Customer Reviews

Enron: The Smartest Guys in the Room

5 star:		(128)
4 star:		(44)
3 star:		(15)
2 star:		(5)
1 star:		(13)

 

 

I went into Alex Gibney's "Smartest Guys in the Room" having read Robert Bryce's "Pipe Dreams" and Kurt Eichenwald's "Conspiracy of Fools" thinking to myself: should be good, but no way the movie is going to come close to telling the story like those two authors did.

Well, surprise, surprise: the movie is outstanding on its own terms and all credit goes to Gibney. While the books focus on unraveling all of Andy Fastow's 'Special Purpose Entities' like the Raptors, LJM, Chewco, etc., Gibney brilliantly focuses on showing us things that are simply better on film: audio recordings of Enron traders jacking the California energy system; a devastated Portland Gas line worker after his 401K has gone to seed; an uncomfortable Skilling getting grilled by a Senate panel while Sherron Watkins glowers at him from 10 feet away; some Enron HR flack urging its employees to put all their 401K money into company stock, etc.

And there are two incredible, spine-tingling moments if you know the Enron story:

- An audio recording of the famous quarterly results analyst call where Skilling loses it and calls an analyst an a------. [The analyst only asked why the company couldn't produce a balance sheet.] Reading Eichenwald's book, you know Skilling is clearly unhinged at this point. For many, this call was the turning point of the great unraveling.

- A secret video recording from Merrill Lynch of Andy Fastow's LJM2 pitch to a bunch of bankers. This is *mesmerizing* stuff. Fastow is front and center in the books, but remains a spooky, off-camera presence in the movie. However, this one piece nails him. He's perpetrating a major fraud with that spiel.

Most of all, the movie is a tribute to the work of reporters Bethany McLean and Peter Elkind, both of whom had the guts to ask at the beginning "How does Enron make money"? No one at the company could answer the question and management's response was to attempt to bully McLean and then, in turn, bully her editors. They didn't bend. The story ran. The rest is history. In business writing, this was journalism on the level of Woodward and Bernstein. All glory belongs to Ms. McLean and Mr. Elkind.

Two other great moves by Alex Gibney:

- Getting Amanda Martin on film to talk about the tragedy of Cliff Baxter's life and of Jeff Skilling's career. What a smart filmmaker. The camera *loves* Amanda Martin. Far better for your film to have her tell that story than have Ken Rice, Lou Pai or any other member of the Skilling inner circle.

- Getting Peter Coyote to narrate. His is the perfect voice for this saga.

Narrated by veteran actor, Peter Coyote, this DVD is disturbingly real. It reveals the depths that people will sink at the expense of others, and it reveals how widespread it was.

First, Arthur Anderson Consulting signed off on "mark to marketing" accounting. In other words, Enron could report their projected earnings as actual profits. They could "report" profits of millions of dollars that they didn't have. They paid bonuses and other excesses with these projections.

Next, Jeff Skilling was hired by Ken Lay to run the operations of the company. Skilling was a man with fresh, or some would say, grandiose ideas. This is just what Lay wanted--a man of vision.

Skilling soon instituted promotions and bonuses for analysts who produced more than the other guy. Creating a classic cuthroat environment, the producers were given phenomenal bonuses while their less successful counterparts were shown the door. These were all being given on projected earnings.

One rebel market analyst from Merrill Lynch would not give Enron a "strong buy" rating. Skilling contacted Merrill Lynch who promptly fired the errant employee, and Enron gave Merrill Lynch a fifty million dollar contract.

Enter Andy Fastow another Enron executive in the mold of Jeff Skilling who managed to set up dummy corporations which were paying Enron. Several prominent banks knew of the scheme and went along with it. (You may even have your money in one of them.)

Another Enron executive, named Pi was an executive cuthroat who knew his predilections and his limits. He left the company after making $250,000,000 and married his pregnant, stripper girlfriend.

