0
00:00:33,801 --> 00:00:36,235
What's he building in there?

1
00:00:37,972 --> 00:00:40,941
What the hell is
he building in there?

2
00:00:43,244 --> 00:00:45,872
It had taken Enron
16 years to go

3
00:00:46,113 --> 00:00:47,842
from about 10 billion
of assets to

4
00:00:48,048 --> 00:00:50,448
65 billion of assets.

5
00:00:50,718 --> 00:00:52,948
It took them 24 days
to go bankrupt.

6
00:00:53,153 --> 00:00:56,020
What the hell is
he building in there?

7
00:00:56,223 --> 00:00:59,351
This company collapsed
so quickly and so entirely.

8
00:00:59,493 --> 00:01:02,519
I mean it was into bankruptcy
within a matter of weeks.

9
00:01:02,730 --> 00:01:04,459
It just immediately had

10
00:01:04,665 --> 00:01:07,600
all the makings of
a gigantic scandal.

11
00:01:07,801 --> 00:01:10,463
He's hiding something
from the rest of us.

12
00:01:10,738 --> 00:01:12,831
The fatal flaw at Enron

13
00:01:13,073 --> 00:01:15,667
if there is one,
you say it was pride

14
00:01:15,876 --> 00:01:18,242
but then it was arrogance,

15
00:01:18,512 --> 00:01:20,537
intolerance, greed,

16
00:01:21,415 --> 00:01:23,645
So many of them were
blinded by the money

17
00:01:23,917 --> 00:01:24,849
that they didn't see that

18
00:01:25,119 --> 00:01:26,484
they were sinking
their own life boat

19
00:01:26,687 --> 00:01:28,552
We have a right to know.

20
00:01:29,256 --> 00:01:31,349
It just got hungrier
and hungrier.

21
00:01:31,659 --> 00:01:33,490
Sooner or later
they were doomed to go off

22
00:01:33,694 --> 00:01:35,389
that cliff at 90 miles an hour.

23
00:01:36,597 --> 00:01:39,657
It's astounding that they
got away with it for so long.

24
00:01:40,267 --> 00:01:42,827
In reality,
Enron was a house of cards.

25
00:01:43,137 --> 00:01:44,764
What we didn't know was
that the house of cards

26
00:01:45,105 --> 00:01:47,972
had been built over
a pool of gasoline

27
00:01:48,809 --> 00:01:51,607
It all sort of became
smoke and mirrors.

28
00:01:54,214 --> 00:01:56,205
Committee will come to order.

29
00:01:56,417 --> 00:01:59,944
This is a case of America's
largest corporate bankruptcy.

30
00:02:00,220 --> 00:02:01,812
The question here is
what happened,

31
00:02:02,056 --> 00:02:03,921
who was responsible
for it happening,

32
00:02:04,124 --> 00:02:05,614
and what can we do to
prevent this sort of thing

33
00:02:05,859 --> 00:02:06,848
from happening again.

34
00:02:08,162 --> 00:02:10,323
I think the Enron story's
so fascinating

35
00:02:10,564 --> 00:02:12,862
because people perceive
it as a story

36
00:02:13,067 --> 00:02:14,125
that's about numbers.

37
00:02:14,335 --> 00:02:17,463
That it's somehow about all
these complicated transactions.

38
00:02:17,638 --> 00:02:19,469
But in reality
it's a story about people

39
00:02:19,640 --> 00:02:21,870
and it's really
a human tragedy.

40
00:03:38,285 --> 00:03:39,809
On this date, at 2:23 am,

41
00:03:40,087 --> 00:03:42,647
Sugar Land police
discovered John C Baxter

42
00:03:43,557 --> 00:03:44,717
located inside his vehicle

43
00:03:44,958 --> 00:03:47,051
with an apparent gunshot
wound to the head.

44
00:03:47,327 --> 00:03:49,921
Ah... at this time there has
been a suicide note located.

45
00:03:50,230 --> 00:03:52,095
Sir, can you give us
any indication whether

46
00:03:52,399 --> 00:03:54,526
this was related to
Enron's bankruptcy.

47
00:03:54,768 --> 00:03:56,497
We do know that he was
and Enron employee,

48
00:03:56,637 --> 00:03:58,935
but as far as any other
indications of why

49
00:03:59,173 --> 00:04:00,538
he committed suicide,
no we do not.

50
00:04:07,548 --> 00:04:08,173
Mr. Skilling,

51
00:04:08,482 --> 00:04:10,507
let me touch on something
that's sort of sad

52
00:04:10,751 --> 00:04:13,652
and that's of course
the suicide of Cliff Baxter.

53
00:04:13,887 --> 00:04:15,821
And you mentioned
he was your best friend

54
00:04:16,023 --> 00:04:17,456
in your opening statement.

55
00:04:17,791 --> 00:04:20,316
Before he died,

56
00:04:20,527 --> 00:04:22,461
did you have many
conversations with him?

57
00:04:23,530 --> 00:04:24,519
Yes.

58
00:04:24,765 --> 00:04:27,962
And were any of them
relative to Enron?

59
00:04:30,637 --> 00:04:32,002
Yes.

60
00:04:34,374 --> 00:04:36,103
There's no one that knew Cliff,

61
00:04:36,343 --> 00:04:37,674
toward the end,
that didn't realize that

62
00:04:37,945 --> 00:04:40,846
he was heartbroken
by what had happened.

63
00:04:42,082 --> 00:04:44,175
And Cliff came over to my house

64
00:04:44,785 --> 00:04:47,583
and he said 'They're calling
us child molesters.'

65
00:04:47,788 --> 00:04:50,552
He says,
'That will never wash off.'

66
00:04:51,792 --> 00:04:53,589
But Mr. Skilling
you don't believe that.

67
00:04:53,794 --> 00:04:54,818
I don't believe what?

68
00:04:55,062 --> 00:04:59,089
You don't believe that
the press and everybody

69
00:04:59,600 --> 00:05:02,865
calling Cliff Baxter
or yourself or anybody

70
00:05:03,103 --> 00:05:04,798
on the Board of Directors,

71
00:05:05,038 --> 00:05:06,630
denigrating or tainting you,

72
00:05:06,907 --> 00:05:08,101
you don't think it's accurate

73
00:05:08,342 --> 00:05:10,037
is what you're saying
to us here today.

74
00:05:10,244 --> 00:05:12,303
I do not believe...

75
00:05:12,679 --> 00:05:16,308
I did not do anything wrong
that was not in the interest

76
00:05:16,550 --> 00:05:18,745
In all the time that
I worked for Enron Corporation,

77
00:05:18,952 --> 00:05:21,011
it was in the interest of the
shareholders of the company.

78
00:05:22,155 --> 00:05:26,353
Ultimately, who was responsible
for the downfall of Enron?

79
00:05:30,664 --> 00:05:31,926
Only a few years ago,

80
00:05:32,132 --> 00:05:35,158
Enron was the nation's
seventh-largest corporation,

81
00:05:35,369 --> 00:05:37,803
valued at almost
70 billion dollars.

82
00:05:38,505 --> 00:05:41,736
Pundits praised the company
as a new business model.

83
00:05:42,910 --> 00:05:46,778
This trading floor was manned
by America's best and brightest,

84
00:05:46,980 --> 00:05:49,676
charting the futures of
energy and power.

85
00:05:50,784 --> 00:05:53,685
And high above each
with a private staircase,

86
00:05:53,921 --> 00:05:55,718
Ken Lay and Jeff Skilling

87
00:05:55,989 --> 00:05:58,514
had built their own
plush staterooms.

88
00:05:58,759 --> 00:06:00,989
They were known as
the smartest guys in the room.

89
00:06:01,228 --> 00:06:05,164
Captains of a ship
too powerful to ever go down.

90
00:06:05,599 --> 00:06:07,931
In the Titanic, the captain
went down with the ship.

91
00:06:08,235 --> 00:06:12,001
In Enron, it looks to me like
the captain first gave himself

92
00:06:12,205 --> 00:06:13,433
and some friends a bonus,

93
00:06:13,640 --> 00:06:15,904
then lowered himself and the
top folks down in the lifeboat

94
00:06:16,143 --> 00:06:17,235
and then hollered up and said,

95
00:06:17,477 --> 00:06:19,445
by the way, everything is
going to be just fine.

96
00:06:20,047 --> 00:06:20,979
Like Skilling,

97
00:06:21,248 --> 00:06:23,944
Ken Lay said he hadn't
done anything wrong.

98
00:06:24,484 --> 00:06:25,712
Could we have a word
with you real quickly?

99
00:06:25,953 --> 00:06:26,920
We're with CNN.

100
00:06:27,187 --> 00:06:28,449
Really not this morning,
thank you.

101
00:06:28,655 --> 00:06:29,986
Beyond the financial issues,

102
00:06:30,257 --> 00:06:32,919
some suspected
a political conspiracy.

103
00:06:33,193 --> 00:06:35,661
Enron had been the largest
corporate contributor

104
00:06:35,862 --> 00:06:39,491
to the first presidential
campaign of George W. Bush.

105
00:06:39,866 --> 00:06:42,528
This is not a political issue,
it is a business issue.

106
00:06:42,936 --> 00:06:44,995
You know Enron had
made contributions to

107
00:06:45,205 --> 00:06:47,639
a lot of people
around Washington D.C.

108
00:06:48,508 --> 00:06:50,601
And if they came to this
administration looking for help

109
00:06:50,844 --> 00:06:51,970
they didn't find any.

110
00:06:52,212 --> 00:06:55,113
To say no help had is like,

111
00:06:55,549 --> 00:06:58,017
'I did not have
political relations

112
00:06:58,352 --> 00:07:00,582
with that man, Mr. Lay.'

113
00:07:00,821 --> 00:07:02,448
What about the fact
that George W. Bush

114
00:07:02,656 --> 00:07:04,419
calls Ken Lay, Kenny Boy?

115
00:07:04,658 --> 00:07:06,250
That's my nickname
for my husband,

116
00:07:06,460 --> 00:07:07,620
which he overheard.

117
00:07:07,861 --> 00:07:09,419
So it wasn't original,
with the President?

118
00:07:09,663 --> 00:07:10,857
It certainly wasn't.

119
00:07:11,365 --> 00:07:12,593
According to published reports,

120
00:07:12,833 --> 00:07:16,633
your husband earned
about 300 million dollars in,

121
00:07:16,870 --> 00:07:18,701
in compensation, in stocks

122
00:07:18,905 --> 00:07:20,805
from Enron
over the last four years.

123
00:07:21,108 --> 00:07:22,837
What happened to
all that money?

124
00:07:23,076 --> 00:07:25,101
It's gone. It's gone.

125
00:07:25,379 --> 00:07:26,539
There's nothing left.

126
00:07:30,584 --> 00:07:33,781
This is the shredded evidence
we got that came out of Enron.

127
00:07:34,287 --> 00:07:37,552
We very quickly determined that
the insiders had sold off

128
00:07:37,791 --> 00:07:41,454
a billion dollars of their stock
in the preceding several months.

129
00:07:41,628 --> 00:07:45,155
Did you convert stock
worth 66 million dollars?

130
00:07:46,366 --> 00:07:47,856
I don't know, but...

131
00:07:48,135 --> 00:07:48,692
I don't have
the records with me...

132
00:07:48,969 --> 00:07:50,493
Would that be surprising to
you to learn that you did that?

133
00:07:50,737 --> 00:07:52,466
No, that would
not be surprising.

134
00:07:52,973 --> 00:07:54,463
Mr. Fastow

135
00:07:54,708 --> 00:07:57,905
got only 30 million
in stock proceeds from Enron,

136
00:07:58,278 --> 00:08:00,803
but he took another
30 million out,

137
00:08:01,515 --> 00:08:03,176
with his side deals.

138
00:08:03,450 --> 00:08:07,511
I think there was just
an immediate sense of outrage

139
00:08:07,821 --> 00:08:11,587
at Lay and Skilling and Fastow

140
00:08:11,825 --> 00:08:14,794
when people realized
how much they had profited,

141
00:08:15,028 --> 00:08:17,053
and how completely artificial

142
00:08:17,297 --> 00:08:19,162
the appearance of
this company had been.

143
00:08:21,101 --> 00:08:23,831
News of shredding at Enron
raised more questions.

144
00:08:24,638 --> 00:08:27,539
What answers were lost
in the torn documents?

145
00:08:28,108 --> 00:08:31,305
20,000 employees
had lost their jobs.

146
00:08:31,712 --> 00:08:35,876
$2 billion in pensions and
retirement funds had disappeared.

147
00:08:36,550 --> 00:08:39,314
Was Enron the work of
a few bad men

148
00:08:39,553 --> 00:08:42,454
or the dark shadow of
the American dream?

149
00:08:47,861 --> 00:08:53,128
Lay comes to the story of
Enron from very humble roots.

150
00:08:56,203 --> 00:08:58,763
My father was
a Baptist minister and,

151
00:08:59,072 --> 00:09:00,539
and he was ordained
a Baptist minister

152
00:09:00,774 --> 00:09:04,767
while I was very young
probably two, three years old.

153
00:09:04,978 --> 00:09:07,412
Ken Lay was a Baptist
Preacher's son in a family

154
00:09:07,547 --> 00:09:09,014
that had been poor
all it's life

155
00:09:09,249 --> 00:09:12,650
and he, throughout his life,
worked several jobs as a kid

156
00:09:13,120 --> 00:09:16,283
and clearly had in mind that
things could be better...

157
00:09:16,523 --> 00:09:17,319
and wanted things to be better.

158
00:09:17,591 --> 00:09:20,651
He had a huge ambition to
make wealth for himself.

159
00:09:20,894 --> 00:09:23,419
He told a story later
about sitting on a tractor,

160
00:09:23,597 --> 00:09:25,121
dreaming about
the world of business

161
00:09:25,332 --> 00:09:26,526
and how different
it could be from the way

162
00:09:26,767 --> 00:09:28,200
things were for him
and his family.

163
00:09:30,637 --> 00:09:33,105
Lay was a PhD in economics
and he became,

164
00:09:33,306 --> 00:09:35,706
very early on,
a real apostle for deregulation.

165
00:09:35,976 --> 00:09:37,876
He was way ahead of
the curve on this.

166
00:09:38,111 --> 00:09:39,635
He was thinking
about energy markets

167
00:09:39,880 --> 00:09:42,246
that would be deregulated.
And in particular,

168
00:09:42,482 --> 00:09:45,576
the natural gas industry
that was shackled by regulation.

169
00:09:45,786 --> 00:09:49,620
And he pushed aggressively in
Washington to change all of that.

170
00:09:54,761 --> 00:09:55,352
In Washington,

171
00:09:55,629 --> 00:09:57,529
Lay became part of
a new crusade

172
00:09:57,831 --> 00:09:59,924
to liberate businessmen
from the rules

173
00:10:00,167 --> 00:10:02,192
and regulations of government.

174
00:10:02,469 --> 00:10:05,700
Government is not
the solution to our problem.

175
00:10:06,106 --> 00:10:08,040
Government is the problem.

176
00:10:08,275 --> 00:10:10,675
The societies which have
achieved the most spectacular,

177
00:10:10,877 --> 00:10:14,108
broad-based economic progress
in the shortest period of time

178
00:10:14,614 --> 00:10:16,445
are not the most
tightly controlled,

179
00:10:16,650 --> 00:10:18,845
not necessarily
the biggest in size,

180
00:10:19,119 --> 00:10:21,747
or the wealthiest
in natural resources.

181
00:10:22,222 --> 00:10:25,089
No, what unites them all
is their willingness to believe

182
00:10:25,292 --> 00:10:27,852
in the magic
of the marketplace.

183
00:10:35,569 --> 00:10:37,696
The magic power of deregulation

184
00:10:37,938 --> 00:10:41,203
pushed Ken Lay to
found Enron in 1985.

185
00:10:41,808 --> 00:10:45,244
Through a merger of vast networks
of natural gas pipelines,

186
00:10:45,579 --> 00:10:47,877
Lay thought Enron
would be poised to take

187
00:10:48,081 --> 00:10:50,106
advantage of
the government's decision

188
00:10:50,350 --> 00:10:53,717
to let gas prices float
with the currents of the market.

189
00:10:55,889 --> 00:10:59,086
Ken Lay had
a view of deregulation

190
00:10:59,292 --> 00:11:00,623
from the standpoint
of all the money

191
00:11:00,861 --> 00:11:02,294
that he thought could be made.

192
00:11:02,529 --> 00:11:03,791
Ken Lay wasn't alone.

193
00:11:04,064 --> 00:11:06,532
A couple of Texas oilmen
shared his views

194
00:11:06,766 --> 00:11:09,530
on how to get government out
of the energy business.

195
00:11:09,736 --> 00:11:11,897
I think they could sort of
understand each other.

196
00:11:12,138 --> 00:11:13,571
It was a professional courtesy

197
00:11:13,840 --> 00:11:16,331
between a sidewinder
and a timber rattlesnake.

198
00:11:16,576 --> 00:11:18,237
Lay was closer to the father.

199
00:11:18,511 --> 00:11:20,479
But while
he was governor of Texas

200
00:11:20,647 --> 00:11:22,638
George W. Bush was
only too happy to

201
00:11:22,849 --> 00:11:25,010
make phone calls for Ken Lay.

202
00:11:25,919 --> 00:11:28,080
This absolutely has
no precedent.

203
00:11:28,321 --> 00:11:31,256
This is by far and away
the most important,

204
00:11:31,625 --> 00:11:34,685
major relationship of
a Presidential family

205
00:11:34,928 --> 00:11:37,192
with a single corporation
in American history.

206
00:11:37,530 --> 00:11:38,394
When Rich Kinder,

207
00:11:38,665 --> 00:11:40,997
one of Enron's Executives,
left the company,

208
00:11:41,234 --> 00:11:43,794
Lay arranged
for a video valentine.

209
00:11:44,104 --> 00:11:47,596
Rich, I've... been asked
to think of one thing

210
00:11:47,908 --> 00:11:49,500
I could say to you
on your departure from Enron.

211
00:11:49,743 --> 00:11:52,268
It'd be this,
'Don't leave Texas.'

212
00:11:52,579 --> 00:11:55,514
Rich, you have been fantastic
to the Bush family.

