Customer Reviews

Pipe Dreams: Greed, Ego, and the Death of Enron

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Penn Square was peanuts. Robert Bryce's witty racountement of the rise and fall of Enron reminds this reader of Mark Singer's equally entertaining tale of the itty-bitty shopping center bank in Oklahoma City that went bust and took the Western Oklahoma Oil Boom with it.

Bryce's book, with introduction by Molly Ivins, is as eminently readable and well organized as Enron was not. It starts and ends with sympathetic folk - those drug down in the Enron muck. Along the way, the reader meets the Politicos, the Pie (or is that Energy?) In The Sky Wheeler-Dealer Traders, "the Divine Miss Mark," Fast Andy Fastow, Snakey Skilling, and Kenny-Boy (President G.W.'s endearing nickname for his Buddy) Lay. Fans (if any) of Senator Phil and wife Wendy Gramm will not be amused by this foray through the Swamp that was Enron. This is an essential Enron primer, complete with footnotes, Index, and explanations of "Mark to Market" accounting that even us "Liberal Arts" majors can understand.

I urge you to BUY this book. Borrowing the library's copy is not recommended, as one should not write the outraged tirades that this book is sure to produce in the margins of Other People's Books.

Okay, we all knew that the Enron scandal was noxious, and we knew that there was substantial governmental complicity. However, the degree of bald faced corruption and theft pervading all aspects of the commodities and trade professions and the extensive government acquiescence, if not compliance, which Bryce describes stagger the imagination.

This is a thorough, well documented study of the Enron scandal, from the corporation's early origins. While extensive, and depressing, Bryce alleviates it with sardonic depictions of the unvarnished vulgarity of the senior management feeding at the Enron trough.

Bryce is fair in that he gives the Clinton Administration its due for facilitating the depradations of Enron; however, while resisting the effort to go for the jugular, he makes it clear that the greatest beneficiaries of Enron's largesse were Republicans, particularly the two Bush administrations. He reserves most of his vitriol for Senator Phil Gramm and his wife, who were undeterred at any time by ethical concerns about their undisguised conflicts of interest in judgements on regulations benefitting the corporation that was filling their pockets.

Bryce provides a number of tutorials on accounting and trade and commodity practices that help the "lay" person understand how the transgressions were allowed to occur and mushroom. Reading "Pipe Dreams" you wonder first why the many members of the Enron management aren't in prison, much less the obscenity of their being able to loot the company and retain their obscene fortunes. It is incredibly disillusioning, and you are left with an increased sense of impotence, yet your outrage is alleviated by Bryce's biting sarcastic wit.

This will be my third and final online review of an Enron-related book (barring any oustanding new releases on the subject). As with all previous efforts, I remain anonymous since I was an employee of the company during the mid 90s and would like to avoid any attention which my efforts may draw. Having read the Cruver, Fox, the Bryce/Ivins books and reflected on all the events, this review may feel more like a commentary than an actual review.

That being said I think the common thread throughout all the books is that Enron remains an enigma. Everyone defines Enron differently depending on their perspective and that is affected by the information they have in hand. For some this is an indictment on greed in America. For others this is a monumental failure of governmental oversight and regulation. I believe in neither. In a recent conversation with another former Enron employee, he asked me to allocate 10 points towards the contributing factors of Enron's demise. I don't even recall how I allocated the points and would probably give a completely different answer today. His answer differed significantly from mine as he assigned the majority of the blame to accounting systems and Arthur Anderson. That is endemic of the ever-shifting nature of the situation, and to be honest, events still remain to unfold. Fastow has been indicted, but what is happening with Lay, Skilling, and the other senior managers and board members? If story ends here, the only lesson that will be learned from Enron is that it's probably worth the risk to create an unsustainable, poorly-capitalized business model (and discounting the possibility of fraud to cover up that fact) if you can walk away with hundreds of millions of dollars in stocks and options.