Skilling, Fastow, and Lay kept attempting new investments in energy and other ventures which flopped miserably. The DVD shows how they were beginning to lose their ability to think of new ideas to fool the public and the investors who never saw an Enron balance sheet or earnings statement.

The most chilling part of this is the Enron analysts who were able to create rolling black-outs through California. They invested in the stock of power companies before they called the power companies and asked them to shut down the power for hours at a time. This, in turn, created demand, which increased the price of the stock and their profits. The real chill is you hear what is tantamount to their psychopathic laughter at the misery and hardship they helped create throughout the state. In another instance, they actually began cheering when a forest fire shuts down a power plant. Their "profit cheering" with no regard for the misery of the people without power may make the viewer want to drop these guys from a tall building.

It gets even better--I mean, worse. Ken Lay said he didn't know what was going on. Interviewees told Ken Lay what his analysts were doing. None were fired or disciplined. How did he not know? He, like other top executives, sold off almost all their shares in the company just before the bad news hit. The common worker who had his or her 401K tied up in Enron stock was not allowed to sell it as the company and its stock value collapsed. They lost everything. One common power company worker who was interviewed said that his pension went from $340,000 to $1,200. This was painful to listen to.

One last thing, these "Enron entrepreneurs" fought tooth and nail to keep California's energy laws deregulated. Everything has its positives and negatives. If free market enterprise is unchecked it does lead to invention and creativity. It also leads to greed and excesses.

Maybe a little regulation is not such a bad thing.

Update: Lay and Skilling have been found guilty. Their lawyer fees, expensive. The verdict, priceless!

OK, I admit it. I didn't get the whole Enron thing a few years back. The Enron collapse happened too soon after 9/11 and I was completely preoccupied with that and our subsequent war on terror to pay much attention to the Enron story. Plus I figured that it was probably too complex for me to understand without doing a lot of research and I just didn't want to give it that much attention. And on top of that, I had never even heard of the company before so understanding what had happened at this Texan company clearly wasn't a priority to me. So...I enjoyed the documentary in helping me to finally understood what happened... Well, now I get it. And I'm soooo suprised to learn about so many connections I hadn't put together before like California's "energy crisis", the Enron collapse, and the political (yet ignorant) motivation for naming Arnold Schwarzenegger as governor. The documentary is extremely well done, definitely kept my attention, and provides an uncomplicated, riveting look at corporate greed and narcissism. It is definitely worth a few bucks and two hours of your time.

Alex Gibney's "Enron: The Smartest Guys in the Room," based on the book by Bethany McLean and Peter Elkind, is a riveting, masterful documentary about the most appalling catastrophe in American corporate history: the collapse of Enron, brought about by the ruthlessness, greed and treachery of its top executives. Although Gibney is adept at adding touches of dark humor to the film, the only emotions I felt at the end were sorrow and outrage that Kenneth Lay, Jeffrey Skilling and Andrew Fastow were allowed to perpetrate their monstrous fraud for so many years, eventually ruining the lives of 20,000 Enron employees and who knows how many Enron shareholders. (There are also those who have never been called to account, such as the elusive and vindictive Lou Pai, who left Enron before the crash with $250 million in his bank account.) A former Enron executive interviewed for the film compares the Enron disaster to the movie "Body Heat," with Fastow playing William Hurt to Skilling's Kathleen Turner. (I have an even better analogy: the Enron collapse as presented by Gibney is like the movie "Henry: Portrait of a Serial Killer," with Fastow playing Otis to Skilling's Henry.) As for Ken Lay, as this film presents him, he's more like Gertrude Stein's description of Oakland: There's no THERE there. Gibney presents in horrifying detail not only the hubris and dishonesty of Lay, Skilling, Fastow and their cohorts, but also the blind greed of Merrill Lynch, Arthur Andersen and other corporations that blithely ignored the signs of impending doom in order to have a share of the pickings. The film's real tragedy is that, however satisfying it is to see Lay, Skilling and Fastow led off in handcuffs at the end, we know the damage they wrought, both financial and political, will last for decades after they're gone. I give one example: of course everyone knows that the California energy crisis brought about largely by the rapacity of Enron energy traders was the main reason for the successful recall effort against California Governor Gray Davis. And most people probably realize, though they don't think about it much, that the Federal Energy Regulatory Commission chief who refused to help Davis was appointed by George W. Bush on the express recommendation of Ken Lay. But what people almost certainly DON'T know--unless they've seen this movie--is that during the crisis Ken Lay called a meeting in Los Angeles of Enron's Caifornia supporters. No minutes from this meeting have ever come to light, but one of the attendees was Arnold Schwarzenegger. You do the math.

