This book is the most comprehensive and well balanced chronicle of the fatal flaws that brought down Enron - the media and investor darling of the late 90s which collapsed in a spectacular heap of Congressional hearings and criminal trials in the early 2000s. This most riveting sections of the book are the ones which describe the frenzied, ultra-competitive, personality driven and share price obsessed rivalries between executives in the firm, each one trying to outdo the other and foisting a culture on the company that led to some really bad decisions that had immense long term consequences. It is in these pages that one comes to the realization that Enron's collapse was not orchestrated by a giant conspiracy to embezzle investors, it was the outcome of bad decision after bad decision piling on each other till the company could no longer bear the load. Reward systems were put in place that prized short term deals over long term value and ultimately, that's what killed Enron. The two principal executives pulling Enron in different directions were Jeff Skilling and Rebecca Mark. Skilling's trading and gas business adopted mark-to-market accounting that recognized revenues supposed to accrue over multiple years in one shot - leaving Enron with a bloated topline but very little cash coming in. Rebecca's International group made huge, long term investments in projects which often failed to take off or generated little returns. Too little cash in, too little cash out makes for a combustible combination. The spark was provided by Andrew Fastow, Enron's inept, arrogant and ultimately sleazy CFO who decided that instead of overseeing controls, which was supposed to be his true function, he would engage in creative accounting with off-balance sheet entities and take a cut of the money from both tills. The brazen manner in which he and his lieutenant, Michael Kopper, exploited accounting and legal loopholes and pressurized bankers and internal Enron staff who tried to object makes for sickening reading.
Ultimately though, Enron collapsed under the weight of its own 'smartness' - the fancy accounting structures couldn't hide the fundamental fact - too little cash coming in and too much going out. And this is where the title of this book is intriguing - to my mind, 'Conspiracy of Fools' can be interpreted in 2 ways - firstly, it could refer to the shenanigans of Fastow and Kopper, two hopelessly out of depth and incompetent employees who were playing by fire, thought they were too smart to ever get caught, defrauded Enron and its senior leadership and ultimately brought down the company through a combination of stupidity and criminality. The second interpretation is more subtle - Enron has been presented as a malevolent entity where right down from the top, everyone was out from day 1 to screw over investors through effectively a Ponzi scheme - however, as this book shows, Enron was more of your run of the mill corporate mad-house with cocky executives, clashing egos and bad business decisions - the senior executives of the company like Lay and Skilling thought they were in control but very often they simply had no idea how bad things were down the line and were taken for a ride - by Fastow, by their accountants and their lawyers who gave them bad advice. It's hard to imagine Enron as a conspiracy given the 'fools' at the top.
Though the author never explicitly makes his views known on the criminality of the people at the top of Enron (except Fastow - who he calls a criminal - and his cronies), his verdict is clear. Based on the evidence presented, it's hard to call Lay and Skilling as criminal - and this brings us to the minutiae of the law - when does bad business judgment become a crime? Lay didn't profit from any of Enron's off-balance sheet dealings, Skilling was itching to come back to Enron during its crisis period (what kind of embezzler wants to rejoin a company on its way down?) - both were indicted but one has to question the justice of a justice system where a corrupt felon like Fastow gets a lesser jail sentence than a Skilling whose only crime was perhaps incompetence.
Lastly; though, Lay and Skilling lived their lives in great wealth and even with their tribulations, sympathy should perhaps be reserved for the people, both within and outside Enron, who were punished for their integrity - people in Enron's risk department and accounting who were overlooked for bonuses and promotions because they refused to get 'creative', people like Carl Bass in Arthur Andersen who were harassed for taking a principled stand against brazen accounting frauds, people like the many investment banking researchers who were fired by their banks for scrutinizing Enron's financials fairly and refusing to get on the hail Enron bandwagon. All in all, the Enron story is ultimately a tragedy for many and the author does a fantastic job giving us the full view of the ride down of what at one time was the seventh largest public corporation in the world
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Top reviews from other countries
- ObjectiveReviewed in Canada on October 13, 2015
Amazing story, makes you scratch your head how in ...
- DOPPLEGANGERReviewed in the United Kingdom on February 17, 2013
IT CAN'T GET ANY BETTER THAN THIS
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- PaulReviewed in the United Kingdom on December 12, 2012
Fascinating book about a fascinating matter
