The Smartest Guys in the Room The Amazing Rise and Scandalous Fall of Enron

by McLean, Bethany; Elkind, Peter

• ISBN13: 9781591840084
• ISBN10: 1591840082
• Format: Hardcover
• Copyright: 2003-10-13
• Publisher: Portfolio Hardcover

Summary

The definitive volume on Enron's amazing rise and scandalous fall, from an award-winning team of Fortuneinvestigative reporters. There were dozens of books about Watergate, but only All the President's Mengave readers the full story, with all the drama and nuance and exclusive reporting. And thirty years later, if you're going to read only one book on Watergate, that's still the one. Today, Enron is the biggest business story of our time, and Fortune senior writers Bethany McLean and Peter Elkind are the new Woodward and Bernstein. Remarkably, it was just two years ago that Enron was thought to epitomize a great New Economy company, with its skyrocketing profits and share price. But that was before Fortunepublished an article by McLean that asked a seemingly innocent question: How exactly does Enron make money? From that point on, Enron's house of cards began to crumble. Now, McLean and Elkind have investigated much deeper, to offer the definitive book about the Enron scandal and the fascinating people behind it. Meticulously researched and character driven, Smartest Guys in the Roomtakes the reader deep into Enron's past-and behind the closed doors of private meetings. Drawing on a wide range of unique sources, the book follows Enron's rise from obscurity to the top of the business world to its disastrous demise. It reveals as never before major characters such as Ken Lay, Jeff Skilling, and Andy Fastow, as well as lesser known players like Cliff Baxter and Rebecca Mark. Smartest Guys in the Roomis a story of greed, arrogance, and deceit-a microcosm of all that is wrong with American business today. Above all, it's a fascinating human drama that will prove to be the authoritative account of the Enron scandal.

Author Biography

Bethany McLean and Peter Elkind are both senior writers at Fortune magazine. McLean is a former analyst for Goldman Sachs. Elkind is the former associate editor of Texas Monthly.

Table of Contents

Authors' Notes and Acknowledgments	vii
Cast of Characters	xiii
Our Values	xix
Introduction	xxi
1. Lunch on a Silver Platter	1	(14)
2. "Please Keep Making Us Millions"	15	(12)
3. "We Were the Apostles"	27	(17)
4. The First Prima Donna	44	(11)
5. Guys with Spikes	55	(15)
6. The Empress of Energy	70	(15)
7. The 15 Percent Solution	85	(15)
8. A Recipe for Disaster	100	(14)
9. The Klieg-Light Syndrome	114	(18)
10. The Hotel Kenneth-Lay-a	132	(18)
11. Andy Fastow's Secrets	150	(21)
12. The Big Enchilada	171	(18)
13. "An Unnatural Act"	189	(23)
14. The Beating Heart of Enron	212	(17)
15. Everybody Loves Enron	229	(17)
16. When Pigs Could Fly	246	(18)
17. Gaming California	264	(20)
18. Bandwidth Hog	284	(29)
19. "Ask Why, Asshole"	313	(24)
20. "I Want to Resign"	337	(15)
21. The $45 Million Question	352	(26)
22. "We Have No Cash!"	378	(28)
EPILOGUE: Isn't Anybody Sorry?	406	(9)
Index	415

Excerpts

Introduction On a cool Texas night in late January, Cliff Baxter slipped out of bed. He stuffed pillows under the covers so his sleeping wife wouldnit notice he was gone. Then he stepped quietly through his large suburban Houston home, taking care not to awaken his two children. The door alarm didnit make a sound as he entered the garage; heid disabled the security system before turning in. Then, dressed in blue jogging slacks, a blue T-shirt, and moccasin slippers, he climbed into his new black Mercedes-Benz S500 and drove out into the night. At 43, John Clifford Baxter, the son of a Long Island policeman, had made it big in Texas. Before quitting his job eight months earlier, he had served as vice chairman of a great American corporation, capping a decade-long career as the companyis top deal maker. Baxter was rich, tooothanks to a generous helping of stock options, a millionaire many times over. But as he cruised the empty streets of Sugar Land, Texas, Baxter was drowning in dark thoughts. Always given to mood swings, he had become deeply depressed in recent days, consumed by the spectacular scandal that had engulfed his old company. Everyone seemed to be after him. A congressional committee had already called; the FBI and SEC would surely be next. Would he have to testify against his friends? The plaintiffsi lawyers had named him as a defendant in a huge securities-fraud suit. Baxter was convinced they were having him tailedoand rummaging through his familyis trash. Then there was the media, pestering him at home a dozen or more times a day: Did he know what had gone wrong? How could Americais seventh-biggest company just blow up? Where had the billions gone? No one, at this early stage, viewed Baxter as a major player in the companyis crash. Yet he took it all personally. In phone calls and visits with friends, he railed for hours about the scandalis taint. Itis as if itheyire calling us child molesters,i he complained. iThat will never wash off.i Desperate to get away, heid spent part of the previous week sailing in the Florida Keys. Sailing was one of Baxteris passions. For years, heid decompressed floating on Galveston Bay aboard his 72-foot yacht, Tranquility Base. But heid sold the boat several months earlier. When Baxter returned from Florida, his doctor prescribed antidepressants and sleeping pills and told him to see a psychiatrist. Heid called the shrinkis office that day to make an appointment. But when the receptionist explained that the schedule was booked until February, Baxter hung upohe wasnit going to wait that long. Less than 48 hours later, at about 2:20 a.m. on January 25, 2002, Baxter stopped his Mercedes on Palm Royale Boulevard, a mile and a half from his home. It was cloudy and a bit chilly that evening by Texas standardsoabout 48 degreesobut the sedan was tuned to an interior temperature of precisely 79. An open package of Newport Lights sat in the center console, a bottle of Evian water in the cup holder. Baxteris black leather wallet lay on the passenger seat. Baxter parked the car in the middle of the street, with the doors locked, the engine running, and the headlights burning. Then he lifted a silver .357 Magnum revolver to his right temple and fired a bullet into his head. Seven days later, Cliff Baxteris friends from Enron gathered to mourn. The Houston energy giantis collapse into bankruptcy had already become the biggest scandal of the new century. Baxteris death had stoked the media bonfire and tossed a fresh element of tragedy into a bubbling stewpot of intrigue. Enronis influence ranged widelyofrom Wall Street to the White House. So feared was this company, so powerful were its connections, so much was at stake that there was open speculation Baxter had actually been murderedothe target of a carefully staged hit, aimed at silencing him from spilling Enronis darkest secrets. The rumblings had forced the Sugar Land police department to treat an op