This is a great documentary which captures the go-go 90's, the rise of the internet, and the rise(and fall)of funny money. Maybe they were the smartest guys at Enron, but they were silk-suit wearing con men who operated a macho ponzi scheme that bilked countless investors who felt secure that something so big could never fall so fast. It is an indictment of corporate greed . . . and I say this as a conservative. This is capitalism run amok. The movie puts the rise and fall of Enron in its proper context . . . a metaphor for the '90's . . . when the only direction on wall street was up.

Rather than repeating what other reviewers have already written, I will only confirm that the 5 Star reviews here are pretty much right on target. This is an exceptionally good documentary for anyone interested in Corporate America in general, or the Enron scandal in particular. It is no small accomplishment to create a riveting film about accounting, but writer/director Alex Gibney somehow did it. Don't let the word "accounting" scare you away--this is a human interest story all the way.

However, there is one thing that bothers me about this film, in that it places Enron executives on a kind of pedestal in the tradition of Greek tragedy, as if Lay, Skilling, Fastow, Pai and others deserved special recognition despite their actions. The commentators often give them credit for working hard and rising from poverty to the upper echelon of wealth, and they call that "success". To me, "success" has more to do with being a decent human being, whether you end up rich or poor, and decency seems to be completely absent in the major characters of this "tragedy". Indeed, for those who are not part of the corporate cult mentality, one could easily argue that these men probably would never have risen to such great heights if they had been decent, because the corporate model doesn't reward decency. It rewards only those who make the bottom line their God.

The commentators also repeat their belief that the Enron executives, and Skilling in particular, were "smart" or "brilliant", and again the only evidence to support this is the fact that they rose from poverty to wealth, as if intelligence and wealth were somehow correlated. Having watched Skilling in action, "smart" is about the last word I would use to describe him. Clever, perhaps, but not smart. After all, these men devastated the lives of countless employees and investors, interfered with the U.S. government regulatory process, forced millions of Californians to endure unnecessary rolling blackouts, and generally destroyed everything they touched (except for Pai, who got away free and clear with a quarter billion dollars and a stripper). How could that possibly describe the actions of people who are "smart"? Again, they are confusing wealth with intelligence, when the two are completely unrelated (just compare the wealthy George W. Bush with impoverished Abe Lincoln in terms of intelligence and literacy).

Lastly, I was horrified by the ease with which Kenneth Lay could express so much false empathy for the lives that Enron destroyed, while his actions show a completely different story. For example, after listing a litany of devastating effects the Enron collapse had on so many poor people, he notes that he and his wife will have to live with that shame for the rest of their lives. Then he notes that he himself has suffered right along with them when his net worth dropped to a mere $20 million. Poor baby.

These were not the smartest men in the room. They were among the stupidest people our society has produced. If there is one lesson to be learned from the Enron scandal, I hope it is the lesson of what happens when stupid people aquire wealth and power, while others put them on a pedastal as being worthy of our consideration at all simply because they achieved that degree of wealth and power.

I know this will not be as popular a critique of this film as others, because it raises some questions that fly in the face of some of the emotions driving many of the responses here.

Let me say upfront, that this is a very effective documentary. It does bring out a lot of facts that many are unaware of, especially those who have gotten their news on this event in the form of sound-bites. It does a great service and is to be commended in that regard.

