeasance and incompetence by the company's top executives. They loved Andy Fastow. They trusted him. They waived conflict-of-interest rules in order to allow him to set up his nefarious schemes. They didn't understand the structures he was setting up for his personal gain. They didn't pursue the subject with any diligence. They failed utterly to provide the oversight that Enron's shareholders had every right to expect.
Seven months before Enron's collapse, Enron's risk assessment group (some of the good guys in the story and in the company) approached the treasurer of Enron, and warned him of potential financial disaster. They "painted a graphic picture of a finance division out of its depth, taking risks it did not fully comprehend." Fastow's off-books partnerships, about which the risk assessment group had been able to garner only partial information, were a danger to Enron; it was, says Eichenwald, as if Enron had agreed to hose down their house with gasoline if a fire started. They reported that "it's conceivable we could hit a cascading series of triggers, setting off a domino effect, where each trigger pushes down our stock price even more. That would result in a massive decrease in the share price and lower our bonds to junk rating." And Enron could not survive if its credit rating fell to junk status. "With eerie precision, [they] had predicted the scenario that would ravage the company in just seven short months." But the treasurer of Enron---himself a recipient of a million-dollar illegal profit from one of Fastow's financial schemes---told them there was nothing to worry about, and he presumably never warned Lay or Skilling or the board of directors.
And then there's the sad case of Cliff Baxter, executive vice president in corporate development, who comes across in the book as a reasonable man of good sense and integrity, but who evidently was overwhelmed by Enron's rapid descent from widely admired corporation to a symbol of corruption and mismanagement. Although he had left Enron months before the collapse, it hit him hard. He talked long hours with his friend Skilling, saying that it felt like being publicly called a child molester, and that "from then on it doesn't matter what you say. It'll never wash off." And then one night he drove his Mercedes a few blocks from his house, parked, and shot himself in the head with a .357 Magnum revolver.
So it's a depressing book, as might be expected of such a tale of hubris and tragedy. But it is quite well-written, gripping in its rapid-fire chronological accounting of the many mistakes of Enron.
If the book has a flaw, it's the brevity of its depiction of the devastating effect of Enron's collapse on the lives of the thousands of good and innocent employees of Enron (and of Andersen, the auditing firm that also imploded in the scandal), as well as many, many ordinary investors who believed Enron stock was worth investing in.
Great title, excellent book. Highly recommended.
27 of 33 people found the following review helpful
4.0 out of 5 stars It's true: It reads like a novel!,
This book lives up to everything it claims to be. Working at a Borders bookstore, I was privileged to read a pre-release copy (thus the early review). Not being familiar with Eichenwald's previous work, I was curious and read the author's letter of introduction. Rolling my eyes at his claim to have made the Enron debacle readable, understandable, AND entertaining, I dubiously started the book...and could hardly put the book down during all of the Thanksgiving holidays!
Eichenwald takes this VERY complex subject and not only makes it accessible to the everyday Joe, if you will, but makes it entertaining to read about, as well. In addition, the book is intellectually stimulating, and makes you think about this scandal in a way you probably won't have before, yet without really taking on its own agenda (as far as that is possible for an author, of course). If you like reading the Washington Post or Grisham-like novels, there's a good chance you will like this book!
Why only four stars? First, it is SO long (though any given reader may actually appreciate the length). Second, and perhaps it is not fair to dock stars for this, I am not familiar enough with the intricacies of the Enron affair to assess the actual veracity of the story, and therefore do not feel comfortable giving it five stars. (But let me be clear--for all I know, it could be perfectly factually accurate).
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Conspiracy of Fools: A True Story by Kurt Eichenwald (Paperback - December 27, 2005)