213
00:11:55,882 --> 00:11:57,509
I don't think
anybody did more than

214
00:11:57,717 --> 00:11:59,241
you did to support George and,

215
00:11:59,486 --> 00:12:00,919
of course,
in this stage of my life,

216
00:12:01,154 --> 00:12:03,452
and Barbara's too,
that's what really matters.

217
00:12:03,690 --> 00:12:05,453
Your family and your friends.

218
00:12:06,159 --> 00:12:08,150
Early on, George Bush, Sr.

219
00:12:08,495 --> 00:12:10,986
Helped secure billions
in government subsidies

220
00:12:11,231 --> 00:12:12,721
for Enron International.

221
00:12:12,999 --> 00:12:15,024
And he helped promote Lay as

222
00:12:15,302 --> 00:12:17,770
deregulation's
Ambassador-at-Large.

223
00:12:18,505 --> 00:12:19,904
Enron is a company...

224
00:12:20,240 --> 00:12:23,471
that deals with everyone
with absolute integrity.

225
00:12:23,677 --> 00:12:25,804
We want people to leave
the transaction with Enron

226
00:12:26,046 --> 00:12:27,274
thinking that
they've been dealt with

227
00:12:27,647 --> 00:12:29,911
in the highest possible way

228
00:12:30,183 --> 00:12:32,344
as far as integrity
and truthfulness.

229
00:12:32,585 --> 00:12:35,486
He always wrapped himself
in the cloak of moral rectitude.

230
00:12:35,789 --> 00:12:37,723
But there was one episode,
early on,

231
00:12:37,991 --> 00:12:39,982
that raised questions
about whether he was actually

232
00:12:40,260 --> 00:12:43,627
walking the walk
This was the Enron oil scandal,

233
00:12:43,863 --> 00:12:45,490
also know as
the Valhalla Scandal.

234
00:12:46,433 --> 00:12:47,866
While you were
at Arthur Anderson,

235
00:12:48,101 --> 00:12:50,934
were you involved
in an investigation

236
00:12:51,204 --> 00:12:53,399
at a company called Enron Oil?"

237
00:12:53,974 --> 00:12:54,963
Yes, I was.

238
00:12:55,175 --> 00:12:57,507
The issue
with the company in 1997

239
00:12:57,677 --> 00:13:01,272
involved the misappropriation
of moneys by two traders.

240
00:13:01,982 --> 00:13:05,884
In 1987 two oil traders
made bets for Enron

241
00:13:06,152 --> 00:13:08,586
on whether the price of
oil would rise or fall.

242
00:13:09,689 --> 00:13:11,281
Oil trading is like gambling:

243
00:13:11,524 --> 00:13:14,049
Sometimes you win,
sometimes you lose.

244
00:13:14,494 --> 00:13:17,463
But Enron Oil
always seemed to win,

245
00:13:17,630 --> 00:13:19,530
much to Ken Lay's delight.

246
00:13:19,733 --> 00:13:21,462
I tried to explain to Ken Lay

247
00:13:21,634 --> 00:13:24,762
the tremendous risk that
you have in that market.

248
00:13:24,971 --> 00:13:26,165
You can lose...

249
00:13:26,506 --> 00:13:28,565
ten times your
original investment.

250
00:13:29,042 --> 00:13:30,976
A veteran trader,
Mike Muckleroy,

251
00:13:31,177 --> 00:13:34,476
was suspicious of Enron Oil's
steady high profits.

252
00:13:35,181 --> 00:13:37,012
Well this oil trading
business had profits

253
00:13:37,250 --> 00:13:38,842
that nobody could really
understand and in fact,

254
00:13:39,185 --> 00:13:41,119
that many of Ken Lay's
lieutenants questioned.

255
00:13:41,388 --> 00:13:42,616
They said this
business can't be making

256
00:13:42,822 --> 00:13:44,050
this much money legitimately.

257
00:13:44,290 --> 00:13:45,917
Something weird is going on.

258
00:13:46,326 --> 00:13:48,487
Something weird was going on.

259
00:13:48,962 --> 00:13:51,055
The first hint came
from an anonymous tip

260
00:13:51,297 --> 00:13:52,992
about the president
of the company,

261
00:13:53,233 --> 00:13:54,530
Louis Borget.

262
00:13:54,768 --> 00:13:57,737
Mr. Borget had taken
some three plus million dollars

263
00:13:58,004 --> 00:14:01,201
of corporate funds and put it
in a personal account of his.

264
00:14:01,474 --> 00:14:04,068
There were offshore
accounts phony books

265
00:14:04,277 --> 00:14:06,472
and a trail that led
from the company's treasurer,

266
00:14:06,746 --> 00:14:07,644
Tom Mastroeni,

267
00:14:07,881 --> 00:14:11,282
to a mysterious Lebanese
speculator no one could find:

268
00:14:11,518 --> 00:14:12,883
M. Yass.

269
00:14:13,386 --> 00:14:14,876
What name did you
suspect that was?

270
00:14:15,121 --> 00:14:16,486
My ass, you know.

271
00:14:16,890 --> 00:14:19,358
And M Smart,
well so that's Maxwell Smart.

272
00:14:19,592 --> 00:14:21,321
I mean, these guys
are playing games

273
00:14:22,095 --> 00:14:24,563
Borget and Mastroeni were
summoned to Houston.

274
00:14:25,098 --> 00:14:28,261
First, they presented
falsified bank records to Enron.

275
00:14:28,668 --> 00:14:30,659
Then they admitted
they had diverted company

276
00:14:30,904 --> 00:14:32,895
profits to personal accounts.

277
00:14:34,007 --> 00:14:35,565
It was brought to the attention
of the Enron Board.

278
00:14:35,775 --> 00:14:37,538
Auditors were brought
in as well,

279
00:14:37,777 --> 00:14:38,869
to look at the whole thing.

280
00:14:39,112 --> 00:14:40,079
At the board meeting,

281
00:14:40,280 --> 00:14:42,771
the auditors told Lay
that Borget and his traders

282
00:14:43,016 --> 00:14:46,042
were manipulating earnings
destroying daily trading records,

283
00:14:46,286 --> 00:14:49,585
and probably gambling
way beyond their limits.

284
00:14:49,823 --> 00:14:51,188
The next day we found out that

285
00:14:51,424 --> 00:14:54,120
Lay's decision was to
basically change nothing

286
00:14:54,360 --> 00:14:56,328
as far as
the operation's concerned.

287
00:14:56,629 --> 00:14:59,325
And the reason
he gave was that this was

288
00:14:59,532 --> 00:15:01,432
the only part of
the combined company

289
00:15:01,668 --> 00:15:04,034
that was making any money
and that he could not,

290
00:15:04,370 --> 00:15:06,600
you know,
kill the golden goose.

291
00:15:07,207 --> 00:15:09,971
The traders weren't fired,
or even disciplined.

292
00:15:10,343 --> 00:15:13,210
Instead,
Enron sent a telex to Borget:

293
00:15:13,580 --> 00:15:16,276
Please keep making us millions.

294
00:15:17,050 --> 00:15:19,143
Instead of reducing
Enron's risk,

295
00:15:19,486 --> 00:15:21,977
Lay encouraged his traders
to gamble more.

296
00:15:22,689 --> 00:15:24,816
But then their luck changed.

297
00:15:26,292 --> 00:15:27,259
Two months later,

298
00:15:27,494 --> 00:15:29,462
here I got this panic
call that they had

299
00:15:29,596 --> 00:15:32,963
drawn down 90 million dollars
in the previous five days.

300
00:15:33,166 --> 00:15:34,861
What we could do is
just try and find out

301
00:15:35,101 --> 00:15:37,899
what kind of guerilla
we had loose up there.

302
00:15:38,671 --> 00:15:41,231
Muckleroy hopped on the
next plane to New York.

303
00:15:41,508 --> 00:15:44,102
He knew Mastroeni had
another set of books,

304
00:15:44,344 --> 00:15:47,313
and he would do whatever
it took to get them.

305
00:15:48,314 --> 00:15:50,373
I basically stood over Tom

306
00:15:50,650 --> 00:15:53,118
and I told him that one of
two things was going to happen.

307
00:15:53,319 --> 00:15:55,184
Either one of
the trading partners

308
00:15:55,522 --> 00:15:56,989
that was crooked with Borget

309
00:15:57,257 --> 00:15:59,885
who was a German arms dealer
was going to kill him,

310
00:16:00,293 --> 00:16:02,693
or I was.
I said 'I'll track you down

311
00:16:03,029 --> 00:16:05,088
and find you
no matter where you go.

312
00:16:05,465 --> 00:16:07,194
And sooner or later,
I'll get you.'

313
00:16:08,368 --> 00:16:11,303
The next day, Mastroeni came
in with the real books.

314
00:16:11,571 --> 00:16:14,870
The traders had gambled away
all of Enron's reserves.

315
00:16:16,142 --> 00:16:19,009
By acting fast,
Muckleroy bluffed the market,

316
00:16:19,279 --> 00:16:21,304
and managed to
save the company.

317
00:16:23,082 --> 00:16:25,550
After Valhalla Ken Lay
maintained that

318
00:16:25,752 --> 00:16:26,980
he had been shocked
that the traders

319
00:16:27,253 --> 00:16:28,447
had gambled so recklessly.

320
00:16:28,621 --> 00:16:30,179
But Ken Lay had known
all along

321
00:16:30,490 --> 00:16:32,048
about the risks
that were taken.

322
00:16:32,258 --> 00:16:34,123
He had seen
the reports warning him

323
00:16:34,327 --> 00:16:35,954
about the traders' behavior.

324
00:16:36,863 --> 00:16:39,161
Since the fall of Enron,
Ken Lay has said that

325
00:16:39,365 --> 00:16:40,627
he can't be responsible
for things

326
00:16:40,833 --> 00:16:42,061
he didn't know about.

327
00:16:42,302 --> 00:16:44,133
Sounds like what he said
about Valhalla.

328
00:16:44,671 --> 00:16:46,468
Do you believe that
he didn't know?"

329
00:16:46,706 --> 00:16:50,107
I can answer only for one.
I can answer for Valhalla

330
00:16:50,310 --> 00:16:52,471
because Ken Lay did in fact
know about this thing.

331
00:16:52,645 --> 00:16:53,873
Because I had told him myself.

332
00:16:54,147 --> 00:16:57,378
The auditors adamantly
told Mr. Ken Lay

333
00:16:57,850 --> 00:17:01,081
that the two rogue traders
should be fired.

334
00:17:01,454 --> 00:17:03,513
Lay read the report
and he read his budget

335
00:17:03,723 --> 00:17:07,159
and estimated how much they,
the two rogue executives made

336
00:17:07,460 --> 00:17:09,553
and if they were fired
what he could lose.

337
00:17:09,862 --> 00:17:12,729
My conclusion was that this guy
is a guy who puts earnings

338
00:17:12,966 --> 00:17:14,433
before scruples
rather than reacting

339
00:17:14,634 --> 00:17:16,568
to the dishonesty right
in front of him.

340
00:17:17,036 --> 00:17:19,436
Mastroeni received
a suspended sentence.

341
00:17:19,639 --> 00:17:23,097
Borget was convicted of fraud,
and spent one year in jail.

342
00:17:23,977 --> 00:17:26,468
With his biggest moneymaker
now behind bars,

343
00:17:26,746 --> 00:17:28,213
Ken Lay had a problem:

344
00:17:28,481 --> 00:17:31,143
Who could he find
to make money for Enron?

345
00:17:32,552 --> 00:17:34,110
Every year, every day,

346
00:17:34,354 --> 00:17:36,549
every week you have to come up
with new ideas.

347
00:17:46,332 --> 00:17:48,664
Ken Lay saw in Jeff Skilling
the guy who had the answer to

348
00:17:48,868 --> 00:17:51,860
what the future of the natural
gas business was supposed to be.

349
00:17:52,138 --> 00:17:54,663
Ken Lay is also a guy who
considers himself a visionary

350
00:17:54,941 --> 00:17:57,466
and he liked other people
he thought of as visionaries.

351
00:17:57,644 --> 00:17:58,804
He liked people with big ideas.

352
00:17:59,178 --> 00:18:02,147
And Jeff Skilling was a person
with the biggest ideas of all.

353
00:18:03,116 --> 00:18:05,778
Jeff Skilling's biggest
single idea was find

354
00:18:06,019 --> 00:18:07,987
a new way to deliver energy.

355
00:18:08,221 --> 00:18:11,315
Rather than be bound by the
physical flow of the pipeline,

356
00:18:11,624 --> 00:18:15,253
Enron would become a kind of
stock market for natural gas.

357
00:18:15,528 --> 00:18:17,519
It was a magical new idea:

358
00:18:17,797 --> 00:18:20,561
Transform energy into
financial instruments

359
00:18:20,800 --> 00:18:23,291
that could be traded
like stocks and bonds.

360
00:18:23,770 --> 00:18:25,533
So that was the one good idea.

361
00:18:25,805 --> 00:18:27,966
In 1992 using that good idea,

362
00:18:28,174 --> 00:18:30,472
we became the largest buyer
and seller of natural gas

363
00:18:30,677 --> 00:18:31,701
in North America.

364
00:18:31,944 --> 00:18:33,309
Jeff was like the prophet.

365
00:18:33,579 --> 00:18:36,241
He came in and said There's
a whole new world out there.

366
00:18:36,482 --> 00:18:38,109
Forget about
this pipeline stuff,

367
00:18:38,351 --> 00:18:39,943
you know the staid pipeline
in the ground and...

368
00:18:40,253 --> 00:18:41,720
gas in and gas out.

369
00:18:41,988 --> 00:18:45,719
We can recreate
this entire industry.

370
00:18:46,492 --> 00:18:48,221
An attorney from
Vinson & Elkins,

371
00:18:48,528 --> 00:18:51,258
Amanda Martin was one of
the first executives hired

372
00:18:51,531 --> 00:18:54,523
by Jeff Skilling and became
part of his inner circle.

373
00:18:55,568 --> 00:18:57,126
The excitement was palpable.

374
00:18:57,370 --> 00:19:00,567
You cannot imagine how proud
we all were to be there.

375
00:19:00,807 --> 00:19:03,901
And then, of course,
we had a leader who imbued us

376
00:19:04,143 --> 00:19:06,543
with a sense of confidence that
if we were smart,

377
00:19:06,779 --> 00:19:10,510
anything could be accomplished
And then the bottom line

378
00:19:10,750 --> 00:19:12,479
we began to make money.

379
00:19:13,252 --> 00:19:15,152
And that in and of itself,

380
00:19:15,355 --> 00:19:18,847
was a re-affirmation
that this could be big.

381
00:19:21,661 --> 00:19:24,186
Skilling saw the opportunity
to build an industry new

382
00:19:24,464 --> 00:19:25,988
and to start a business
from scratch.

383
00:19:26,232 --> 00:19:28,462
But he had
one specific condition

384
00:19:28,701 --> 00:19:30,498
that had to be met
before he'd join Enron,

385
00:19:30,737 --> 00:19:32,864
and it was that
he be allowed to use

386
00:19:33,072 --> 00:19:35,438
a certain kind of accounting
known as mark-to-market.

387
00:19:35,742 --> 00:19:38,336
Arthur Andersen signed off,
and the SEC approved it.

388
00:19:38,978 --> 00:19:40,946
I remember walking in
and going 'What's going on? '

389
00:19:41,214 --> 00:19:42,545
And Causey and everybody,

390
00:19:42,749 --> 00:19:44,649
I mean every one was so excited
and then came the champagne

391
00:19:44,884 --> 00:19:47,148
and We had got Mark-to-market
accounting treatment.

392
00:19:47,487 --> 00:19:50,945
And I often think about how clear
my memory was about that event.

393
00:19:51,224 --> 00:19:54,921
And that was
the beginning of a major cog

394
00:19:55,128 --> 00:19:56,857
of the downfall
ultimately of Enron.

395
00:19:59,766 --> 00:20:02,234
Mark-to-market
accounting allowed Enron

396
00:20:02,502 --> 00:20:04,766
to book potential
future profits

397
00:20:05,004 --> 00:20:06,869
on the very day
a deal was signed.

398
00:20:07,273 --> 00:20:10,265
No matter how little cash
actually came in the door,

399
00:20:10,576 --> 00:20:13,545
to the outside world,
Enron's profits could be...

400
00:20:13,813 --> 00:20:16,407
whatever Enron said they were.

401
00:20:17,250 --> 00:20:19,047
Very subjective.

402
00:20:20,753 --> 00:20:26,658
And very...
it left it open to manipulation.

403
00:20:26,859 --> 00:20:28,588
And they were saying
that we're going to sell

404
00:20:28,828 --> 00:20:31,991
power out of this
power plant in ten years

405
00:20:32,231 --> 00:20:34,927
for X dollars per kilowatt.

406
00:20:35,668 --> 00:20:38,466
And there was no way
anybody could prove that

407
00:20:38,738 --> 00:20:39,204
they could do it.

408
00:20:39,405 --> 00:20:40,269
Well...
Hey Reg.

409
00:20:40,473 --> 00:20:41,167
Good morning.
How are you?

410
00:20:41,407 --> 00:20:42,738
Finally. Great.
Good to see you.

411
00:20:42,942 --> 00:20:44,432
Jeff. Good to see you.
Todd, sit down.

412
00:20:44,744 --> 00:20:46,041
We've been working
hard on this

413
00:20:46,245 --> 00:20:47,371
and we've really pulled
out all the stops.

414
00:20:47,580 --> 00:20:49,377
Look what we got.
Origination...

415
00:20:49,615 --> 00:20:50,912
We did 20 million last year,

416
00:20:51,184 --> 00:20:53,414
I think we can do 120 million
dollars this year.

417
00:20:53,886 --> 00:20:55,877
Trading
we did 10 million last year

418
00:20:56,122 --> 00:20:58,283
we think we can do
64 this year.

419
00:20:58,524 --> 00:20:59,388
This is the key.

420
00:20:59,625 --> 00:21:00,489
We're going to move from

421
00:21:00,693 --> 00:21:02,627
mark-to-market accounting
to something

422
00:21:02,829 --> 00:21:05,354
I call H, F, V

423
00:21:05,598 --> 00:21:09,090
Hypothetical
Future Value accounting.