In terms of Ken Lay and Jeffrey Skilling, if I could lessen their pain and suffering for what they both did with their power and leadership, by waving my hand in a dark room .... I wouldn't bother to wave it. They got off easily in comparison to what they did. No arguments here. My emotions run high too when I consider the human suffering they inflicted by their abuse of their power and influence.

The pain and suffering inflicted by their irresponsibility, greed and ego-maniacal behavior is too great to even begin to calculate. Jobs were lost, families destroyed, retirements ruined, suicides prompted, divorces in the wake of financial ruin, and this is just the tip of the iceberg.

So, if all this is true, what could I have to say about this film that could argue for the techniques used in comparison with that?

Just this;

Emotions are a legitimate response to the magnitude of this event. When emotions replace critical thinking and follow an agenda however, a disservice is done to those watching as well as those whose suffering is dehumanized and diminished by their suffering being used as a tool for political or ideological purposes.

I think this movie missed some salient elements that would have resulted in a more even-handed dealing with the issues.

What emotional issues am I referring to?

How about the use of camera techniques to morph an Enron executive into a red skinned effigy of Satan? How about the focus on George W. Bush as governor of Texas, a constitutionally weak governorship, while ignoring the current president and appointer of SEC governance at the time? How about mentioning contributions to the GOP, which is true, while ignoring similar contributions to the Democrats?

I viewed this film in the context of a Master's Degree class asking the question of whether leadership really matters, and what this film has to say in regard to that question.

Enron was more than a single event. Enron took place in a context that included:

1. The Toxic Leadership of Lay, Skilling and a host of others in Enron. This comes through in the documentary and is more clearly presented than any other element. This is understandable and defensible in my opinion. Both these "gentlemen" misused their power and position and violated any number of ethical standards. They deserve what they get in this documentary and more.

2. Shareholder profit expectations at the tail end of the Dot Com were driven through the roof by the excitement of investors believing they just couldn't lose in the strongest bull market run ever witnessed in modern times. Enron struck upon the "innovation" of accounting for "potential" profits at the inception of an idea and using this as a basis for valuation. It wasn't a new idea. It was a new application though in the context of a company supposedly dealing in hard energy commodities. The movie captures this, but doesn't give the context of how this accounting was used in intellectual companies such as the dot-coms. Enron is isolated in this instance and context is lost.

3. The complicity of Arthur Anderson as the auditors of the firm. Corporate auditing had moved by this time from being an adversarial relationship to one of a willingness of the auditor to view itself as a "partner" with its "client." Anderson was the recipient of over $1 million dollars a week for their oversight role in auditing Enron. They acted to preserve this at the expense of holding Enron to accounting standards that were designed to be enforced to the benefit of shareholders and analysts. This more than anything else, is what led to Sarbanes-Oxley legislation following Enron's colossal collapse. The movie references this, but in the end paints Anderson and its employees, a similar number of whom lost their jobs when Anderson failed too, as fellow victims. Really?

4. Stock Analyst's complicity in the presentation of the numbers "massaged" by Skilling and Company. The movie rightly captures the influence exerted upon such brokerages as Merrill Lynch et al to keep the positive presentation flowing. It fails however, to hold as accountable those who could have raised the issues presented earlier. McLean story in Fortune is amazing, not for its raising hard questions, but for the fact that it took this long for someone to ask them. This documentary would have you infer that they were victims or complicit with Enron management. There is a much bigger picture here, that is not completely captured and further minimized in the agenda to take Enron and caste it into the desired light of sole corporate corrupter. Enron was complicit. They were not the only ones and Stock Analysts manipulated their analysis to benefit themselves and companies like Enron before Enron came along. They still do. Where's the statement on that?

5. Banker's cooperation in the debt manipulations needed to extend the Ponzi Scheme that was at work here in presenting quarter after quarter of illusory profits. Try to walk into a bank with no balance sheet and ask for a loan and see how far you get. Enron was not the banking industry. Again, who was overseeing the banks at this time? Was it George W. Bush? Maybe the heretofore unnamed president prior to January of 2001 had some responsibility too. Who was that, anyway?