The Bryce/Ivins book focuses largely on the corporate culture of the Enron as being the culprit. An early conversation with a fast-talking, mid-30s, Lexus-driving former employee, led the authors to the thesis that Enron was a product of its deal-making, wheeling-and-dealing culture. They support that thesis by analyzing the beginnings of the company, the key players, and the many questionable transactions. Perhaps, my telephone conversation triggered it, but the discussion with my friend made me take more notice of the chapter on the Performance Review Committee (PRC) which is discussed in detail in this book (and in the other books). During the PRC, all employees are forced ranked 1 to 5 under a secretive, Byzantine process. The authors contend that the process created and championed by Skilling is largely responsible for the corporate culture at Enron. It rewarded the dealmakers who brought in the dollars. Combined with the emphasis on current quarterly and annual income that is often marked-to-market, it is no surprise why the environment was ripe for entering into bad transactions (i.e. negative NPV or cash flow but high current MTM income) which ultimately needed to be covered up with off-balance sheet shennanigans.

Like a dimaond under the proper magnification, I think all readers will find some fault with the books about Enron including this one. However, the book provides a contribution worthy of being part of the literature on the subject.

This is a very readable account. The text opens stating, "My premise throughout this book is that Enron's failure wasn't due to faulty accounting or poor regulation.... Rather it failed because key leaders at Enron lost their moral/ethical direction at the same time that the company was making multibillion-dollar bets on fatally flawed projects." The author asks" Why did a seventy-six year old pipeline company with rock-solid cash flow and reliable earnings suddenly flame out in a maelstrom of accounting irregularities, fraud and skullduggery."

After a brief three-chapter history of Enron, the author develops his thesis that "Enron failed because its leadership was morally, ethically and financially corrupt," showing how deal-focused management took one of the most profitable companies in Houston into bankruptcy. The author, Robert Bryce, a Texas investigative journalist, interviewed over 200 individuals, and researched countless documents, including nineteen SEC filings for this book.

The text discusses the major players in the context of their work, their abilities, Houston society and their work-place relationships. Many former Enron people blamed Ken Lay stating ".... he flat couldn't judge people and said he became blinded to other people's faults. One Executive said Lay 'never understood that the pipelines that are paid for and power and processing plants that are mostly paid for, were the way to make money."

The harshest accounts concern Jeff Skilling and Andy Fastow. Skilling, who became president in 1997, was called by one executive" the smartest son of a bitch I've ever met." However, "Skilling was not a manager, he was a deal maker. Exotic financing schemes and the deals that came with them excited Skilling." The text notes, " When it came to strategy and starting businesses, Jeff Skilling was a genius. When it came to understanding the importance of cash, he was dumber than a box of hammers."

Skilling conceived the idea of a Gas Bank where gas producers were "depositors" in an imaginary bank while gas consumers were the "borrowers." The Gas Bank was a turning point for Enron and made money. However, Skilling felt that accrual accounting was inadequate and changed to mark-to-market accounting for gas trading. Revenue growth then became more important than cash, which eventually put Enron in a cash crisis, giving birth to off-balance-sheet accounts. Enron started down a slippery ethical slope and no one in authority seemed to care.

Bryce states CFO Andy Fastow was not suited for his job. He knew how to set up dozens of off-balance-sheet entities, but he didn't understand the company's overall finances. "Fastow's special-purpose entities became a fast-and-dirty way for Enron to manufacture additional revenues in a big hurry. Fastow's off-the-balance sheet entities gave Enron the ability to do deals quickly."

The book notes that making deals was enormously profitable to the managers who conceived the deals because these managers were paid fabulous bonuses when the deals were signed, rather than when the project was successful. Frank Wing's Teeside power deal in Britain was "colossal blunder"; he was nevertheless handsomely rewarded. In like manner, Rebecca Mark initiated a power plant project in India where there was no need and where historically 30 percent or more of the plant's output would simply disappear. The project paid her big bonuses plus Enron pardoned loans to her, which they did for many top executives, in excess of $1.6 million. Using off-balance-sheet entities, Mark next formed Azurix putting Enron in the water utilities world market. Through poor planning and extravagant spending Azurix was soon in cash extremis. The author states ".... there is no question that the enormous losses Enron took on Mark's projects accelerated the company's downfall."