424
00:21:09,502 --> 00:21:12,471
If we do that
we can add a kazillion dollars

425
00:21:12,705 --> 00:21:13,797
to the bottom line.

426
00:21:14,006 --> 00:21:19,069
Whoa! Jeff... alright!
That sounds fantastic.

427
00:21:19,312 --> 00:21:23,146
Oh Jeff, thank you.
That's just supurb performance.

428
00:21:23,349 --> 00:21:25,146
And you're going to go far,
my boy.

429
00:21:25,384 --> 00:21:27,215
Probably President of
the company one day.

430
00:21:27,520 --> 00:21:28,782
You think so?
I think!

431
00:21:28,988 --> 00:21:31,047
He really believed that
the idea was everything.

432
00:21:31,257 --> 00:21:32,622
And that when you came up
with an idea,

433
00:21:32,859 --> 00:21:35,191
you should be able to book
the profits from that idea,

434
00:21:35,528 --> 00:21:36,495
right away.

435
00:21:36,696 --> 00:21:39,130
Because otherwise some lesser
man was taking the profits

436
00:21:39,365 --> 00:21:40,855
from the idea
that some greater man

437
00:21:41,100 --> 00:21:42,761
had come up with in the past.

438
00:21:44,170 --> 00:21:46,661
When Jeff Skilling applied to
Harvard Business School,

439
00:21:46,906 --> 00:21:49,033
the professor asked him
if he was smart.

440
00:21:49,275 --> 00:21:51,903
He replied,
'I'm fucking smart.'

441
00:21:53,112 --> 00:21:56,240
One of his favorite books
was The Selfish Gene,

442
00:21:56,549 --> 00:21:59,211
about the ways human nature
is steered by greed

443
00:21:59,452 --> 00:22:02,182
and competition in the service
of passing on our genes.

444
00:22:03,289 --> 00:22:03,914
At Enron.

445
00:22:04,190 --> 00:22:06,750
Skilling wanted to set free
the basic instincts

446
00:22:07,059 --> 00:22:08,890
of survival of the fittest.

447
00:22:11,764 --> 00:22:14,358
Jeff had a very Darwinian
view of how the world worked.

448
00:22:14,634 --> 00:22:17,034
He was famous for saying once
in Enron's early years,

449
00:22:17,303 --> 00:22:19,703
that money was the only thing
that motivated people.

450
00:22:21,507 --> 00:22:23,634
Skilling's notion of
how the world should work

451
00:22:23,910 --> 00:22:24,706
really trickled down,

452
00:22:25,011 --> 00:22:27,206
and affected everything
about how Enron did business.

453
00:22:27,513 --> 00:22:29,208
He instituted the system
know as the PRC,

454
00:22:29,415 --> 00:22:30,882
or Perfomance Review Committee.

455
00:22:31,117 --> 00:22:34,086
It required that people be
graded from a one to a five.

456
00:22:34,287 --> 00:22:36,983
And roughly ten percent of
people had to be a five.

457
00:22:37,189 --> 00:22:39,180
And those people were
supposed to be fired.

458
00:22:39,425 --> 00:22:41,791
Hence, this came to be know
as 'Rank and Yank.'

459
00:22:42,061 --> 00:22:43,392
I, personally, am convinced

460
00:22:44,530 --> 00:22:47,590
that the PRC process
is the most important process

461
00:22:47,967 --> 00:22:49,935
that we conduct as a company.

462
00:22:50,136 --> 00:22:51,535
I've never heard of
a company yet

463
00:22:51,771 --> 00:22:54,069
that would be successful
terminating 15 percent

464
00:22:54,307 --> 00:22:55,706
of their people every year...

465
00:22:55,942 --> 00:22:58,376
just to satisfy the fact
that the other employees

466
00:22:58,578 --> 00:22:59,636
had to vote on them.

467
00:22:59,845 --> 00:23:01,745
And so when you're being
evaluated by that group,

468
00:23:01,948 --> 00:23:05,349
you are getting direct
communication from Ken and me

469
00:23:05,585 --> 00:23:07,553
about what the objectives
of the company are

470
00:23:07,753 --> 00:23:09,448
and how you fit
with those objectives.

471
00:23:09,689 --> 00:23:11,452
It was a brutal process.

472
00:23:11,691 --> 00:23:14,785
The ability for
a 25 year old to go in

473
00:23:15,061 --> 00:23:18,087
and to be reviewed
and to be superior...

474
00:23:18,698 --> 00:23:22,134
and as a consequence get
a five million dollar bonus.

475
00:23:22,702 --> 00:23:24,465
I don't think that's
repeated in many places

476
00:23:24,637 --> 00:23:25,695
in corporate America.

477
00:23:25,938 --> 00:23:27,530
Our culture is a tough culture.

478
00:23:27,773 --> 00:23:30,742
It is a very aggressive culture.

479
00:23:33,079 --> 00:23:33,636
At Enron,

480
00:23:33,913 --> 00:23:36,711
no one was more aggressive
than the traders.

481
00:23:37,917 --> 00:23:40,511
If I'm on the way to
my boss's office

482
00:23:40,753 --> 00:23:42,152
talking about my compensation.

483
00:23:42,355 --> 00:23:44,152
And if I step on somebody's
throat on the way

484
00:23:44,357 --> 00:23:45,119
that doubles it?

485
00:23:45,358 --> 00:23:47,053
Well, I'll stomp
on the guy's throat.

486
00:23:47,627 --> 00:23:50,494
You know,
that that's how people were.

487
00:23:51,731 --> 00:23:54,791
On the trading side
we got to be the biggest,

488
00:23:55,067 --> 00:23:57,160
baddest house in town.

489
00:23:57,536 --> 00:23:58,525
And by necessity,

490
00:23:58,804 --> 00:24:00,237
if you wanted to be
in the market,

491
00:24:00,506 --> 00:24:02,940
you had to deal with Enron.

492
00:24:05,144 --> 00:24:08,443
Enron's traders were like the
super powerful high school

493
00:24:08,614 --> 00:24:11,105
clique that even the principal
doesn't dare to reign in.

494
00:24:11,350 --> 00:24:13,682
They had become
the major engine of

495
00:24:13,986 --> 00:24:16,454
at least reported profits
at the company.

496
00:24:16,622 --> 00:24:19,318
They took Jeff Skilling and
Ken Lay's belief in free markets

497
00:24:19,592 --> 00:24:21,560
and turned it into an ideology.

498
00:24:21,794 --> 00:24:25,195
But they pitch it almost
as a new economic religion.

499
00:24:28,501 --> 00:24:31,061
Enron on-line will
change the markets

500
00:24:31,303 --> 00:24:32,930
for many many commodities.

501
00:24:33,239 --> 00:24:37,073
It is creating an open
transparent marketplace

502
00:24:37,343 --> 00:24:40,471
that replaces the dark
blind system that existed.

503
00:24:41,313 --> 00:24:42,905
It is real simple.

504
00:24:43,282 --> 00:24:45,944
You turn on your computer
and it's right there.

505
00:24:46,185 --> 00:24:46,810
That's our vision.

506
00:24:47,086 --> 00:24:48,781
We're trying to
change the world.

507
00:24:53,959 --> 00:24:56,189
I think Jeff Skilling
had a desperate

508
00:24:56,529 --> 00:24:58,156
need to believe
that Enron was a success.

509
00:24:58,397 --> 00:25:00,058
I think he identified
with Enron.

510
00:25:00,299 --> 00:25:02,790
He proclaimed, at one point,'
I am Enron'.

511
00:25:04,370 --> 00:25:06,235
The other thing
about people at Enron is,

512
00:25:06,472 --> 00:25:09,669
a lot of them were former nerds
and including Jeff Skilling.

513
00:25:09,909 --> 00:25:11,774
He had been paunchy.
He had big glasses.

514
00:25:12,011 --> 00:25:13,239
He was losing his hair.

515
00:25:13,479 --> 00:25:15,538
And Jeff Skilling
one day kinda woke up

516
00:25:15,781 --> 00:25:17,009
and decided to change himself.

517
00:25:17,249 --> 00:25:19,240
And he started working out,
lost a lot of weight.

518
00:25:19,518 --> 00:25:20,849
But he really did
remake himself

519
00:25:21,053 --> 00:25:24,147
through sheer will
and force of personality.

520
00:25:24,924 --> 00:25:28,451
When Jeff got Lasik on his eyes,
everybody at Enron got Lasik,

521
00:25:28,694 --> 00:25:30,855
so nobody was wearing glasses.

522
00:25:32,498 --> 00:25:34,989
I think Jeff Skilling
is really a tragic figure,

523
00:25:35,234 --> 00:25:36,496
in a classic sense of the word.

524
00:25:36,769 --> 00:25:39,795
He's a guy that people describe
as incandescently brilliant.

525
00:25:40,072 --> 00:25:42,734
But he's also a guy who
is radically different

526
00:25:42,942 --> 00:25:44,102
than he at times
portrays himself.

527
00:25:44,310 --> 00:25:46,244
He's portrayed himself
as somebody who has

528
00:25:46,512 --> 00:25:48,912
very tightly-monitored risk.
In reality, he's a gambler.

529
00:25:49,115 --> 00:25:52,107
He gambled away huge sums of
money before he was 20 years old,

530
00:25:52,351 --> 00:25:54,546
by making wild bets
on the market.

531
00:25:57,690 --> 00:25:59,419
To Jeff Skilling,
risk was glamorous.

532
00:25:59,592 --> 00:26:00,786
He was a huge risk taker.

533
00:26:00,993 --> 00:26:03,655
He actually talked about
wanting to go on trips that

534
00:26:03,863 --> 00:26:05,888
were so perilous that
someone could actually die.

535
00:26:10,503 --> 00:26:13,734
This manifested itself
in trips that Jeff Skilling led

536
00:26:14,006 --> 00:26:16,236
for a small group of friends
and customers.

537
00:26:21,180 --> 00:26:23,910
A core cadre of
Enron guys used to go on

538
00:26:24,183 --> 00:26:25,810
these wild adventures:

539
00:26:26,018 --> 00:26:28,680
Andy Fastow would go;
Ken Rice would go.

540
00:26:29,155 --> 00:26:30,679
The trips were legend.

541
00:26:30,890 --> 00:26:33,552
You know, we can sit and think
about what strange insecurities

542
00:26:33,826 --> 00:26:35,453
they were trying to overcome.

543
00:26:35,628 --> 00:26:37,687
But it made them
feel good as men.

544
00:26:38,564 --> 00:26:40,964
And they took a particularly
memorable trip to the Baja

545
00:26:41,267 --> 00:26:44,168
twelve hundred miles of
very rugged terrain in Mexico.

546
00:26:48,040 --> 00:26:50,838
This is a trip where
people crashed bikes.

547
00:26:51,177 --> 00:26:51,939
Ken Rice was on the trip,

548
00:26:52,244 --> 00:26:55,475
and he busted a lip and
required a bunch of stitches.

549
00:26:55,681 --> 00:26:57,012
People broke bones.

550
00:26:57,216 --> 00:26:59,810
One guy flipped a jeep
and almost got killed.

551
00:27:00,319 --> 00:27:02,844
Those sorts of stories
at Enron became legend.

552
00:27:03,322 --> 00:27:05,813
And it fed the whole macho
culture of the place.

553
00:27:16,001 --> 00:27:18,595
Jeff Skilling had a way of
describing people that he liked.

554
00:27:18,804 --> 00:27:20,237
He said,
'I like guys with spikes.'

555
00:27:20,472 --> 00:27:23,066
He liked somebody with
something extreme about them.

556
00:27:26,011 --> 00:27:27,706
Ken Rice was one of
the Men with Spikes.

557
00:27:27,947 --> 00:27:29,642
He was the salesman
of the group.

558
00:27:29,849 --> 00:27:32,477
Very amiable, fun, man's man.

559
00:27:32,685 --> 00:27:36,451
And was the guy out selling
deals to energy companies.

560
00:27:36,622 --> 00:27:39,318
In the case of Cliff Baxter,
the company's chief dealmaker

561
00:27:39,558 --> 00:27:42,083
he was extraordinarily talented
at just doing a deal.

562
00:27:42,494 --> 00:27:43,984
But he was a manic depressive.

563
00:27:45,664 --> 00:27:47,564
Baxter was a very bright guy,

564
00:27:47,766 --> 00:27:50,234
very blunt would
tell Skilling whatever

565
00:27:50,502 --> 00:27:52,663
he thought was closest
to Skilling, personally,

566
00:27:52,872 --> 00:27:54,134
than anyone else
in the company.

567
00:27:54,540 --> 00:27:56,235
There was a guy named Lou Pai,

568
00:27:56,508 --> 00:27:58,203
who was a key
Skilling lieutenant;

569
00:27:58,410 --> 00:27:59,809
helped build the trading
business in the early years;

570
00:28:00,045 --> 00:28:02,275
went on to run Enron's doomed

571
00:28:02,481 --> 00:28:04,005
effort called
Enron Energy Services.

572
00:28:04,283 --> 00:28:07,309
What was the job of EES,
as you ran it?

573
00:28:07,586 --> 00:28:11,886
Ah, it was to sell energy
services to end users,

574
00:28:12,157 --> 00:28:13,624
industrial end users.

575
00:28:13,893 --> 00:28:15,417
Lou Pai is
the guy that Skilling

576
00:28:15,561 --> 00:28:16,994
tapped to run the EES business.

577
00:28:17,229 --> 00:28:17,888
Because this was,

578
00:28:18,097 --> 00:28:19,462
this was so important
to the company,

579
00:28:19,665 --> 00:28:20,632
and to Skilling's future.

580
00:28:20,866 --> 00:28:22,629
He called Lou Pai 'my ICBM.'

581
00:28:23,102 --> 00:28:24,933
And Lou Pai dispatched
his enemies

582
00:28:25,170 --> 00:28:26,831
with incredible skill.

583
00:28:27,039 --> 00:28:29,439
And if that meant leaving
bodies behind him,

584
00:28:29,608 --> 00:28:31,075
Skilling was certainly
fine about that.

585
00:28:31,543 --> 00:28:33,477
I'm not feeling anything.

586
00:28:33,712 --> 00:28:35,737
Lou Pai was kind of
a mysterious figure.

587
00:28:35,948 --> 00:28:39,213
He was kind of like
the invisible CEO.

588
00:28:39,485 --> 00:28:42,045
For awhile he was located
on the 7th floor.

589
00:28:42,354 --> 00:28:46,222
And there's a long office.

590
00:28:46,492 --> 00:28:49,655
And it was all glass-enclosed,
and you would walk by there,

591
00:28:49,895 --> 00:28:52,363
and it was just almost
all the time it was empty.

592
00:28:54,233 --> 00:28:56,758
Details didn't
interest Lou Pai.

593
00:28:57,336 --> 00:28:59,600
Only two things seemed
to motivate Pai

594
00:28:59,905 --> 00:29:03,841
money and a peculiar
fascination with strippers.

595
00:29:04,510 --> 00:29:07,502
For Pai,
it was all about the numbers.

596
00:29:13,886 --> 00:29:15,410
He was there
every night after work

597
00:29:15,554 --> 00:29:17,988
and he usually brought some of
the traders along with him.

598
00:29:18,290 --> 00:29:20,417
He spent quite a lot of
money there as well.

599
00:29:20,826 --> 00:29:23,158
Much of it charged to
the Enron expense accounts.

600
00:29:23,462 --> 00:29:25,089
There were rumors that
he brought strippers up

601
00:29:25,297 --> 00:29:26,730
to the trading floor.

602
00:29:26,966 --> 00:29:28,797
Almost everyone knew the story.

603
00:29:29,068 --> 00:29:31,059
The story is that
because he's kind of a mild,

604
00:29:31,637 --> 00:29:32,831
soft-spoken,

605
00:29:33,038 --> 00:29:36,496
almost meek individual
that maybe these...

606
00:29:36,809 --> 00:29:39,972
these strippers didn't even
believe he was the CEO.

607
00:29:40,179 --> 00:29:43,046
So he took them up
to his office.

608
00:29:43,248 --> 00:29:44,180
And I guess they,

609
00:29:44,383 --> 00:29:46,544
they put on
a little show for him there.

610
00:29:51,223 --> 00:29:53,020
One night he was at a club.
And one of the guys said,

611
00:29:53,225 --> 00:29:56,058
you know, Lou,
all the rest of us are single.

612
00:29:56,295 --> 00:29:57,455
You know,
we don't have any problem.

613
00:29:57,596 --> 00:29:58,654
But how do you keep your wife

614
00:29:58,897 --> 00:30:00,865
from smelling
the strippers' perfume on you?

615
00:30:01,333 --> 00:30:03,028
And Lou said,
'oh, I've got a secret'.

616
00:30:03,335 --> 00:30:05,462
He said, 'I stop in at a gas
station on the way home.

617
00:30:05,704 --> 00:30:07,433
And I spill a little
gasoline on myself

618
00:30:07,740 --> 00:30:08,798
and it kills the scent.'

619
00:30:09,041 --> 00:30:10,872
So the other guy shot back,
he said, 'but Lou,

620
00:30:11,110 --> 00:30:11,872
doesn't your wife then think

621
00:30:12,077 --> 00:30:13,840
you're fucking
the gas station attendant? '

622
00:30:14,079 --> 00:30:16,343
In the context of Lou Pai,
everyone was horrified,

623
00:30:16,615 --> 00:30:18,981
a pall fell over the table.

624
00:30:19,218 --> 00:30:21,243
Because Lou Pai was
not a man to trifle with.

625
00:30:21,520 --> 00:30:23,715
Two days later,
the guy who told the joke,

626
00:30:23,956 --> 00:30:25,082
as Enron legend... has it,

627
00:30:25,324 --> 00:30:27,519
was dispatched to Calgary,
Canada.

628
00:30:31,930 --> 00:30:35,058
Lou Pai lost all interest
in running EES

629
00:30:35,267 --> 00:30:37,599
as soon as the numbers
got high enough.

630
00:30:39,571 --> 00:30:43,405
I netted approximately
a hundred million dollars.