6. Deregulation in California certainly played a role. Pete Wilson and the California legislature made some decisions that opened a pandora's box in a manner not seen for many years. Was the idea of limiting options speculation leverage by debt a new one? No. This had happened in the past with similar predictable fall-out. Why did Enron engage in the activity it did? Because they could. Who allowed them to and created an environment where to fail to do so meant competitors would? Does it excuse Enron? No, it doesn't. What they did was legal however in the strictest sense in view of the deregulation of the industry. Why not focus more upon those in the state and at the Federal level who made it so? Why simply focus on Schwarzeneger based upon a "guilt by association" type argument because he met one time with Kenneth Lay. Could there have been complicity? Maybe. No proof however, coupled with a limited scope that ignores others with more proof to incorporate. Hardly seems balanced to me.

7. The greatest outcome of this whole debacle was Sarbanes-Oxley legislation. Why no mention of this? Does the need for such legislation perhaps, lessen the agenda of the documentary and the points they wanted to make?

Hopefully you get the picture. This is not a hatchet job documentary in the vein of Michael Moore where all rational thought is thrown out the window to make a political point. It is some ways is more insidious than that. One senses that more than political passion, there is a set agenda here to make a point and to lead the average watcher to conclusions that fail to appreciate the big picture.

That is a shame in my opinion. I give it 3 stars because it does educate and I am in no way a defender of Enron, Lay or Skilling. I don't blindly support Bush and Republicans either. There is plenty of blame to go around at many different levels. This film misses the opportunity to make a broader statement and to educate more broadly and in view of that, 3 stars are the most I can give it. I do recommend people view it. Just view it critically.

If you were an Enron employee, as I was, you will cry watching this movie. It is sick with greed, manipulations and facts about no one minding the store. But, it is a good movie to watch to understand big business and corporations, and yes, their political agendas and their political friends. The fall of Enron encompassed many other big companies and their complicity is shown well in this movie. The reporters did a great job putting this very complicated situation into an understandable story. I recommend this movie no matter who you work for--it will help you protect yourself if in no other way but to always question what these companies are up to. And a lesson in NOT putting your savings into the company who also writes your paycheck!

****1/2

Don't be surprised if you find yourself throwing things at the screen while watching "Enron: The Smartest Guys in the Room," a brilliantly effective and meticulously researched documentary (based on the book by Bethany McLean and Peter Elkind) that is guaranteed to get both your dander and your adrenaline up to dangerously high levels.

Rarely does a real life event provide us with as clear and universally recognized a symbol of a larger social theme as does the fall of Enron, which, in the years since it happened, has come to stand for everything that's wrong with corporate America. It is the classic tale of corruption and unethical behavior performed in the service of unbridled greed. That the men responsible for the disaster took so many innocent people down with them is what makes it a tragedy. In fact, more than one person interviewed for the film draws the parallel between the downfall of Enron and the sinking of the Titanic - an apt analogy if ever there was one, only, in this case, the captains had no intention of going down with the ship, preferring instead to ruthlessly knock over any number of helpless women and children in the desperate race to the lifeboats.

The beauty of the film is that it takes a very complex and convoluted story and makes it completely comprehensible to those of us who might otherwise get lost in the maze of arcane corporate-world details. The movie introduces us to the key players - primarily CEOs Jeffrey Skilling and Ken Lay, and CFO Andrew Fastow - showing the step-by-step process by which they built the energy corporation virtually from scratch, raised it to the position of seventh largest company in the world, then slowly destroyed it through deceit, hubris and greed - but not, of course, before bestowing obscene multi-million dollar packages on themselves as compensation. We see how they employed little more than smoke-and-mirror accounting schemes to pull the wool over the eyes of investors, regulatory commissions and fellow employees. However, the film makes it clear that a large number of "reputable" banks and loan agencies must also have been complicit in the company's malfeasance for all of this to have come off so effectively.