From 1990 through 1996, Enron had a competent/effective president, Rich Kinder. Kinder's obsessions were cash and cash flow and under Kinder's management Enron grew steadily. Unfortunately, Kinder repeated Ken Lay's mistakes by sleeping with Lay's secretary. Lay was worried what his secretary may reveal to Kinder, and informed Kinder he would not be made CEO. Kinder resigned. The author states "Giving Kinder his walking papers would prove to be the single worst decision Ken Lay made in his career." Jeff Skilling replaced Kinder and Enron's fate was sealed.

While they experienced cash shortages, Enron ignored expense control. Besides uncontrolled operating expenses there were many costly non-operating expenses. Enron's air fleet was a much-abused extravagance. In 2000 alone, Ken Lay's personal usage of Enron airplanes was estimated at $334,179. Amazingly just eighteen months before bankruptcy, Andy Fastow was the driving force behind an art-buying binge for Enron; and when Enron was just weeks from bankruptcy, art buying was accelerating.

The text gives a good account of Enron's final dive into failure. Criticism was not tolerated from outside analysts or by internal sources. The Board of Directors did virtually nothing to solve the cash problem for their annual $87,000 a year in cash and stock options. By year 2000 Enron had granted over 93.5 million shares of stock. As disaster approached, Skilling, Fastow, Mark and other senior executives began bailing out by cashing their stock options. Most employees didn't have the information or opportunity to follow suit. Skilling resigned in August 2001 and Fastow left on leave of absence in October.

It was now up to Ken Lay to save the company. Unfortunately, Lay didn't know what to do about Enron's $18 billion in liabilities. One sources observed, "Lay didn't have a clue. He was like a deer in the headlights." The only solution was a merger. The only merger candidate, Dynegy Inc., terminated talks because of "questions about Enron's cash position." Next, Standard & Poors slashed Enron's credit rating to junk status. On December 2, 2001 Enron filed for bankruptcy. Still without a clue, "Ken Lay made sure to keep blaming someone else. Along with the bankruptcy papers, Enron filed a $10 billion lawsuit against Dynergy, claiming breach of contract."

In conclusion, as one analyst stated, "Pigs get fat, hogs get slaughtered"; this best summarizes the results of Enron's greed and arrogance.

Out of many books available on the Enron travesty, this one probably offers the most bang for the buck with its fast-moving and incredibly informative structure. Bryce has sufficient skills as an investigative journalist and provides a healthy mix of history, finance, and politics, allowing the general reader to understand what happened with that ridiculous corporate house of cards at Enron. Bryce's main theory is that the company was done in by a lack of hard cash, as just about all of its revenues were long-term contractual deals in which cash would actually come in slowly and periodically, although the "revenues" could be claimed immediately through preposterous over-use of "mark-to-market" accounting. Meanwhile, greedy executives who set up such deals were paid millions in hard cash bonuses immediately, long before a single cent of actual cash was made for the company. This in turn led to preposterous deal-making shenanigans that were little more than schemes to cook the books and claim profits, such as a bizarre web of tax havens and false subsidiaries set up by the crookedest executive of all, Andy Fastow.

Bryce's cash-centric theories on the Enron downfall are open to scrutiny by financial experts, and could possibly be shot down, but that doesn't affect the quality of the book's condemnation of the Enron executives and the suffering they caused for employees and investors. Bryce has a wonderfully biting and sarcastic writing style that leads to some unexpected chuckles, with quips like "there's no sex in laying pipe," "Texas-sized sphincter," and my personal favorite "uber-execucrat" (referring in particular to Enron's purchased statesman Henry Kissinger). Bryce should probably take some heat for his treatment of the women in Enron's upper ranks who may have gotten to the top by less-than-wholesome means, especially Rebecca Mark, who nevertheless blew away a few billion dollars. Bryce is generally harsh in his portrayals of all the guilty executives - from the unscrupulous Fastow and the self-worshipping Jeff Skilling to the utterly incompetent Ken Lay. But these greedy plutocrats, who pocketed tens of millions for their personal fortunes while ruining the lives of thousands of employees and sticking investors with billions in losses, deserve harsh treatment. That's just the beginning of the punishment they deserve. (...)