631
00:30:43,709 --> 00:30:46,269
I don't know
if that number is accurate,

632
00:30:46,512 --> 00:30:47,843
plus or minus 20 million.

633
00:30:48,113 --> 00:30:50,172
He actually left Enron
with more money than anybody,

634
00:30:50,416 --> 00:30:51,849
250 million dollars,

635
00:30:52,117 --> 00:30:53,880
because he sold
all his stock in Enron

636
00:30:54,186 --> 00:30:56,518
after he got
a divorce from his wife,

637
00:30:56,755 --> 00:30:58,416
in order to marry
his stripper girlfriend,

638
00:30:58,624 --> 00:30:59,886
who had had his child.

639
00:31:03,495 --> 00:31:09,331
His exit from Enron was as
mysterious as his presence there.

640
00:31:09,601 --> 00:31:11,262
Just sort of one day,

641
00:31:11,503 --> 00:31:17,237
we all learned that Lou Pai
was no longer the CEO of EES.

642
00:31:19,244 --> 00:31:21,269
Though Lou Pai
flew away from Enron

643
00:31:21,513 --> 00:31:23,640
with 250 million dollars,

644
00:31:23,849 --> 00:31:25,339
the divisions he left behind

645
00:31:25,617 --> 00:31:28,142
lost a total of
nearly $1 billion.

646
00:31:28,620 --> 00:31:31,282
But Enron managed to
disguise that fact.

647
00:31:31,690 --> 00:31:35,854
Lou Pai became the second
largest landowner in Colorado.

648
00:31:39,031 --> 00:31:39,861
It was the number.

649
00:31:40,065 --> 00:31:41,327
It was always making
those numbers,

650
00:31:41,567 --> 00:31:43,159
and looking, you know,
it was, to me,

651
00:31:43,535 --> 00:31:45,969
the real mythology is
high school mythology.

652
00:31:46,171 --> 00:31:46,569
That, you know,

653
00:31:46,805 --> 00:31:48,898
you wanted to be the most
popular guy on Wall Street,

654
00:31:49,108 --> 00:31:52,509
and you were gonna do whatever
you had to do to stay there.

655
00:31:52,678 --> 00:31:54,202
And Jeff understood
those rules better than,

656
00:31:54,446 --> 00:31:55,606
I think, anyone else.

657
00:32:02,955 --> 00:32:04,946
Americans are making
a lot of money in stocks.

658
00:32:05,157 --> 00:32:08,126
The stock market soared to
near record highs yesterday.

659
00:32:08,327 --> 00:32:10,955
The stock market continued
its bull run Thursday.

660
00:32:11,163 --> 00:32:13,495
The Dow rose nearly 61 points.

661
00:32:13,732 --> 00:32:16,326
Even the person with
very little disposable income

662
00:32:16,635 --> 00:32:18,728
all of a sudden began to play
in the stock market,

663
00:32:18,971 --> 00:32:19,960
because nobody could fail.

664
00:32:20,205 --> 00:32:22,833
Because stock prices were
just going up and up and up.

665
00:32:23,041 --> 00:32:24,599
Another day, another record.

666
00:32:24,877 --> 00:32:26,276
And the internet
technology stocks,

667
00:32:26,545 --> 00:32:27,204
just going wild.

668
00:32:27,513 --> 00:32:30,846
Gained more than 100 points
to close at 7895.81,

669
00:32:31,083 --> 00:32:32,607
the highest finish ever.

670
00:32:32,951 --> 00:32:36,182
It was a time where
we had the biggest bull market

671
00:32:36,522 --> 00:32:37,580
in the history of the world.

672
00:32:37,823 --> 00:32:41,486
Ken Lay was right there,
acting as a cheerleader.

673
00:32:41,627 --> 00:32:43,492
Obviously our stock has
been doing very well.

674
00:32:43,762 --> 00:32:44,956
I think there's
a fairly good chance

675
00:32:45,197 --> 00:32:46,323
we could see the
stock price double

676
00:32:46,532 --> 00:32:48,227
again over the next year
to eighteen months.

677
00:32:57,543 --> 00:32:59,101
Enron mounted
a campaign to capture

678
00:32:59,344 --> 00:33:02,905
the hearts and minds
of stock analysts.

679
00:33:03,148 --> 00:33:05,173
The natural gas stocks
include Enron...

680
00:33:05,484 --> 00:33:06,451
We're never satisfied

681
00:33:06,618 --> 00:33:08,643
and I don't want us
to ever be satisfied

682
00:33:08,887 --> 00:33:10,445
with the stock price.
It should always be higher.

683
00:33:10,722 --> 00:33:13,816
Enron posted a 30-percent jump
in second-quarter profits,

684
00:33:14,092 --> 00:33:17,357
as Web-based trading boosted
its wholesale energy business.

685
00:33:17,596 --> 00:33:19,757
The game was played
on Wall Street in such

686
00:33:20,032 --> 00:33:22,694
an established way
throughout the 1990's.

687
00:33:22,935 --> 00:33:24,869
As long as
a company met or exceeded

688
00:33:25,103 --> 00:33:27,663
the analysts' projections for
quarterly earnings per share,

689
00:33:27,906 --> 00:33:28,770
the stock went higher.

690
00:33:29,074 --> 00:33:31,269
The game was called
'pump and dump.'

691
00:33:31,944 --> 00:33:33,878
Top execs would push
the stock price up

692
00:33:34,112 --> 00:33:37,673
and then cash in their
multi-million-dollar options.

693
00:33:37,950 --> 00:33:40,680
People at Enron got paid,
in large part, through stock.

694
00:33:40,986 --> 00:33:44,012
Everyone had a huge stake
in seeing the stock price go up.

695
00:33:44,523 --> 00:33:46,252
And it was driven,
very clearly,

696
00:33:46,525 --> 00:33:48,152
by the profits
every single quarter.

697
00:33:48,393 --> 00:33:49,985
They were exceedingly
conscious of that;

698
00:33:50,229 --> 00:33:51,560
Skilling was, and everyone
else in the company was.

699
00:33:51,797 --> 00:33:53,594
They posted the stock price
in the elevator.

700
00:33:53,832 --> 00:33:56,858
You were surrounded by
the health of the company;

701
00:33:57,069 --> 00:33:58,696
what's the stock price doing?

702
00:33:59,037 --> 00:34:00,061
We were consumed by it.

703
00:34:02,908 --> 00:34:06,674
This company was fixated
on its stock price

704
00:34:06,912 --> 00:34:11,440
and fixated on a massive
public relations campaign

705
00:34:11,950 --> 00:34:15,477
to convince the investment
community that they were new,

706
00:34:15,721 --> 00:34:16,983
different, innovative;

707
00:34:17,256 --> 00:34:20,885
almost heralding a new era of...
of corporate enterprise.

708
00:34:23,629 --> 00:34:25,153
Come work for us.

709
00:34:25,797 --> 00:34:27,526
We encourage our people
to do new things,

710
00:34:27,766 --> 00:34:31,463
try new things,
experiment step out.

711
00:34:31,637 --> 00:34:33,264
We begin by attracting
the kind of people

712
00:34:33,505 --> 00:34:35,473
that are more comfortable
in an environment of change.

713
00:34:36,241 --> 00:34:38,141
You know
when you work for Enron

714
00:34:38,377 --> 00:34:39,571
you're gonna see
the newest thinking.

715
00:34:39,778 --> 00:34:41,678
You're going to see the
newest markets opening up.

716
00:34:41,980 --> 00:34:44,813
Enron on-line, a fabulous,
fabulous story.

717
00:34:45,017 --> 00:34:47,110
They were so good
at their acting

718
00:34:47,352 --> 00:34:49,115
that they convinced
corporate America

719
00:34:49,354 --> 00:34:50,912
that they were smarter
than anyone else.

720
00:34:51,156 --> 00:34:53,647
Alan, with our sincere
thanks and admiration,

721
00:34:54,126 --> 00:34:57,323
we are pleased and indeed
honored to award you

722
00:34:57,529 --> 00:35:00,327
the Enron prize for
distinguished public service.

723
00:35:07,306 --> 00:35:08,603
They continued to
sell the company

724
00:35:08,840 --> 00:35:10,535
as being a very stable place

725
00:35:10,742 --> 00:35:12,767
where it could
predictably increase profits

726
00:35:13,011 --> 00:35:14,342
10 to 15 percent a year.

727
00:35:14,613 --> 00:35:16,740
In fact, to get to those
numbers Enron was doing

728
00:35:16,982 --> 00:35:19,450
all sorts of
questionable things;

729
00:35:19,651 --> 00:35:20,982
taking enormous risks.

730
00:35:21,219 --> 00:35:22,277
We like risk.

731
00:35:22,554 --> 00:35:24,579
Because you make money
by taking risk.

732
00:35:30,896 --> 00:35:33,456
By all accounts,
Enron was soaring.

733
00:35:36,034 --> 00:35:38,867
But in reality,
profits weren't going up;

734
00:35:39,104 --> 00:35:41,504
they were headed
in the opposite direction.

735
00:35:42,274 --> 00:35:46,267
Enron had vast natural gas
operations all over the world.

736
00:35:46,578 --> 00:35:48,478
They had cost
billions to build

737
00:35:48,747 --> 00:35:50,977
and most were
performing terribly.

738
00:35:51,516 --> 00:35:53,575
But in other places
in the world, in India,

739
00:35:53,819 --> 00:35:56,083
great quarter
and a great year in India.

740
00:35:56,521 --> 00:36:00,013
Phase one of Dabhol is
in operation generating power.

741
00:36:00,258 --> 00:36:02,852
Phase two is financed
and is under construction.

742
00:36:03,128 --> 00:36:06,154
My experience indicated
there were certain places that you

743
00:36:06,465 --> 00:36:08,433
assiduously stayed away from.

744
00:36:08,633 --> 00:36:10,430
And one of them,
as an example, was India.

745
00:36:10,602 --> 00:36:12,069
They built this
power plant in India.

746
00:36:12,304 --> 00:36:13,896
Nobody else would
do that at the time.

747
00:36:14,139 --> 00:36:15,902
They were terrified of
investing in India.

748
00:36:16,174 --> 00:36:18,608
Enron did it,
and did it in a big way.

749
00:36:19,544 --> 00:36:21,978
But Enron had failed to
see something basic.

750
00:36:22,247 --> 00:36:24,613
India couldn't
afford to pay for the power

751
00:36:24,883 --> 00:36:26,441
Enron's plant produced.

752
00:36:27,052 --> 00:36:29,486
Now Dabhol is a ruin.

753
00:36:31,256 --> 00:36:33,588
Though it lost a billion
dollars on the project,

754
00:36:33,825 --> 00:36:35,918
Enron paid out
multi-million dollar

755
00:36:36,128 --> 00:36:38,096
bonuses to executives based

756
00:36:38,330 --> 00:36:41,094
on imaginary profits
that never arrived.

757
00:36:42,033 --> 00:36:44,467
Where was the real money
going to come from?

758
00:36:45,370 --> 00:36:47,338
Of course the pressure
was enormous.

759
00:36:47,539 --> 00:36:49,200
You had to come up
with the next idea

760
00:36:49,508 --> 00:36:50,805
that would break through.

761
00:36:51,009 --> 00:36:53,102
Failure was not an option.

762
00:36:53,378 --> 00:36:55,073
A flurry of buy-outs
in the corporate world...

763
00:36:55,414 --> 00:36:56,073
the biggest:

764
00:36:56,281 --> 00:36:58,647
Enron announcing a buy out
of Portland General.

765
00:36:59,818 --> 00:37:03,652
The merger with PGE put Enron
in the electricity business.

766
00:37:03,855 --> 00:37:06,415
And Portland General's
position on the west coast

767
00:37:06,658 --> 00:37:11,027
gave Enron access to the newly
deregulated market of California.

768
00:37:12,197 --> 00:37:13,221
The merger, we think...

769
00:37:13,465 --> 00:37:15,433
it uniquely positions us
to ultimately

770
00:37:15,801 --> 00:37:19,259
become the largest marketer of
electricity and natural gas

771
00:37:19,571 --> 00:37:22,438
at both the wholesale
and retail level nationwide."

772
00:37:23,742 --> 00:37:25,801
What brought all this
on was the deregulation

773
00:37:26,044 --> 00:37:27,773
they said that
we would not survive,

774
00:37:28,013 --> 00:37:29,173
unless we joined forces.

775
00:37:29,481 --> 00:37:32,177
Enron, I'd never heard of 'em
until they were gonna buy us.

776
00:37:32,484 --> 00:37:34,918
They slid in here,
and when they purchased PGE,

777
00:37:35,220 --> 00:37:37,279
all the PGE stock became Enron.

778
00:37:37,589 --> 00:37:39,523
Just went through,
stamped every one of 'em.

779
00:37:39,724 --> 00:37:40,452
I looked around me,

780
00:37:40,659 --> 00:37:41,819
and all the guys that were
buyin' all this Enron,

781
00:37:42,060 --> 00:37:43,459
they were doublin' their money.

782
00:37:43,628 --> 00:37:45,960
And that whole time since then,
I put the maximum

783
00:37:46,198 --> 00:37:48,996
I could into
my 401 and savings.

784
00:37:49,234 --> 00:37:52,761
Portland General, again,
good earnings and cash flow.

785
00:37:53,071 --> 00:37:55,369
It's what's they call on Wall
Street a "trust me" story.

786
00:37:55,574 --> 00:37:57,132
People that had been
gas pipeline workers who

787
00:37:57,409 --> 00:37:58,967
for decades kept
all their money in the company

788
00:37:59,211 --> 00:38:01,543
because they thought
it was this traditional and,

789
00:38:02,647 --> 00:38:04,911
you know, safe investment
as it... as it had always been.

790
00:38:05,150 --> 00:38:06,515
And it was...
it wasn't anything close to that.

791
00:38:06,785 --> 00:38:09,515
Should we invest all of
our 401k in Enron stock?

792
00:38:09,721 --> 00:38:11,985
Absolutely.
Don't you guys agree?

793
00:38:26,304 --> 00:38:27,862
Enron is a big winner today

794
00:38:28,106 --> 00:38:29,937
One of the things
that fascinated me was that

795
00:38:30,141 --> 00:38:31,904
almost all of
the Wall Street analysts

796
00:38:32,177 --> 00:38:33,940
who covered Enron
had buy ratings

797
00:38:34,212 --> 00:38:35,839
or strong buy ratings
on the company's stock.

798
00:38:36,081 --> 00:38:41,815
Why were the analysts blinded
to the company's deceit?

799
00:38:42,020 --> 00:38:44,284
We relied on the information
that was available at the time.

800
00:38:44,489 --> 00:38:47,117
I trusted the integrity of
the company's certified

801
00:38:47,325 --> 00:38:48,189
financial statements,

802
00:38:48,493 --> 00:38:51,155
and the representations of
the company's management.

803
00:38:51,396 --> 00:38:53,330
And we've been absolutely
upfront with the analysts.

804
00:38:53,565 --> 00:38:55,897
Jeff Skilling was
the critical component

805
00:38:56,101 --> 00:38:57,898
in creating the Enron illusion.

806
00:38:58,336 --> 00:39:00,930
Time and time again
when we had a question

807
00:39:01,172 --> 00:39:04,073
to the sell-side analysts that
they couldn't answer,

808
00:39:04,442 --> 00:39:06,842
the response was,
'I'll give Jeff a call;

809
00:39:07,112 --> 00:39:08,704
I'll run this by Jeff.'

810
00:39:08,947 --> 00:39:10,608
By giving Jeff a call,

811
00:39:10,815 --> 00:39:13,113
the analysts weren't
'analyzing' at all.

812
00:39:13,351 --> 00:39:14,784
They were willing to
believe virtually

813
00:39:15,020 --> 00:39:16,920
anything Enron told them.

814
00:39:22,193 --> 00:39:24,753
Most of the analysts right
now have a target price on us

815
00:39:25,030 --> 00:39:27,658
from a hundred to a hundred
and fifteen dollars a share.

816
00:39:27,899 --> 00:39:29,799
Any analyst who didn't
buy the company line

817
00:39:30,001 --> 00:39:31,992
became an enemy of Enron.

818
00:39:32,237 --> 00:39:34,432
Enron's CFO, Andy Fastow,

819
00:39:34,673 --> 00:39:36,664
had his eye on John Olson

820
00:39:36,942 --> 00:39:40,002
one of the only analysts
skeptical of the Enron story.

821
00:39:40,245 --> 00:39:43,112
Enron loved analysts' strong
buy recommendations.

822
00:39:43,481 --> 00:39:45,506
Merrill was informed by Fastow,

823
00:39:45,784 --> 00:39:49,720
either you get somebody who is
on board with us as a strong

824
00:39:49,955 --> 00:39:54,051
buy recommendation
and loves us at the same time

825
00:39:54,593 --> 00:39:56,288
or we don't do
any business with you.

826
00:39:56,494 --> 00:39:59,395
I knew that my days
were numbered.

827
00:39:59,698 --> 00:40:01,165
This is an abuse.

828
00:40:01,433 --> 00:40:03,799
Merrill Lynch fired John Olson.

829
00:40:04,069 --> 00:40:06,230
Soon after Fastow
rewarded the bank

830
00:40:06,504 --> 00:40:08,301
with two investment
banking jobs

831
00:40:08,640 --> 00:40:10,369
worth 50 million dollars.

832
00:40:10,609 --> 00:40:12,770
Analysts were routinely
getting large bonuses

833
00:40:12,978 --> 00:40:14,741
from the investment banking
departments to bring

834
00:40:14,946 --> 00:40:18,006
in investment banking deals.
Ah... once that happens,

835
00:40:18,249 --> 00:40:21,275
you know, never was heard
a discouraging word.

836
00:40:22,587 --> 00:40:25,021
While Enron's stock
kept rising,

837
00:40:25,290 --> 00:40:27,315
its businesses kept
losing money.

838
00:40:28,193 --> 00:40:30,855
Looking at the soaring
stocks of the dot-coms,

839
00:40:31,129 --> 00:40:34,530
Skilling decided to take
Enron into cyberspace.

840
00:40:35,467 --> 00:40:37,264
We're now in
the process of seeing

841
00:40:37,502 --> 00:40:40,164
if we can create
a bandwidth trading market.

