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Monday, May 09, 2005


Enron: The Smartest Guys in the Room

Trading energy... it sounds so droll and boring and completely unexciting - certainly not fodder for a lurid and scandalous movie. But, in fact, that is exactly what we have with Enron: The Smartest Guys in the Room. Enron is the sometimes humorous, but often mind-boggling, new documentary from director Alex Gibney that chronicles the swift rise and even quicker descent of the Houston-based energy company. The movie intercuts new interviews, extensive amateur video, footage from Congressional hearings after the company's collapse, as well as a few reenactments to tell the story of how Ken "Kenny Boy" Lay and Jeffrey Skilling (among many others) swindled billions of dollars and directly impacted thousands of people. The movie subtitle is taken the title of a book by a couple people who were among the first to have doubts about that maybe Enron stock was overvalued.

Gibney gives us numerous shocking and powerful moments. Perhaps first in my mind is the section that details the electricity problems in California back in 2001. Basically, the West Coast Enron traders found loopholes in the new energy deregulation in that state. On whims, they could halt the availability of electricity to any particular area. They would move energy around - sometimes out of the state - and would skyrocket the selling price when demand warranted it. This led to out-of-control electric prices, which led to the "rolling blackouts" that plagued the state and eventually helped to take down its governor ("Cal-ee-for-nee-ya"). That information is nothing compared to the glee and unimpaired joy that some Enron employees had when wildfires struck the state. "Burn, baby, burn," one exclaimed, knowing that this would drive up the prices even further.

But the unethical corporate environment at Enron began long before 2001. We meet the ruthless Lou Pi who headed up an Enron sub-company and had a love for strippers. Pi ultimately walked away a couple years before the crash with a couple hundred million dollars, for a division that was badly treading water. We also meet Jeffrey Skilling, the CEO who came up with the brilliant plan to use "mark-to-market" accounting. Which is to say, Enron could more or less make up whatever profits they wanted. In the very high-risk game of energy trading, Enron was always in the black. As such, the stock price continued to rise higher and higher to the delight of many powerful people. Then there is Andrew Fastow, the man that Chairman Lay made out to be the clown prince. Fastow was the Chief Financial Officer and created his own holding companies for Enron to hide their substantial losses at. See, for all its success and high stock value, Enron was struggling to make any money. It is simply amazing that Enron's lawyers, accounting firm Arthur Anderson, and numerous other leading financial institutions signed off on these practices.

One interesting comparison that Gibney makes is to the famed Milgram Experiments in the 1960s. You can read more about that here, but basically participants were to read questions to someone in another room that they could not see (it was an actor). If the actor got an answer wrong, then the participant was to shock them with electricity, where upon the actor would pretend that they were in great pain. The electric voltage was gradually increased. The end result was that more than half of the participants continued inflicting the maximum voltage even though it was apparent to them that the other person was in trouble. Anyway, the film suggests that the rank-and-file Enron workers were just following the direction of the top brass (just as the Milgram people were following the instructions of the experimenters). I'm not sure I fully believe that hypothesis, but it is certainly something to think about long after the movie is over.

All this being said, the movie isn't perfect. I would have appreciated a little more on the relationship between Kenny Boy and Skilling. Was Skilling the mastermind behind most of the evil, and Lay was just along for the ride? Or did Lay play a greater part in shaping the greed-is-good, self-destructive behaviors of the company? Also, I still don't quite understand what exactly it means to "trade energy." But, I suppose that is more my problem then Gibney's. This is a very good movie. It is a gripping account of a saga that can be seen as a modern fable on the excesses of greed and immorality. You really have to see it, to believe everything. I highly recommend checking it out.

The Verdict: A-.

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