As evil and corrupt as I thought some of my co-workers were, I only saw the surface until Robert Bryce scraped away the top layer of slime and exposed some of the most devious outlaws to ever drive their expensive vehicles on the Houston streets. This fast paced, witty and clearly written book can make you both laugh and cry whether you were inside or outside of this company. A must read for any present or past college student who's education was paid for with "daddy's ill gotten gains" from Enron.

The author clearly went to exhaustive pains to research the facts and produced a book that not only explains the history and evolution of the Enron disaster, but did it in such a way that anyone can follow. On top of that his approach to the subject matter turns this educational text into a real page turner. I couldn't put it down and have gone back to read parts over and over. Finally having been an Enron insider for several years I can tell you - HE GOT IT RIGHT! This is a must read.

Mr. Bryce obviously had the advantage of speaking with many former and current Enron employees. As an Enron employee for seven years, I thought I knew quite a bit about the financing and mechanics of the businesses. This was a great education for me as well as validation of all the unprofessional (can we say kinky?) "moments". I couldn't put this book down. It was a quick read and one I have continued to recommend to everyone I know. I hope all the characters in this book are squirming in preparation for the spankings they all deserve (but would probably enjoy).

The great challenge of journalism is to take important information and make it interesting enough for people to read. Unfortunately, daily reporting rarely has the time or resources to write the kinds of stories that might have impact. And there are two few reporters who have the skills to make us interested, much less motivate us to push for change.
Fortunately, Robert Bryce as a full complement of abilities and he has deployed them skillfully in his book, "Pipe Dreams." Bryce has done what neither daily journalism nor the government has been able to accomplish: tell the true story of what went wrong at Enron. And he does it brilliantly.
Bryce drew upon 200 interviews to get the story of mighty Enron's collapse. Everyone who reads the papers or watches the network news knows that there are many things wrong with business and politics. "Pipe Dreams" will be your first chance to learn exactly how corrupted our economy and our democracy have become. Getting the big picture and getting it right is accomplishment enough. But Bryce has given the story a narrative engine that makes it move like a novel. He'll get criticized for being gossipy and breezy in some of his writing. But take out the anecdotes about the people who wrecked Enron and you would have another academic deconstruct of a business that failed. And the story of Enron is so much more that that.
Bryce gets the reader from the beginning when he takes you to an overcrowded job fair with a long time Enron employee. She can't find work. But the people who ruined her company and cost her a job, Ken Lay, Jeff Skilling, Andrew Fastow, Rebecca Mark, are all living the lives of multi-millionaires after selling their stock before the collapse. Greed and ambition have long been popular sins in oil town Houston, but Enron execs gave them new dimensions. Self-indulgence also became their favorite past time.
...Bryce has grabbed it all, spread it out on the table for us all to see and shake our heads at. Read it. Get your friends to read it. And then get mad. And do something about it.

Just finished reading this and was disappointed to the point of deciding to write a non-positive review. I expected to see piles of glowing reviews and be that lone dissenter, but I was pleased to see Brazos49's review. He is right on the money - and even in tune with some sideline players, whereas I echo his statements from the position of a total outsider. Yes, it was a quick light read - fun at times - but there was no meat, no real explanation, clearly no understanding of finance and real business by the author. His explanation of the Enron collapse was like a news report that says that the cause of the accident was because the car went off the road. No kidding. The few financial numbers he included weren't well referenced in the text, nor did they really support his sensationalist statements. Bottom line: it's easy to take pot shots from the rim of the canyon, and while clearly excesses occurred and the targets of these shots deserve no defense, there are few black and whites in this world. Bryce's portrayal of ALL Enron actions as evil comes across as naive and petty; there is no real balance or intelligent analysis here, just mudslinging. Look elsewhere for an account of the Enron debacle.