842
00:40:40,405 --> 00:40:42,396
Enron is using its
knowledge of trading gas

843
00:40:42,707 --> 00:40:44,766
to barter other forms of
energy even space

844
00:40:45,076 --> 00:40:47,374
on the information superhighway
called bandwidth.

845
00:40:47,846 --> 00:40:50,781
Ken Rice has worked at Enron
for twenty years.

846
00:40:51,016 --> 00:40:53,883
Enron has found a way to
stay ahead of the curve.

847
00:40:54,219 --> 00:40:57,484
From 7 PM to 7 AM
we're paying for bandwith that

848
00:40:57,689 --> 00:40:59,486
we are not using. Why?

849
00:41:00,258 --> 00:41:01,452
Why?

850
00:41:01,760 --> 00:41:04,558
One of our themes around here
is to always be asking why.

851
00:41:05,030 --> 00:41:06,930
Why something's
done a certain way

852
00:41:07,165 --> 00:41:08,894
or why it's not done
a different way.

853
00:41:09,200 --> 00:41:10,326
There's our market.

854
00:41:10,568 --> 00:41:12,934
Why can't we sell the
bandwidth to other companies?

855
00:41:13,238 --> 00:41:16,469
Make it a commodity
like a pork belly

856
00:41:25,150 --> 00:41:27,618
Just last week Enron
captivated Wall Street

857
00:41:27,886 --> 00:41:29,854
with its bold move
into broadband,

858
00:41:30,088 --> 00:41:33,080
teaming up with Blockbuster to
deliver movies on demand.

859
00:41:33,391 --> 00:41:37,259
It was like being
at a religious cult meeting.

860
00:41:37,529 --> 00:41:39,394
People started jumping up
from their seats,

861
00:41:39,631 --> 00:41:41,326
with their cell phones
and their Blackberrys,

862
00:41:41,700 --> 00:41:44,635
running out to the halls
to call their bosses.

863
00:41:45,103 --> 00:41:47,071
One analyst summed up
his recommendation

864
00:41:47,272 --> 00:41:49,240
to investors in one word

865
00:41:49,541 --> 00:41:54,501
Wow! Enron's stock soared
34 percent in two days.

866
00:41:55,046 --> 00:41:57,378
And you can tell from
the response of the stock market

867
00:41:57,716 --> 00:41:59,741
that they like the strategy.
It makes sense.

868
00:42:00,018 --> 00:42:01,610
They announced that they had
developed the technology.

869
00:42:01,853 --> 00:42:03,582
It would be in test markets
by the end of the year.

870
00:42:03,822 --> 00:42:05,119
And the technology works.

871
00:42:05,390 --> 00:42:07,881
The quality is great
and the customers like this,

872
00:42:08,159 --> 00:42:09,490
so we've made a lot of progress.

873
00:42:09,761 --> 00:42:12,457
The truth was that Enron
was just struggling

874
00:42:12,697 --> 00:42:15,063
with the technology
for video on demand.

875
00:42:15,300 --> 00:42:17,234
The technology didn't work

876
00:42:17,502 --> 00:42:20,630
and the deal with
Blockbuster soon collapsed.

877
00:42:20,939 --> 00:42:23,203
But with the magic of
mark-to-market Enron

878
00:42:23,408 --> 00:42:28,004
used future projections to book
$53 million in earnings

879
00:42:28,213 --> 00:42:30,579
on a deal that
didn't make a penny.

880
00:42:30,782 --> 00:42:32,215
By the end of the year 2000,

881
00:42:32,517 --> 00:42:33,984
Enron was running
out of ways to make

882
00:42:34,252 --> 00:42:36,049
the broadband business
look successful.

883
00:42:36,287 --> 00:42:39,552
They'd tried every trick
in the bag to try to create

884
00:42:39,758 --> 00:42:41,623
the illusion of a business
where there was none,

885
00:42:41,826 --> 00:42:42,758
and the people who were working

886
00:42:42,961 --> 00:42:44,622
there were getting
increasingly desperate.

887
00:42:45,130 --> 00:42:47,792
The executives started
selling their stock.

888
00:42:48,066 --> 00:42:52,002
By Enron's collapse,
Ken Rice had sold 53 million.

889
00:42:52,537 --> 00:42:55,233
Ken Lay had sold 300 million.

890
00:42:55,540 --> 00:42:57,599
Cliff Baxter 35 million.

891
00:42:57,842 --> 00:43:00,208
Jeff Skilling 200 million.

892
00:43:00,745 --> 00:43:02,736
As the fraud is perpetuated,

893
00:43:02,981 --> 00:43:05,609
all the various lies
and artifices

894
00:43:05,850 --> 00:43:07,875
begin to convince
the ringmaster,

895
00:43:08,086 --> 00:43:09,314
if you will, himself

896
00:43:09,621 --> 00:43:12,749
that it's thi
own bizarre reality.

897
00:43:12,957 --> 00:43:14,447
That in fact,
the fraud is the reality.

898
00:43:14,726 --> 00:43:16,318
The perception is the reality.

899
00:43:16,561 --> 00:43:18,461
As long as you can keep
the perception going on,

900
00:43:18,696 --> 00:43:20,220
it really isn't fraud.

901
00:43:20,765 --> 00:43:22,232
You spoke about
bandwidth trading,

902
00:43:22,500 --> 00:43:24,468
what about weather
options or futures?

903
00:43:24,636 --> 00:43:26,126
How is that market developing?

904
00:43:26,371 --> 00:43:28,703
Yeah, we have
a market in weather.

905
00:43:31,509 --> 00:43:34,842
When Enron announced its
latest plan to trade weather,

906
00:43:35,079 --> 00:43:37,172
people wondered whether
it was good science

907
00:43:37,515 --> 00:43:39,039
or science fiction.

908
00:43:40,718 --> 00:43:42,310
Do the weather guys
get punished here

909
00:43:42,554 --> 00:43:43,486
if the weather is wrong?

910
00:43:43,721 --> 00:43:44,278
I mean they predict wrong?

911
00:43:44,522 --> 00:43:45,989
I don't know, do you have any
whip marks on your back there?

912
00:43:46,291 --> 00:43:48,156
Well, it's unfortunate.
That's a good call.

913
00:43:50,028 --> 00:43:51,188
Jeff, as time went on,

914
00:43:51,529 --> 00:43:54,123
had a harder time
admitting things were wrong.

915
00:43:55,066 --> 00:43:57,500
And I have to believe that,

916
00:43:57,669 --> 00:44:00,661
you know, when the lights
went out at night,

917
00:44:00,905 --> 00:44:02,873
he knew what was coming.

918
00:44:07,612 --> 00:44:09,341
I would liken it
to the Titanic,

919
00:44:09,581 --> 00:44:11,173
when you've got
a captain who's saying,

920
00:44:11,482 --> 00:44:12,471
'maintain full speed'

921
00:44:12,717 --> 00:44:14,048
and they bump into
a couple of icebergs,

922
00:44:14,352 --> 00:44:16,980
and then they still
keep full speed going.

923
00:44:18,990 --> 00:44:21,288
The captain of this ship,
Enron,

924
00:44:21,526 --> 00:44:23,255
he ignored
all the warning signs.

925
00:44:23,494 --> 00:44:25,189
And there were plenty of them.

926
00:44:25,396 --> 00:44:26,624
And the captain
of the ship was?

927
00:44:26,831 --> 00:44:27,991
Kenneth Lay

928
00:44:39,143 --> 00:44:41,475
It was one of the bloodiest
days in Wall Street history.

929
00:44:41,980 --> 00:44:43,811
Shares plummeted
thirty one percent.

930
00:44:44,082 --> 00:44:46,016
High tech stocks led
Friday's fierce sell-off

931
00:44:46,217 --> 00:44:48,048
This is really
a great wake-up call.

932
00:44:48,286 --> 00:44:50,220
Millions of nervous
investors following

933
00:44:50,421 --> 00:44:52,582
the huge drop on Friday.
The Dow Jones

934
00:44:52,824 --> 00:44:55,349
Enron was especially
a big deal by the end

935
00:44:55,560 --> 00:44:57,289
of the year 2000
because by then,

936
00:44:57,528 --> 00:44:59,621
most Internet companies had
already begun to fall,

937
00:44:59,831 --> 00:45:02,299
and everybody on Wall Street was
looking for the next big thing.

938
00:45:02,567 --> 00:45:03,534
And here you had Enron,

939
00:45:03,801 --> 00:45:06,031
which appeared to be
this shining star

940
00:45:06,271 --> 00:45:07,431
of a new-economy company.

941
00:45:07,572 --> 00:45:10,473
Its stock price went up
90 percent in the year 2000,

942
00:45:10,675 --> 00:45:13,337
and had gone up over 50 percent
the year before that.

943
00:45:13,678 --> 00:45:15,475
It was an it' stock
on Wall Street

944
00:45:15,680 --> 00:45:18,080
one of those companies
that can seemingly do no wrong.

945
00:45:19,984 --> 00:45:22,077
We were the poster child
for the new economy.

946
00:45:22,320 --> 00:45:25,153
We had this culture
that had a lot of focus on

947
00:45:25,390 --> 00:45:27,324
reminding us how good we were.

948
00:45:27,592 --> 00:45:29,082
And as that culture emerged,

949
00:45:29,327 --> 00:45:31,261
then we get to Fortune
magazine telling us

950
00:45:31,496 --> 00:45:33,464
we were the most innovative
corporation in America.

951
00:45:33,665 --> 00:45:36,293
Then we really began to
feel good about ourselves.

952
00:45:36,968 --> 00:45:38,560
Well, you all did it again.

953
00:45:39,070 --> 00:45:42,233
Enron was just
recently chosen, again,

954
00:45:42,507 --> 00:45:44,304
for the sixth year in a row

955
00:45:44,542 --> 00:45:47,170
in the
most-admired-company survey

956
00:45:47,412 --> 00:45:51,678
by Fortune magazine as the most
innovative company in America.

957
00:45:52,717 --> 00:45:54,651
Well deserved. Well deserved.

958
00:45:55,520 --> 00:45:57,681
The sales pitch
still sounded good.

959
00:45:57,956 --> 00:46:00,925
But one investor saw something
in Enron's numbers

960
00:46:01,125 --> 00:46:03,423
that the stock
analysts had missed.

961
00:46:03,761 --> 00:46:05,558
By and large,
the analysts admitted to us,

962
00:46:05,763 --> 00:46:08,254
in person, 'it's a black box.
You have to take it on faith.

963
00:46:08,466 --> 00:46:09,455
'Who knows where
the earnings come from?

964
00:46:09,734 --> 00:46:10,564
They just pop out.

965
00:46:10,768 --> 00:46:12,133
And all we know is,
they're always good.'

966
00:46:12,670 --> 00:46:14,331
And I kept pointing out, well,

967
00:46:14,539 --> 00:46:15,699
yeah, isn't that
the whole point of...

968
00:46:16,007 --> 00:46:19,238
if the black box is
there to fool you,

969
00:46:19,477 --> 00:46:20,444
the numbers are always
going to be good,

970
00:46:20,611 --> 00:46:21,669
until they're not.

971
00:46:22,046 --> 00:46:23,274
I'm not a beat reporter,

972
00:46:23,548 --> 00:46:25,675
so I would have had no reason
to look at Enron.

973
00:46:25,917 --> 00:46:28,545
But Jim Chanos mentioned to me
that I should take a closer

974
00:46:28,753 --> 00:46:30,277
look at Enron's
financial statements.

975
00:46:30,521 --> 00:46:32,853
And it wasn't clear from Enron's
financial statements that

976
00:46:33,091 --> 00:46:34,217
there was fraud here.

977
00:46:34,525 --> 00:46:37,619
But what was clear is that
something didn't add up.

978
00:46:37,895 --> 00:46:40,261
In March 2001, Bethany Mclean,

979
00:46:40,531 --> 00:46:42,226
a reporter
with Fortune magazine,

980
00:46:42,500 --> 00:46:45,526
first raised questions about
Enron's financial condition.

981
00:46:45,803 --> 00:46:47,100
She asked a simple question

982
00:46:47,338 --> 00:46:49,738
in the article that no one
could seem to answer,

983
00:46:50,041 --> 00:46:53,636
'how exactly does
Enron make its money? '

984
00:46:55,513 --> 00:46:57,071
You got very upset with her,
didn't you?

985
00:46:57,348 --> 00:47:01,216
I very specifically remember
the telephone conversation

986
00:47:01,452 --> 00:47:03,784
that I had with...
the Fortune reporter.

987
00:47:04,088 --> 00:47:06,420
She called up and started
asking some very,

988
00:47:06,657 --> 00:47:09,524
very specific questions about
accounting treatment on things.

989
00:47:09,761 --> 00:47:12,229
I am not an accountant.
And I could not answer them.

990
00:47:12,463 --> 00:47:14,294
He became really,
really agitated.

991
00:47:14,599 --> 00:47:16,829
He said that people who
raise questions like this

992
00:47:17,068 --> 00:47:18,592
were just trying to throw
rocks at the company.

993
00:47:18,803 --> 00:47:20,634
And that I was not ethical

994
00:47:20,905 --> 00:47:22,429
because I hadn't done
enough homework.

995
00:47:22,640 --> 00:47:23,971
And if I had done
enough homework,

996
00:47:24,175 --> 00:47:26,302
I would understand how off-base
my questions were.

997
00:47:26,644 --> 00:47:28,475
Mr. Skilling, it appears as

998
00:47:28,713 --> 00:47:31,477
if you were trying to
bully someone

999
00:47:31,783 --> 00:47:35,446
who was asking very basic
questions about Enron.

1000
00:47:35,686 --> 00:47:36,983
I said... said to her

1001
00:47:37,188 --> 00:47:39,053
I have got six minutes left

1002
00:47:39,490 --> 00:47:40,855
before I have to be
in a meeting.

1003
00:47:41,159 --> 00:47:42,990
And I can't get
into the details.

1004
00:47:43,227 --> 00:47:44,455
And I'm not an accountant.'

1005
00:47:44,762 --> 00:47:45,888
And she said,
'well, that's fine.

1006
00:47:46,097 --> 00:47:47,189
We're going to do
the article anyway.'

1007
00:47:47,498 --> 00:47:49,056
And I said, 'if you do that,

1008
00:47:49,300 --> 00:47:51,097
I personally think
that's unethical.'

1009
00:47:51,302 --> 00:47:52,326
And then the next day...

1010
00:47:52,570 --> 00:47:53,798
Let me interrupt you.
Our chief financial officer

1011
00:47:54,038 --> 00:47:55,471
and our chief
accounting officer

1012
00:47:55,673 --> 00:47:58,471
flew to New York at Enron's
expense, to sit down,

1013
00:47:58,709 --> 00:47:59,641
not with the editors,

1014
00:47:59,911 --> 00:48:02,607
but to sit down with
the reporter on that story,

1015
00:48:02,847 --> 00:48:05,407
and help her understand the
questions that she was asking.

1016
00:48:05,616 --> 00:48:07,243
And the next day
we sat in this small,

1017
00:48:07,485 --> 00:48:09,612
dark, windowless conference room
for about three hours,

1018
00:48:09,854 --> 00:48:12,789
going through the various aspects
of the company's business.

1019
00:48:12,990 --> 00:48:14,218
And I'll never forget this.

1020
00:48:14,459 --> 00:48:16,086
When the interview was over,

1021
00:48:16,294 --> 00:48:17,226
the other
two executives packed up

1022
00:48:17,528 --> 00:48:18,790
their things
and had left the room,

1023
00:48:18,996 --> 00:48:21,658
and Andy Fastow turned around
and looked at my editor and me,

1024
00:48:21,866 --> 00:48:24,096
and said, 'I don't care what
you write about the company,

1025
00:48:24,302 --> 00:48:26,133
just don't make me look bad.'

1026
00:48:26,537 --> 00:48:31,133
And Fastow had good reasons
for not wanting to look bad.

1027
00:48:32,276 --> 00:48:35,211
There were these partnerships
that were run by Andy Fastow

1028
00:48:35,480 --> 00:48:37,004
that were doing business
with Enron.

1029
00:48:37,248 --> 00:48:38,772
And these were disclosed

1030
00:48:38,983 --> 00:48:39,972
in the company's
financial statements.

1031
00:48:40,184 --> 00:48:42,015
But I didn't mention them
in the story I wrote,

1032
00:48:42,220 --> 00:48:42,743
because I thought,

1033
00:48:42,987 --> 00:48:44,181
well, the accountants
and the board of directors

1034
00:48:44,388 --> 00:48:45,719
have said that this is okay.

1035
00:48:45,990 --> 00:48:48,857
So I must be crazy to think
there's anything wrong with this.

1036
00:48:49,560 --> 00:48:51,494
The story
I ran was actually pretty meek.

1037
00:48:51,762 --> 00:48:53,753
The title was
'ls Enron Overpriced? '

1038
00:48:54,065 --> 00:48:56,363
But in the end,
I couldn't prove that

1039
00:48:56,567 --> 00:48:58,296
it was anything more than
an overvalued stock.

1040
00:48:58,503 --> 00:49:00,835
And I was probably too naive
to suspect that it was anything...

1041
00:49:01,038 --> 00:49:02,198
anything more than that.

1042
00:49:02,440 --> 00:49:03,964
And was her article critical?

1043
00:49:04,275 --> 00:49:05,537
Yes it was.

1044
00:49:05,910 --> 00:49:08,504
The Fortune magazine article
that's out the headline is,

1045
00:49:08,713 --> 00:49:10,408
'ls Enron's Stock Overvalued? '

1046
00:49:10,681 --> 00:49:13,081
The gist of the article is that

1047
00:49:13,551 --> 00:49:15,576
Enron is sort of a black box...

1048
00:49:15,853 --> 00:49:17,252
which, sorry, it's true.

1049
00:49:17,455 --> 00:49:18,945
I mean,
it's just difficult for us

1050
00:49:19,190 --> 00:49:22,853
to show people the specifics of
how money flows through,

1051
00:49:23,060 --> 00:49:24,322
particularly
the wholesale business.