As always, it is the "little guy" who winds up getting shafted. Probably the greatest hair-pulling section of the film involves Enron's cold-blooded creation and manipulation of California's bogus "energy crisis" in the early 2000's, which drained billions from the state`s treasury, a situation which the newly elected President Bush, ever sympathetic to his buddies in the energy business, refused to help rectify. Just as bad is the CEOs' callous encouragement of their own lower level employees to invest their retirement savings in the company's 401K plan that the chief executives themselves knew would soon be defunct. With hissable villains like these around, who needs fiction?

The sole consolation is the fact that the system did work in the end, that the wrongdoers eventually overreached to such an extent that the house of cards they had built finally came tumbling down. There's certainly a great deal of joy in seeing the creeps responsible for the catastrophe being carted off to jail in handcuffs and sweating under the public scrutiny of a congressional investigative committee. (It should be noted that the film predates Ken Lay's death in 2006). The movie also balances the case by highlighting some of the "heroes" in the story, primarily whistleblowers within the company and a resourceful reporter for FORTUNE magazine who was the first to hint in a public forum that Enron might just be the corporate equivalent of the emperor with no clothes.

This is more than just a mere "talking heads" documentary. It explores the details of the story within the broader context of unbridled capitalism, de-regulation, and corporate corruption. The movie also shows us how strangely immature the men at the head of this company were, with their frat boy antics and the daredevil activities they indulged in to erase their "nerd" image and to establish their bona fides as real "macho" men. The fact that individuals of this caliber could spell the ruin of so many trusting people is what gives the movie's title that little ironic kick.

By all means, don't miss this film - though you might want to have a good stiff drink handy for when it's over.

Enron has been in the news for years. The accounting sleight-of-hand, Arthur Andersen driven out of business for its part, the works. This film does an excellent job of summarizing what really happened, even the terminology the accountants used to rationalize the phony books.

Andy Fastrow seems to be the major culprit. He was the CFO who paid himself a fortune while doctoring the books. But the film also indicates that he was the fall guy; Ken Lay and Jeff Skilling also needed to know what was going on.

That Ken Lay is a Baptist minister's son doesn't surprise me much. The whole company was run on a theology, rather than on any remotely useful business practice. Between Skilling's theological risk taking--despite any evidence that the motorbike risks OR the business risks were doing anyone any good--and the faithful doctoring of books are truly acts of religious faith, but the type of irrational thinking that caused Bertrand Russell to write, "Why I Am Not a Christian."

It's intriguing to see how particularly Skilling rationalizes the company's--and his--activities. Even when confronted by a Senator on how he was encouraging employees to invest in Enron, he was cashing out to the tune of many millions of dollars. He still felt he was "right" in doing so. "No, I didn't do nuthin' wrong." Like a spoiled pre-adolescent.

That the director had access to so much information--e-mails, audio tapes of criminal activity, Senate hearings, made the film particularly valuable, and certainly credible. And the clear implication of Arnold Schwarznegger's peripheral part in the scheme--at least his election to governor of CA because of Grey Davis's inability to confront the Enron debacle head-on--is something to examine, and keep our eyes on during the Lay and Skilling's trials early in 2006.

Much of what I could say other critics have already noted. But one point not yet covered was stated by the whistle blower perhaps most responsible for spilling the Enron beans: There's little reason to think it's an abberation.

And, before I forget, many interviewed for the film, those " in the know," insist that the banks who participated HAD TO KNOW TOO what was going on. They too should be tried for their part in the debacle.

I think it's important that Lay and Skilling be tried--and convicted--for their heinous crimes. But I may be in the minority who thinks that those lower on the corporate totem pole--those, for instance, who were talking of the megabucks they were making off of the California energy consumers, and of retiring at 30--should also pay for their crimes. One can't rationalize their behavior either, just because the corporate culture seemed to foster it.

Well, seeing the film has prodded me to get the book, read it, and work zealously to prevent other things from happening in the future.