1052
00:49:24,562 --> 00:49:27,122
The entire reason
that this analysis

1053
00:49:27,365 --> 00:49:28,525
was done by Fortune magazine

1054
00:49:28,766 --> 00:49:30,996
is because Business Week
had a favorable article

1055
00:49:31,235 --> 00:49:33,499
about Enron the week before.

1056
00:49:33,738 --> 00:49:35,467
And there's this competition
with the news...

1057
00:49:35,706 --> 00:49:38,607
the news magazines have,
where one says something good,

1058
00:49:38,809 --> 00:49:40,276
the other one has to come
and find something bad.

1059
00:49:40,478 --> 00:49:42,446
So I think that was kind of
the genesis of it.

1060
00:49:42,580 --> 00:49:45,572
So the criticism,
I think, is kind of ridiculous.

1061
00:49:45,783 --> 00:49:48,775
When Bethany McLean at Fortune

1062
00:49:49,220 --> 00:49:50,847
started analyzing cash flows,

1063
00:49:51,088 --> 00:49:52,555
and she had this
wonderful article saying,

1064
00:49:52,823 --> 00:49:55,257
'take a look at first quarter,
second quarter, third quarter,

1065
00:49:55,493 --> 00:49:57,688
and end of year cash flows.'

1066
00:49:57,962 --> 00:49:59,554
There's a reason
she didn't invest in Enron

1067
00:49:59,830 --> 00:50:01,764
'cause the financials
didn't make sense.

1068
00:50:02,033 --> 00:50:04,024
But you have to be
willing to say

1069
00:50:04,302 --> 00:50:06,065
that the emperor
doesn't have any clothes.

1070
00:50:06,270 --> 00:50:09,501
And this emperor was
pretty powerful.

1071
00:50:09,974 --> 00:50:12,033
We are going to
unveil this morning

1072
00:50:12,276 --> 00:50:13,868
a new corporate vision.

1073
00:50:14,245 --> 00:50:17,612
Okay, you ready?
One, two, three.

1074
00:50:20,351 --> 00:50:21,613
How's this?

1075
00:50:25,056 --> 00:50:26,080
It's really hard to know

1076
00:50:26,390 --> 00:50:29,917
when Enron first crossed the
line into outright fraud.

1077
00:50:30,228 --> 00:50:31,320
But there isn't any doubt

1078
00:50:31,562 --> 00:50:33,359
about who the guy was
who led them there.

1079
00:50:33,564 --> 00:50:35,191
It was a protege
of Jeff Skilling's

1080
00:50:35,399 --> 00:50:37,196
by the name of Andy Fastow.

1081
00:50:44,809 --> 00:50:48,142
Andy Fastow was Enron's
chief financial officer.

1082
00:50:48,446 --> 00:50:50,346
His job was to
cover up the fact

1083
00:50:50,648 --> 00:50:54,106
that Enron was becoming
a financial fantasyland.

1084
00:50:54,385 --> 00:50:56,853
Enron essentially was
losing money on a cash basis,

1085
00:50:57,054 --> 00:50:58,112
year after year.

1086
00:50:58,422 --> 00:51:00,014
And yet it was
reporting profits.

1087
00:51:00,291 --> 00:51:02,452
So it was defying
laws of financial gravity.

1088
00:51:02,660 --> 00:51:03,649
And the way he was doing it

1089
00:51:03,961 --> 00:51:05,929
was with something called
structured finance.

1090
00:51:06,230 --> 00:51:09,495
And the maestro of all that
at Enron was Andy Fastow.

1091
00:51:10,001 --> 00:51:11,468
Andy was very young.

1092
00:51:11,736 --> 00:51:14,671
He was hired by Jeff Skilling
probably before he was even 30

1093
00:51:14,972 --> 00:51:17,805
and he idolized Jeff Skilling.

1094
00:51:18,042 --> 00:51:21,102
And he certainly wanted to
please the boss.

1095
00:51:21,646 --> 00:51:22,943
To please the Boss,

1096
00:51:23,180 --> 00:51:26,707
Fastow had to figure out a way
to keep the stock price up

1097
00:51:26,951 --> 00:51:28,885
by hiding the fact
that Enron was

1098
00:51:29,086 --> 00:51:31,179
thirty billion dollars in debt.

1099
00:51:31,922 --> 00:51:35,915
People pressured by the need
to keep the stock price up

1100
00:51:36,160 --> 00:51:37,593
begin to cheat a little bit.

1101
00:51:37,828 --> 00:51:39,796
But then the
next quarter comes along

1102
00:51:40,031 --> 00:51:41,896
and you have to
cheat a little more to

1103
00:51:42,400 --> 00:51:46,598
do the new cheating to
make up for the old cheating.

1104
00:51:46,871 --> 00:51:48,896
And before long,

1105
00:51:49,273 --> 00:51:54,575
you've created a momentum
that now you can't stop.

1106
00:51:55,112 --> 00:51:57,637
Fastow created hundreds
of special companies

1107
00:51:57,882 --> 00:51:59,543
to perform a magic trick...

1108
00:51:59,784 --> 00:52:03,242
prop up Enron's stock by
making its debt disappear.

1109
00:52:04,121 --> 00:52:05,452
To outsider investors

1110
00:52:05,656 --> 00:52:07,681
it looked like cash was
coming in the door.

1111
00:52:07,892 --> 00:52:11,953
In fact Enron was just stashing
its debt in Fastow's companies

1112
00:52:12,163 --> 00:52:13,994
where investors
couldn't see it.

1113
00:52:14,999 --> 00:52:17,058
It was black magic.
It really was.

1114
00:52:17,301 --> 00:52:19,235
You were pulling some
rabbits out of a hat.

1115
00:52:24,275 --> 00:52:27,073
They could bury debt;
they could bury losses.

1116
00:52:27,311 --> 00:52:29,711
Many of the companies
had exotic names:

1117
00:52:29,947 --> 00:52:32,814
Jedi, Chewco Raptors.

1118
00:52:33,217 --> 00:52:36,482
LJM was Fastow's
most ambitious creation.

1119
00:52:36,620 --> 00:52:38,315
It would work magic for Enron

1120
00:52:38,622 --> 00:52:40,613
and it would allow
Fastow to conjure

1121
00:52:40,858 --> 00:52:43,850
45 million dollars for himself.

1122
00:52:47,998 --> 00:52:49,659
Andy, in many ways,

1123
00:52:49,867 --> 00:52:53,735
was someone we all knew didn't
have a strong moral compass.

1124
00:52:54,004 --> 00:52:55,699
It's almost like
Jeff Skilling said,

1125
00:52:55,906 --> 00:52:57,840
'okay, we're hitting
some troubled times.

1126
00:52:58,075 --> 00:53:00,942
Let's set up Andy so we can
fill the earnings' holes

1127
00:53:01,212 --> 00:53:01,940
when we need to',

1128
00:53:02,146 --> 00:53:05,707
knowing that Andy would
probably skim a little bit

1129
00:53:06,016 --> 00:53:08,450
off each transaction
for himself.

1130
00:53:08,652 --> 00:53:12,349
There's a 'Body Heat'
kind of angle to this,

1131
00:53:12,623 --> 00:53:15,456
you know, where
Skilling is Kathleen Turner

1132
00:53:15,659 --> 00:53:17,456
and Andy is William Hurt.

1133
00:53:17,728 --> 00:53:18,752
You know, in the end,

1134
00:53:18,996 --> 00:53:21,863
he got suckered into
helping all the executives

1135
00:53:22,099 --> 00:53:23,259
meet their earnings.

1136
00:53:23,501 --> 00:53:25,128
What I wish, I, you know,
in retrospect?

1137
00:53:25,369 --> 00:53:26,700
I wish I'd never heard of LJM.

1138
00:53:26,937 --> 00:53:28,564
Is it your contention
that you knew of it

1139
00:53:28,773 --> 00:53:29,296
and it was appropriate?

1140
00:53:29,507 --> 00:53:30,735
Arthur Andersen
and our lawyers

1141
00:53:30,975 --> 00:53:33,034
had taken a very hard look
at this structure

1142
00:53:33,244 --> 00:53:34,336
and they believed
it was appropriate.

1143
00:53:34,545 --> 00:53:37,810
If the theory is that Fastow
went rogue somewhere deep

1144
00:53:38,015 --> 00:53:39,539
in the jungles of Enron

1145
00:53:39,817 --> 00:53:42,513
and was the sole agent
of the apocalypse,

1146
00:53:42,820 --> 00:53:44,117
I just don't buy it.

1147
00:53:44,422 --> 00:53:46,788
Skilling, Lay,
and the Enron board

1148
00:53:47,024 --> 00:53:49,891
had signed off
on Fastow's LJM funds.

1149
00:53:50,261 --> 00:53:52,354
They saw the benefits
of letting Fastow

1150
00:53:52,630 --> 00:53:54,222
do deals with himself.

1151
00:53:54,598 --> 00:53:56,293
It is in Enron's best interest,

1152
00:53:56,534 --> 00:53:58,126
because Enron needs the capital,
number one.

1153
00:53:58,369 --> 00:54:01,463
In a secret video tape that
surfaced after the bankruptcy,

1154
00:54:01,672 --> 00:54:04,266
Fastow can be seen selling LJM

1155
00:54:04,542 --> 00:54:06,840
to a group of
Merrill Lynch bankers.

1156
00:54:07,077 --> 00:54:09,511
He pitches them on the benefits
of investing in a fund

1157
00:54:09,780 --> 00:54:12,146
that only buys assets
from Enron.

1158
00:54:12,383 --> 00:54:15,011
Remember, I'm not sellling
the assets to myself.

1159
00:54:15,286 --> 00:54:18,653
They own the assets.
They're selling them to LJM2.

1160
00:54:19,023 --> 00:54:23,483
Fastow knew what kind of deal
he was offering as Enron's CFO.

1161
00:54:23,828 --> 00:54:26,991
He could guarantee
profits for LJM.

1162
00:54:27,398 --> 00:54:29,992
I think this is an
extraordinary opportunity.

1163
00:54:30,267 --> 00:54:33,031
He has a sort of Cheshire Cat
grin on his face as he talks

1164
00:54:33,237 --> 00:54:35,467
about all the ways that
the fund is gonna profit.

1165
00:54:35,639 --> 00:54:37,470
And he talks about the
informational advantages

1166
00:54:37,775 --> 00:54:41,370
that he is gonna have in
his dual role as Enron's CFO

1167
00:54:41,612 --> 00:54:43,102
and as the head of these funds.

1168
00:54:43,414 --> 00:54:45,075
Isn't there a question of
conflict of interest?

1169
00:54:45,316 --> 00:54:46,305
There is never
any question that

1170
00:54:46,550 --> 00:54:48,279
I will be on both sides
of the transaction.

1171
00:54:48,552 --> 00:54:50,713
I will always be on the LJM
side of the transaction.

1172
00:54:50,988 --> 00:54:53,548
He was general partner of LJM,
while at the same time,

1173
00:54:53,824 --> 00:54:55,121
being CFO of Enron.

1174
00:54:55,326 --> 00:54:56,554
You know, that's a whole
'nother ball of wax

1175
00:54:56,760 --> 00:54:58,523
when you want to talk about
that conflict of interest.

1176
00:54:58,729 --> 00:55:03,325
Because no human being should
be put in a situation where,

1177
00:55:03,868 --> 00:55:05,233
you know,
every single transaction,

1178
00:55:05,469 --> 00:55:06,663
they decide
whether they're looking

1179
00:55:06,871 --> 00:55:10,307
after Enron's best interests
or their limited partners.

1180
00:55:10,574 --> 00:55:13,475
Because this LJM
partnership existed

1181
00:55:13,711 --> 00:55:15,110
solely to do business
with Enron.

1182
00:55:15,913 --> 00:55:17,244
As you would expect,

1183
00:55:17,481 --> 00:55:19,449
Andy as Chief Financial
Officer of Enron,

1184
00:55:19,717 --> 00:55:22,914
is heavily banked, so to speak.

1185
00:55:23,187 --> 00:55:25,587
And as a result,

1186
00:55:25,856 --> 00:55:29,553
there are five or six
of the name brand banks

1187
00:55:29,827 --> 00:55:32,352
who have stepped up and said
they'll commit to this.

1188
00:55:32,897 --> 00:55:34,990
Commit they did.
And why not?

1189
00:55:35,499 --> 00:55:38,696
Fastow was letting them gamble
with Enron's chips.

1190
00:55:39,069 --> 00:55:41,663
Fastow was using Enron's stock

1191
00:55:41,906 --> 00:55:44,306
as collateral
for a lot of these things.

1192
00:55:44,508 --> 00:55:46,499
They were betting their own
company on the transactions.

1193
00:55:47,111 --> 00:55:48,874
With the prospect of returns

1194
00:55:49,113 --> 00:55:51,013
that would exceed
two thousand percent,

1195
00:55:51,315 --> 00:55:54,944
96 individual bankers
invested in LJM.

1196
00:55:55,185 --> 00:55:59,246
And America's major banks put up
as much as $25 million each.

1197
00:55:59,456 --> 00:56:02,289
It's sort of the Who's
Who of Wall Street:

1198
00:56:02,493 --> 00:56:07,157
JP Morgan Chase CS
First Boston Citibank

1199
00:56:07,464 --> 00:56:11,059
Merrill Lynch, DeutscheBank...

1200
00:56:11,468 --> 00:56:15,905
These are some of the premier
investment banks in the world.

1201
00:56:16,240 --> 00:56:18,435
It's hard for us
to poke holes in this.

1202
00:56:18,576 --> 00:56:19,440
Good.

1203
00:56:21,879 --> 00:56:23,904
It's just amazing
how skilled Enron

1204
00:56:24,148 --> 00:56:27,015
and Andy Fastow were
at working Wall Street,

1205
00:56:27,251 --> 00:56:28,775
playing on Wall Street's greed,

1206
00:56:29,019 --> 00:56:30,953
in order to get money
out of them.

1207
00:56:31,188 --> 00:56:34,282
To quote Lenin,

1208
00:56:34,692 --> 00:56:38,594
they were the investment
bankers useful idiots.

1209
00:56:41,665 --> 00:56:43,724
As disturbing as
Enron's own misconduct,

1210
00:56:43,968 --> 00:56:46,061
is the growing evidence that

1211
00:56:46,270 --> 00:56:48,363
leading U.S.
Financial institutions

1212
00:56:48,639 --> 00:56:52,268
not only took part in Enron's
deceptive practices,

1213
00:56:52,710 --> 00:56:57,044
but at times designed,
advanced and profited from them.

1214
00:56:57,314 --> 00:57:01,410
The Enron fraud is the story
of synergistic corruption.

1215
00:57:01,619 --> 00:57:04,417
There are supposed to be checks
and balances in the system.

1216
00:57:04,622 --> 00:57:06,647
The lawyers are
supposed to say no.

1217
00:57:06,890 --> 00:57:08,858
The accountants are
supposed to say no.

1218
00:57:09,126 --> 00:57:10,957
The bankers are supposed
to say no.

1219
00:57:11,195 --> 00:57:13,891
But no one who was supposed
to say no said no.

1220
00:57:14,098 --> 00:57:15,656
They all took their
share of the money,

1221
00:57:15,866 --> 00:57:17,697
from the fraud and put it
in their pockets.

1222
00:57:17,901 --> 00:57:19,926
Enron paid its advisers well.

1223
00:57:20,204 --> 00:57:23,503
In 2001 the accounting
firm Arthur Andersen

1224
00:57:23,741 --> 00:57:25,470
received one million a week.

1225
00:57:25,876 --> 00:57:28,106
Enron's law firm,
Vinson & Elkins,

1226
00:57:28,479 --> 00:57:30,037
did nearly as well.

1227
00:57:30,481 --> 00:57:34,247
Everyone had their
hand out at the table.

1228
00:57:34,485 --> 00:57:36,180
They were all being paid.

1229
00:57:36,487 --> 00:57:38,546
And as long as Enron continued,

1230
00:57:38,856 --> 00:57:40,721
they received their fees.

1231
00:57:41,158 --> 00:57:43,626
They were a part of the process.

1232
00:57:43,961 --> 00:57:45,451
So it's hard now to say,

1233
00:57:45,729 --> 00:57:47,287
'oh, we didn't know anything.'

1234
00:57:47,564 --> 00:57:50,829
Had we known then what we know
now about Enron's practices,

1235
00:57:51,135 --> 00:57:53,763
we would not have engaged in
these transactions with Enron.

1236
00:57:54,038 --> 00:57:56,233
The facts that we now have
come to light about Enron,

1237
00:57:56,507 --> 00:57:57,974
however,
were not known at the time.

1238
00:57:58,208 --> 00:57:59,835
I believe that
the Citigroup professionals

1239
00:58:00,110 --> 00:58:02,977
involved with these
transactions acted in good faith.

1240
00:58:03,247 --> 00:58:08,776
I'd like you here to
look at one Citi email,

1241
00:58:08,852 --> 00:58:12,413
The email trail here
is all too lurid.

1242
00:58:12,656 --> 00:58:14,681
Oh, for instance,
one email I remember,

1243
00:58:14,892 --> 00:58:18,794
where the banker writes,
'Enron loves these deals.

1244
00:58:19,096 --> 00:58:20,427
They produce cash,

1245
00:58:20,664 --> 00:58:22,859
but they don't have to show
the debt on the balance sheet.'

1246
00:58:23,100 --> 00:58:25,000
Now, a high school student
can figure out that.

1247
00:58:25,235 --> 00:58:29,695
The banks were all knowing
articipants in this wrong-doing.

1248
00:58:30,741 --> 00:58:33,801
Meryll Lynch assisted Enron
in cooking it's books

1249
00:58:34,144 --> 00:58:37,545
by pretending to purchase
an existing Enron asset

1250
00:58:37,781 --> 00:58:41,046
when it was really
engaged in a loan.

1251
00:58:42,019 --> 00:58:44,544
The accounting sham involved
the sale of an interest

1252
00:58:44,755 --> 00:58:46,552
in three Nigerian barges

1253
00:58:47,491 --> 00:58:50,119
Nigeria is a long way
from Manhattan.

1254
00:58:50,360 --> 00:58:51,156
Yet for some reason,

1255
00:58:51,395 --> 00:58:54,455
toward the end of
the fourth quarter in 1999

1256
00:58:54,631 --> 00:58:56,462
Merrill Lynch suddenly
decided to buy

1257
00:58:56,734 --> 00:58:59,931
three Nigerian power
barges from Enron.

1258
00:59:00,237 --> 00:59:02,432
Nigerian power barges
have nothing to do

1259
00:59:02,673 --> 00:59:04,038
with Merrill Lynch's business.

1260
00:59:04,274 --> 00:59:06,265
It was a blatantly
illegal transaction.

1261
00:59:06,844 --> 00:59:08,243
It was just taking the barges,

1262
00:59:08,512 --> 00:59:10,412
getting them off
of Enron's books,

1263
00:59:10,614 --> 00:59:12,673
having Merill Lynch,
if you will,

1264
00:59:12,950 --> 00:59:16,408
warehouse them for five months
and then buying them back.

1265
00:59:16,587 --> 00:59:18,612
Mr. Martin, you...
you've testified here today

1266
00:59:18,922 --> 00:59:22,414
that there was no guarantee.
And you said that under oath.

1267
00:59:24,261 --> 00:59:25,785
Here's a document,

1268
00:59:26,029 --> 00:59:28,623
saying that the head of
your whole division here

1269
00:59:29,099 --> 00:59:33,263
was going to confirm
that understanding.

1270
00:59:36,974 --> 00:59:38,236
Over the year 2001,

1271
00:59:38,475 --> 00:59:40,705
Skilling became
increasingly despondent.

1272
00:59:40,978 --> 00:59:42,445
He'd always been a moody guy,

1273
00:59:42,613 --> 00:59:44,080
but people who knew
him said he became

1274
00:59:44,348 --> 00:59:46,316
just increasingly volatile.

1275
00:59:46,517 --> 00:59:48,576
Show up for work unshaven,
looking blurry-eyed.

1276
00:59:48,819 --> 00:59:50,252
And I think it was
the battle of holding these

1277
00:59:50,487 --> 00:59:53,650
two totally disjointed
thoughts in his mind at...

1278
00:59:53,857 --> 00:59:54,619
at the same time.

1279
00:59:54,825 --> 00:59:56,759
One is Enron
a super-star company

1280
00:59:56,994 --> 00:59:59,827
and the other of feeling like
it was all crumbling away.

1281
01:00:00,597 --> 01:00:03,191
The first cracks
in Skilling's public image

1282
01:00:03,433 --> 01:00:04,991
appeared in
a conference call with

1283
01:00:05,235 --> 01:00:07,499
analysts in April, 2001.

1284
01:00:07,738 --> 01:00:09,467
And then Jeff Skilling
took questions.

1285
01:00:09,940 --> 01:00:12,306
And about mid-way
through the session...

1286
01:00:12,543 --> 01:00:13,771
there was a question.

1287
01:00:13,977 --> 01:00:18,141
It was sort of aggressively
wondering out loud

1288
01:00:18,348 --> 01:00:19,610
why it was that Enron,

1289
01:00:19,883 --> 01:00:22,147
as a financial services
company in effect,

1290
01:00:22,419 --> 01:00:24,717
could not release
a balance sheet

1291
01:00:24,922 --> 01:00:26,184
with its earning statement,

1292
01:00:26,390 --> 01:00:28,153
like most financial
institutions do.

1293
01:00:28,392 --> 01:00:30,690
You're the only financial
institution that can't produce

1294
01:00:30,894 --> 01:00:33,192
a balance sheet or a cash flow
statement with their earnings

1295
01:00:35,098 --> 01:00:37,032
Well, you, you...

1296
01:00:37,434 --> 01:00:41,700
Well, thank you very much.
We appreciate it, asshole.

1297
01:00:43,073 --> 01:00:44,404
And then quite audibly

1298
01:00:44,641 --> 01:00:46,734
you could here
Skilling say asshole!

1299
01:00:47,110 --> 01:00:48,873
And then he said, 'asshole'.

1300
01:00:49,112 --> 01:00:51,478
As I understand it,
you called him an asshole.

1301
01:00:52,249 --> 01:00:54,217
And this just
caused unbelievable

1302
01:00:54,451 --> 01:00:56,009
amounts of consternation
all across Wall Street

1303
01:00:56,253 --> 01:00:57,345
because people thought,

1304
01:00:57,554 --> 01:01:00,045
'A Fortune 500 CEO
losing it like this,

1305
01:01:00,257 --> 01:01:03,317
calling publicly
an investor an asshole? '

1306
01:01:03,560 --> 01:01:05,323
If I could go back
and redo things,

1307
01:01:05,529 --> 01:01:09,761
I would not now,
have used the term that I used.

1308
01:01:09,967 --> 01:01:12,026
Mark Palmer,
Enron's chief PR guy,

1309
01:01:12,236 --> 01:01:14,500
Even ran a note up to Skilling,
telling him to apologize.

1310
01:01:14,771 --> 01:01:16,466
And he just took
the piece of paper

1311
01:01:16,607 --> 01:01:18,666
and tucked it under the pile
of papers on his desk.

1312
01:01:18,942 --> 01:01:19,499
And afterwards,

1313
01:01:19,743 --> 01:01:21,301
Enron's traders who had
erupted in cheers

1314
01:01:21,511 --> 01:01:23,979
when Skilling called this guy
an asshole made him a sign.

1315
01:01:24,248 --> 01:01:25,647
It was a play off
Enron's motto

1316
01:01:25,883 --> 01:01:28,317
'Ask Why' and the sign said
'ask why asshole.'

1317
01:01:30,420 --> 01:01:33,685
My personal feeling was that
Jeff looked at the numbers

1318
01:01:34,324 --> 01:01:39,489
and he knew that
we were in a massive hole.

1319
01:01:40,030 --> 01:01:42,521
It was the only time
that I saw him truly,

1320
01:01:42,733 --> 01:01:46,225
truly worried about keeping
the stock price up.

1321
01:01:46,436 --> 01:01:47,869
And he just kept saying to me,

1322
01:01:48,071 --> 01:01:50,232
'I don't know what the hell
I'm going to do.'

1323
01:01:53,877 --> 01:01:56,175
The broadband business was
in complete meltdown.

1324
01:01:56,546 --> 01:01:58,377
And there were all sorts
of other problems

1325
01:01:58,615 --> 01:02:00,173
that Jeff Skilling
as the company's Chief

1326
01:02:00,384 --> 01:02:01,976
Operating Officer was
wrestling with.

1327
01:02:02,219 --> 01:02:03,618
And in the middle of all this,

1328
01:02:03,887 --> 01:02:06,185
Ken Lay walks in Jeff
Skilling's office holding up

1329
01:02:06,490 --> 01:02:10,153
fabric swatches for the new G5
45 million dollar corporate

1330
01:02:10,360 --> 01:02:11,327
jet he wanted to buy.

1331
01:02:11,628 --> 01:02:13,562
And he said to Jeff,

1332
01:02:13,830 --> 01:02:15,263
asked him
a very important question,

1333
01:02:15,532 --> 01:02:16,965
'which of these
cabin configurations

1334
01:02:17,267 --> 01:02:18,461
do you like best, Jeff? '

1335
01:02:19,836 --> 01:02:23,272
While Ken Lay was stressing
over the corporate jet,

1336
01:02:23,607 --> 01:02:26,041
EES was headed for
a crash landing.

1337
01:02:26,376 --> 01:02:28,936
Facing 500 million in losses,

1338
01:02:29,212 --> 01:02:31,373
Lou Pai's top leuitenant,
Tom White,

1339
01:02:31,682 --> 01:02:34,082
wondered how EES
could show a profit

1340
01:02:34,418 --> 01:02:35,885
by the end of the quarter.

1341
01:02:36,520 --> 01:02:39,751
One of the things
that was always a strange

1342
01:02:39,990 --> 01:02:41,082
occurrence at Enron was

1343
01:02:42,125 --> 01:02:45,492
for weeks before
a quarterly report

1344
01:02:46,229 --> 01:02:48,629
we would be under
the impression that

1345
01:02:48,865 --> 01:02:50,594
we weren't going to
make our numbers.

1346
01:02:50,867 --> 01:02:52,357
But then somehow,
miraculously,

1347
01:02:52,836 --> 01:02:55,896
we always made the numbers,
and then some.

1348
01:02:56,139 --> 01:02:59,404
But then a question was
asked to Tom White,

1349
01:02:59,576 --> 01:03:02,238
'how is it that
we made the numbers? '

1350
01:03:02,546 --> 01:03:07,313
And his answer was,
'One word, California.'

1351
01:03:15,892 --> 01:03:18,258
The first clues to
Enron's new strategy

1352
01:03:18,495 --> 01:03:20,463
hit California with a jolt.

1353
01:03:21,698 --> 01:03:24,132
It started at Noon
rolling across the state.

1354
01:03:24,334 --> 01:03:26,632
Sacramento, San Francisco,
Beverly Hills,

1355
01:03:26,870 --> 01:03:28,201
Long Beach, San Diego

1356
01:03:28,505 --> 01:03:31,804
Twenty six thousand miles of
California power lines.

1357
01:03:32,109 --> 01:03:33,508
Enough to circle the Earth.

1358
01:03:33,877 --> 01:03:35,344
But for the second day
in a row,

1359
01:03:35,579 --> 01:03:38,377
not enough electricity
for America's largest state,

1360
01:03:38,615 --> 01:03:40,708
and the world's
sixth largest economy.

1361
01:03:40,984 --> 01:03:42,474
The first thing we heard about
this energy crisis is well,

1362
01:03:42,652 --> 01:03:44,210
our lights are going to go off
in the middle of winter

1363
01:03:44,421 --> 01:03:45,854
when we're using half
the electricity

1364
01:03:46,056 --> 01:03:47,387
we normally use
during the summer.

1365
01:03:47,691 --> 01:03:49,283
The Bay Area got hit
by not one,

1366
01:03:49,559 --> 01:03:51,117
but two rolling blackouts.

1367
01:03:51,361 --> 01:03:53,761
We only need
twenty eight thousand

1368
01:03:53,964 --> 01:03:55,261
to thirty thousand
megawatts in December.

1369
01:03:55,532 --> 01:03:58,194
We have an installed capacity
in California at the time

1370
01:03:58,435 --> 01:03:59,925
forty-five thousand megawatts.

1371
01:04:00,137 --> 01:04:02,867
Plenty o' power to meet
our electric demand.

1372
01:04:03,106 --> 01:04:05,165
Of course,
we had blackouts in December.

1373
01:04:05,509 --> 01:04:07,977
The people who control
California's power grid

1374
01:04:08,178 --> 01:04:10,339
say once again they're worried
about having to blackout

1375
01:04:10,547 --> 01:04:12,139
the Northern half of the state.

1376
01:04:12,482 --> 01:04:14,450
When the rolling blackouts
started hitting California

1377
01:04:14,651 --> 01:04:16,278
there was definitely a lot of
excitement in the air.

1378
01:04:16,586 --> 01:04:17,678
It was something new.

1379
01:04:17,888 --> 01:04:19,549
It was something that hadn't
been encountered before.

1380
01:04:19,756 --> 01:04:22,452
It was,
'how is this event going to

1381
01:04:22,626 --> 01:04:23,558
effect the price of power? '

1382
01:04:23,794 --> 01:04:25,762
Control's rotating attitudes
are being implemented.

1383
01:04:26,029 --> 01:04:26,961
I knew.

1384
01:04:27,230 --> 01:04:30,222
I knew that there was
illegality going on.

1385
01:04:30,500 --> 01:04:31,728
I could feel it.
I could smell it.

1386
01:04:31,935 --> 01:04:32,560
I could sense it.

1387
01:04:32,836 --> 01:04:34,098
And there was
no other explanation.

1388
01:04:34,304 --> 01:04:36,135
Because the numbers
just didn't add up.

1389
01:04:36,339 --> 01:04:37,897
We had enough power
in California.

1390
01:04:38,175 --> 01:04:40,075
It was never
about lack of supply.

1391
01:04:40,310 --> 01:04:41,607
When I ran for Governor
in 1998,

1392
01:04:41,878 --> 01:04:44,346
not one human being asked me
about electricity.

1393
01:04:44,548 --> 01:04:46,140
This thing kind of
came out of the woods,

1394
01:04:46,349 --> 01:04:47,179
as far as I was concerned.

1395
01:04:47,417 --> 01:04:48,475
And I was trying
in the early days

1396
01:04:48,718 --> 01:04:51,585
to learn what was happening;
how we could fix the problem.

1397
01:04:54,324 --> 01:04:56,588
California was
selected by Enron

1398
01:04:56,860 --> 01:04:58,987
as the prime place
to experiment

1399
01:04:59,262 --> 01:05:01,662
with this new concept of
deregulated electricity.

1400
01:05:01,865 --> 01:05:04,299
Reducing electricity cost
is only one benefit

1401
01:05:04,901 --> 01:05:06,528
from choice and competition.

1402
01:05:06,870 --> 01:05:09,703
In 1996, under pressure
from energy companies,

1403
01:05:09,973 --> 01:05:12,237
Governor Pete Wilson and
the California legislature

1404
01:05:12,509 --> 01:05:16,206
passed a bill allowing for
the deregulation of electricity.

1405
01:05:16,546 --> 01:05:18,844
I wasn't in
the Legislature in 1996,

1406
01:05:19,082 --> 01:05:21,846
but I can tell you that there
isn't a legislator alive

1407
01:05:22,052 --> 01:05:24,612
that can tell you
with any sophistication

1408
01:05:24,921 --> 01:05:27,890
how a deregulated electricity
market ought to work.

1409
01:05:28,191 --> 01:05:29,249
Not a one.

1410
01:05:29,993 --> 01:05:33,258
California's deregulated system
was a bizarre compromise

1411
01:05:33,497 --> 01:05:36,193
between legislators
and free-market advocates.

1412
01:05:36,500 --> 01:05:39,060
The rules were complicated
and hard to follow.

1413
01:05:39,970 --> 01:05:41,267
Inside Enron,

1414
01:05:41,538 --> 01:05:44,132
California's system was
little more than a joke.

1415
01:05:44,407 --> 01:05:45,601
And once in place,

1416
01:05:45,909 --> 01:05:49,970
Enron made sure that the joke
would be on California.

1417
01:05:50,313 --> 01:05:52,281
I remember the conversation
I had with Ken.

1418
01:05:52,516 --> 01:05:54,006
At the end of it he says 'Well,

1419
01:05:54,284 --> 01:05:55,216
Dave, old buddy,
let me just tell you.

1420
01:05:55,552 --> 01:05:57,782
It doesn't matter really to us

1421
01:05:58,021 --> 01:06:00,751
what kooky rules you
Californians put in place.

1422
01:06:01,024 --> 01:06:02,787
I got a bunch of really
smart people down here

1423
01:06:03,059 --> 01:06:04,993
who will figure out how to
make money anyhow.'

1424
01:06:06,863 --> 01:06:09,991
One of the smartest guys
at Enron was Tim Belden,

1425
01:06:10,233 --> 01:06:12,326
who ran the west
coast trading desk.

1426
01:06:13,170 --> 01:06:14,899
Tim Belden was
a fervent believer

1427
01:06:15,138 --> 01:06:16,628
in the idea of free markets

1428
01:06:16,873 --> 01:06:19,433
and as such he spent hours
poring over the new rules

1429
01:06:19,643 --> 01:06:22,043
for the deregulation of
California's energy industry,

1430
01:06:22,479 --> 01:06:25,448
looking for loopholes that Enron
could exploit to make money.

1431
01:06:26,016 --> 01:06:28,450
He found plenty.
After the bankruptcy,

1432
01:06:28,618 --> 01:06:30,779
a confidential memo surfaced
revealing the names of

1433
01:06:31,021 --> 01:06:34,650
Belden's strategies to game
the California market

1434
01:06:35,058 --> 01:06:38,255
Wheel Out, Get Shorty, Fat Boy

1435
01:06:39,029 --> 01:06:42,829
Recently, audio tapes of the
Enron traders were discovered.

1436
01:06:43,099 --> 01:06:44,327
What do you want to
call this project?

1437
01:06:44,935 --> 01:06:46,197
Probably have a catchy
name for that.

1438
01:06:47,170 --> 01:06:48,137
How about, you know,

1439
01:06:48,338 --> 01:06:50,272
something friendly
like 'Death Star'?

1440
01:06:55,111 --> 01:06:57,238
The tapes revealed
Enron's contempt

1441
01:06:57,514 --> 01:07:00,745
for any values except one,
making money.

1442
01:07:03,653 --> 01:07:04,779
Hey John, it's Tim.

1443
01:07:05,021 --> 01:07:06,579
Regulatory's all
in a big concern

1444
01:07:06,856 --> 01:07:09,222
about is we're wheeling power
out of California.

1445
01:07:09,459 --> 01:07:10,983
He just steals money
from California

1446
01:07:11,228 --> 01:07:12,820
to the tune of a million
Can you rephrase that?

1447
01:07:13,063 --> 01:07:15,463
Okay, he arbitrages
the California market

1448
01:07:15,699 --> 01:07:17,428
to the tune of a million
bucks or two a day.

1449
01:07:23,473 --> 01:07:25,805
An arbitrage opportunity
has been defined to me

1450
01:07:26,042 --> 01:07:28,101
as any opportunity to
make abnormal profits.

1451
01:07:28,311 --> 01:07:30,006
So an abnormal profit would be

1452
01:07:30,480 --> 01:07:33,677
returns above
and beyond the norm.

1453
01:07:33,917 --> 01:07:36,681
I was told that a good trader
is a creative trader.

1454
01:07:36,920 --> 01:07:38,751
And a creative
trader is a trader

1455
01:07:38,955 --> 01:07:41,583
that can find
arbitrage opportunities.

1456
01:07:42,359 --> 01:07:45,021
One of those opportunities
was called Ricochet.

1457
01:07:45,562 --> 01:07:47,962
I'll see you guys.
I'm takin' mine to the desert.

1458
01:07:48,331 --> 01:07:50,891
In the midst of energy
shortages Enron's traders

1459
01:07:51,301 --> 01:07:53,861
started to export power
out of the state.

1460
01:07:54,271 --> 01:07:57,035
When prices soared,
they brought it back in.

1461
01:07:57,374 --> 01:07:59,740
So we fuckin' export
like a motherfucker.

1462
01:08:00,043 --> 01:08:01,908
Getting rich?
Trying to.

1463
01:08:05,448 --> 01:08:07,712
Traders would stay after
a twelve hour shift

1464
01:08:08,051 --> 01:08:11,077
and pour over maps of
the western energy grid.

1465
01:08:11,321 --> 01:08:13,619
What are the permutations
and combinations of ways to

1466
01:08:13,857 --> 01:08:16,052
move power around the west.

1467
01:08:16,326 --> 01:08:18,624
And I think that's something
that Enron knew better

1468
01:08:18,862 --> 01:08:21,695
than any other Energy marketer
in the country, period.

1469
01:08:21,998 --> 01:08:24,694
We know all of
the California imports.

1470
01:08:25,068 --> 01:08:27,229
We know all of
the California load.

1471
01:08:27,504 --> 01:08:29,199
We're getting' pretty spoiled
with all this money.

1472
01:08:29,472 --> 01:08:30,530
You said you were
getting a little scared

1473
01:08:30,740 --> 01:08:32,970
we're making a little too much.
And I tend to agree with you.

1474
01:08:35,178 --> 01:08:38,739
These are two traders,
t-r-a-d-e-r-s.

1475
01:08:38,982 --> 01:08:40,176
This is what they say.

1476
01:08:40,483 --> 01:08:42,849
'What we did was overbook
the transmission line

1477
01:08:43,119 --> 01:08:45,917
we had the rights on and said
to California Utilities,

1478
01:08:46,156 --> 01:08:48,454
'lf you want to use the line,
pay us.'

1479
01:08:48,925 --> 01:08:51,291
By the time they agreed
to meet our price,

1480
01:08:51,561 --> 01:08:53,995
rolling blackouts
had already hit California

1481
01:08:54,264 --> 01:08:56,528
and the price for electricity
went through the roof.'

1482
01:08:56,800 --> 01:08:59,030
Did you have any knowledge
that this was happening?

1483
01:08:59,302 --> 01:09:01,395
The only thing that
I'm aware of Senator,

1484
01:09:01,604 --> 01:09:02,764
is there was a,

1485
01:09:03,006 --> 01:09:04,769
there was
a difference of opinion

1486
01:09:05,041 --> 01:09:07,066
on the rules of the
independent system operator.

1487
01:09:07,310 --> 01:09:10,108
It was just set up,
the rules weren't quite clear.

1488
01:09:10,313 --> 01:09:12,611
We have traders here
from Enron

1489
01:09:12,816 --> 01:09:14,147
who were saying
they did something wrong.

1490
01:09:14,451 --> 01:09:15,475
But you don't see
anything wrong.

1491
01:09:15,752 --> 01:09:18,186
I have one last question
and then I am done.

1492
01:09:19,789 --> 01:09:23,418
Traders soon discovered that
by shutting down power plants,

1493
01:09:23,660 --> 01:09:26,060
they could create
artificial shortages

1494
01:09:26,296 --> 01:09:28,594
that would push prices
even higher.

1495
01:09:31,634 --> 01:09:33,693
Hey, this is David up at Enron.

1496
01:09:34,471 --> 01:09:36,598
There's not much demand
for power at all here.

1497
01:09:36,840 --> 01:09:37,670
If we shut it down,

1498
01:09:37,874 --> 01:09:39,671
can you bring it back up
in 3 or 4 hours?

1499
01:09:39,976 --> 01:09:40,670
Oh, yeah.

1500
01:09:40,910 --> 01:09:42,241
Why don't you just go ahead
and shut her down then,

1501
01:09:42,479 --> 01:09:43,741
if that's ok?
Okay.

1502
01:09:43,980 --> 01:09:46,540
When you see two
or three energy companies

1503
01:09:46,850 --> 01:09:50,217
with 30, 35 percent of
their entire capacity down

1504
01:09:50,487 --> 01:09:52,079
for maintenance on a single day

1505
01:09:52,489 --> 01:09:56,084
and as a result
the price of electricity is

1506
01:09:56,326 --> 01:09:57,691
skyrocketing three or
four hundred percent

1507
01:09:57,961 --> 01:09:59,588
and then a week later
someone else does it up

1508
01:09:59,796 --> 01:10:01,127
in Northern California

1509
01:10:01,364 --> 01:10:03,730
you begin to believe something's
not smelling right here.

1510
01:10:04,033 --> 01:10:06,365
We want you guys to get
a little creative.

1511
01:10:06,603 --> 01:10:06,898
Okay.

1512
01:10:07,170 --> 01:10:08,228
And come up with
a reason to go down.

1513
01:10:08,471 --> 01:10:09,802
Like a forced
outage type thing?

1514
01:10:10,106 --> 01:10:10,834
Right.

1515
01:10:11,141 --> 01:10:13,041
Those guys
at the flip of a switch

1516
01:10:13,276 --> 01:10:15,005
could just yank
the California economy

1517
01:10:15,311 --> 01:10:16,710
on it's leash whenever
they wanted to.

1518
01:10:16,946 --> 01:10:17,844
And they did it,
and they did it,

1519
01:10:18,047 --> 01:10:19,378
and they did it.
And they made so much money.

1520
01:10:19,649 --> 01:10:22,550
The heart of it is
that an industry

1521
01:10:22,786 --> 01:10:26,347
that went for a hundred years
from the days of Edison built

1522
01:10:26,656 --> 01:10:29,090
the best electrical system
in the world,

1523
01:10:29,426 --> 01:10:31,724
sold the power at reasonable
prices to consumers

1524
01:10:31,928 --> 01:10:34,897
and was very reliable
was all of a sudden

1525
01:10:35,198 --> 01:10:36,756
turned into a casino.

1526
01:10:40,036 --> 01:10:42,732
These strategies made
some money for Enron.

1527
01:10:42,972 --> 01:10:44,940
But the real money was
made by betting

1528
01:10:45,241 --> 01:10:47,209
that the price of
energy would go up

1529
01:10:47,577 --> 01:10:48,475
It did.

1530
01:10:48,711 --> 01:10:50,201
And the West Coast traders made

1531
01:10:50,413 --> 01:10:52,881
nearly two billion dollars
for Enron.

1532
01:10:58,822 --> 01:11:01,791
You can't treat electricity
like you treat oranges.

1533
01:11:02,058 --> 01:11:03,923
It's the lifeblood
of the society.

1534
01:11:04,160 --> 01:11:04,717
It can't be stored.

1535
01:11:04,961 --> 01:11:06,451
You can't turn
these people loose

1536
01:11:06,663 --> 01:11:09,928
and let them
just have a quote free market

1537
01:11:10,133 --> 01:11:12,465
because a free market is God

1538
01:11:12,669 --> 01:11:14,694
Damn expensive to
the customers.

1539
01:11:15,205 --> 01:11:17,105
There would be
ample supply available

1540
01:11:17,340 --> 01:11:18,602
at the right fuckin' price.

1541
01:11:18,842 --> 01:11:19,501
Oh, sure there would.

1542
01:11:19,742 --> 01:11:20,231
It wasn't just Enron

1543
01:11:20,510 --> 01:11:23,274
"Every company traded
according to the rules

1544
01:11:23,546 --> 01:11:25,639
that California put up there.

1545
01:11:26,082 --> 01:11:27,845
We're the future of Enron.

1546
01:11:28,117 --> 01:11:31,951
And we're fucking making half
a billion dollars for Enron.

1547
01:11:32,255 --> 01:11:33,347
Can you believe that?

1548
01:11:33,890 --> 01:11:36,381
We'll definitely retire
by the time we're 30.

1549
01:11:36,726 --> 01:11:38,489
We're talking
about a commodity that

1550
01:11:38,695 --> 01:11:39,821
normally trades
in the thirty-five,

1551
01:11:40,029 --> 01:11:41,121
forty-five dollar range.

1552
01:11:41,331 --> 01:11:42,889
High prices are when it
gets into the fifties.

1553
01:11:44,000 --> 01:11:45,763
A thousand dollars?

1554
01:11:46,269 --> 01:11:49,761
Prices aren't going to stay
at 1,000 bucks forever.

1555
01:11:50,540 --> 01:11:52,235
It weeds out the weak
people in the market.

1556
01:11:52,842 --> 01:11:54,241
Get rid of them
and you know what,

1557
01:11:54,544 --> 01:11:56,512
the people who are strong
will stick around.

1558
01:11:56,846 --> 01:11:59,406
And the Enron traders never
seemed to step back and say,

1559
01:11:59,649 --> 01:12:01,583
'Wait.
Is what we're doing ethical?

1560
01:12:01,784 --> 01:12:03,445
Is it in our best
long term interests? '

1561
01:12:03,720 --> 01:12:06,314
'Does it help us
if we totally rape California? '

1562
01:12:06,556 --> 01:12:09,719
'Does that advance our goals
of nation-wide deregulation? '

1563
01:12:09,993 --> 01:12:12,154
Instead they sought
out every loophole

1564
01:12:12,495 --> 01:12:15,259
they could in order to profit
from California's misery.

1565
01:12:16,199 --> 01:12:19,896
Temperatures in California are
hitting higher than 100 degrees

1566
01:12:20,169 --> 01:12:24,003
fueling wildfires and fears that
California's strained power grid

1567
01:12:24,274 --> 01:12:26,265
could once again near collapse.

1568
01:12:27,510 --> 01:12:28,204
What's happening?

1569
01:12:28,611 --> 01:12:29,976
There's a fire under
the core line.

1570
01:12:30,246 --> 01:12:33,579
It's been de-rated
from 45 to 2100.

1571
01:12:34,150 --> 01:12:36,584
Burn, baby, burn.

1572
01:12:36,886 --> 01:12:38,319
That's a beautiful thing.

1573
01:12:41,257 --> 01:12:44,488
I was never comfortable
on the trading floor at Enron.

1574
01:12:45,328 --> 01:12:48,024
And if I had questions,
I didn't ask them,

1575
01:12:48,264 --> 01:12:50,357
because I didn't want
to know the answer.

1576
01:12:51,568 --> 01:12:52,762
You know,
I didn't want confirmed

1577
01:12:53,069 --> 01:12:55,799
what I suspected might be true.

1578
01:12:56,105 --> 01:12:58,938
That what I was doing was,
in fact,

1579
01:12:59,242 --> 01:13:04,874
unseemly or was,
at least, unethical,

1580
01:13:05,081 --> 01:13:06,639
if not worse.

1581
01:13:08,518 --> 01:13:10,816
Why did the traders do
what they did?

1582
01:13:11,154 --> 01:13:13,714
Was it their multi-million
dollar bonuses

1583
01:13:13,957 --> 01:13:16,653
or had Enron found
a way to exploit

1584
01:13:16,859 --> 01:13:19,157
the darker side of
human behavior?

1585
01:13:20,663 --> 01:13:22,824
In the early
60's Stanley Milgram

1586
01:13:23,099 --> 01:13:25,226
tried to figure out
what characteristics

1587
01:13:25,535 --> 01:13:26,661
there were of evil people.

1588
01:13:26,903 --> 01:13:29,736
Was there an evil strain
or could normal people

1589
01:13:29,939 --> 01:13:31,270
do really bad things?

1590
01:13:31,507 --> 01:13:33,202
And so he set up
this experiment.

1591
01:13:33,409 --> 01:13:35,934
In the experiment
he had an actor playing

1592
01:13:36,145 --> 01:13:39,546
an experimental subject
and a real experimental subject.

1593
01:13:40,183 --> 01:13:41,844
Want to step right
in here and have a seat?

1594
01:13:42,085 --> 01:13:44,679
They went into this room
and he had an experimenter say,

1595
01:13:45,088 --> 01:13:47,352
'we're going to see
if mild electric shocks

1596
01:13:47,590 --> 01:13:49,490
will help people
memorize lists.

1597
01:13:50,293 --> 01:13:54,354
Incorrect... You'll now get
a shock of 75 volts.

1598
01:13:55,365 --> 01:13:57,060
Soft air.

1599
01:13:57,934 --> 01:13:59,526
He kind of did some
yelling in there.

1600
01:13:59,769 --> 01:14:02,101
The Milgram Experiment has
a lot to say about Enron

1601
01:14:02,338 --> 01:14:06,638
because I think people lost
their sense of morality.

1602
01:14:06,943 --> 01:14:08,570
Like Milgram,
once you accepted the idea

1603
01:14:08,845 --> 01:14:10,836
that behaving
inhumanly was okay,

1604
01:14:11,080 --> 01:14:12,012
you could do anything.

1605
01:14:12,281 --> 01:14:13,873
And the shocks increased
with the number

1606
01:14:14,150 --> 01:14:15,447
of mistakes that they made.

1607
01:14:15,752 --> 01:14:17,777
I can't stand the pain!
Let me out of here!

1608
01:14:18,021 --> 01:14:20,182
He can't stand it.
I'm not going to kill that man.

1609
01:14:20,523 --> 01:14:22,150
The subject,
the real subject is begging

1610
01:14:22,358 --> 01:14:24,553
the scientist-looking
person to stop too.

1611
01:14:24,794 --> 01:14:26,284
And the scientist only says

1612
01:14:26,596 --> 01:14:28,928
'the experiment requires
that you continue.

1613
01:14:29,232 --> 01:14:30,597
Please continue. Go on, please.

1614
01:14:31,367 --> 01:14:33,232
You accept all responsibility?

1615
01:14:33,503 --> 01:14:35,232
The responsibility is mine,
correct.

1616
01:14:35,505 --> 01:14:36,028
Please go on.

1617
01:14:36,339 --> 01:14:39,103
In a way,
Skilling was almost like the guy

1618
01:14:39,342 --> 01:14:40,536
telling those people below him

1619
01:14:40,810 --> 01:14:43,335
it was okay to up the power.

1620
01:14:45,181 --> 01:14:47,240
California's Electric Utilities

1621
01:14:47,517 --> 01:14:49,576
may have to pull the plug on
millions of customers.

1622
01:14:49,886 --> 01:14:52,878
It's the fucking coolest thing
I've done in a long time.

1623
01:14:53,122 --> 01:14:54,680
Holy fuck, yes.
You gotta love the west.

1624
01:14:55,024 --> 01:14:55,547
Oh.

1625
01:14:58,528 --> 01:15:00,428
During the height of
Wednesday's blackout,

1626
01:15:00,663 --> 01:15:03,461
fire crews had to free people
trapped in elevators.

1627
01:15:04,033 --> 01:15:05,967
All that money you guys
stole from those

1628
01:15:06,169 --> 01:15:07,431
poor grandmothers in California.

1629
01:15:07,737 --> 01:15:09,329
Yeah, Grandma Millie, man.

1630
01:15:09,572 --> 01:15:11,563
She's the one who couldn't
figure out how to fucking vote

1631
01:15:11,808 --> 01:15:12,866
on the butterfly ballot.

1632
01:15:13,109 --> 01:15:14,974
Now she wants her fucking money
back for all the power

1633
01:15:15,178 --> 01:15:16,839
you've charged right up her ass.

1634
01:15:25,755 --> 01:15:27,188
You must continue.
Go on, please.

1635
01:15:27,590 --> 01:15:30,616
You're gonna keep giving him
what... 450 volts every shot now?

1636
01:15:30,860 --> 01:15:32,487
That's correct. Continue.

1637
01:15:32,695 --> 01:15:34,287
It's kinda hard to say
well we should be,

1638
01:15:34,497 --> 01:15:36,260
you know we shouldn't do this
even though it's allowed

1639
01:15:36,499 --> 01:15:39,730
because you know.
I mean, that's what we do.

1640
01:15:39,969 --> 01:15:40,799
Right.

1641
01:15:41,237 --> 01:15:43,364
Best thing that could happen
is fucking an earthquake.

1642
01:15:43,606 --> 01:15:45,198
Let that thing float
out to the Pacific.

1643
01:15:45,508 --> 01:15:46,475
Put up fucking candles.

1644
01:15:50,046 --> 01:15:52,139
Milgram's discovery
was disturbing.

1645
01:15:52,381 --> 01:15:53,780
Fifty percent of
the subjects were

1646
01:15:53,983 --> 01:15:55,746
willing to shock to the death,

1647
01:15:56,018 --> 01:15:57,485
so long as the commands came

1648
01:15:57,720 --> 01:16:00,086
from a seemingly
legitimate source.

1649
01:16:09,065 --> 01:16:10,760
Tonight I'm declaring
a state of emergency

1650
01:16:11,000 --> 01:16:13,093
in California to give the state

1651
01:16:13,302 --> 01:16:15,202
the authority
and the resources to

1652
01:16:15,471 --> 01:16:16,733
keep the lights on
in California.

1653
01:16:16,939 --> 01:16:18,338
The Governor,
who's been basically

1654
01:16:19,108 --> 01:16:21,099
capitulating to
the demands of the energy

1655
01:16:21,310 --> 01:16:24,006
companies and utility companies,
needs to put his foot down.

1656
01:16:24,213 --> 01:16:26,443
We wanted the Governor to send
in the state police

1657
01:16:26,582 --> 01:16:29,210
or the National Guard to seize
control of the power plants

1658
01:16:29,485 --> 01:16:30,452
and put it back on-line.

1659
01:16:30,686 --> 01:16:31,983
And I thought we didn't have
to take over every plant,

1660
01:16:32,221 --> 01:16:33,654
we really only had to
take over one.

1661
01:16:33,923 --> 01:16:35,550
'Cause then they would
know he meant it.

1662
01:16:35,758 --> 01:16:37,749
I'm going to get
the nine billion dollars

1663
01:16:38,027 --> 01:16:38,925
back that Enron,

1664
01:16:39,128 --> 01:16:42,689
Dynergy and Reliant stole
from us and get it back to you.

1665
01:16:42,932 --> 01:16:44,456
Despite what the
people of California

1666
01:16:44,600 --> 01:16:47,933
think Enron's making money
despite California,

1667
01:16:48,137 --> 01:16:49,764
not because of California.

1668
01:16:50,239 --> 01:16:52,298
The year-long energy
crisis would cost

1669
01:16:52,542 --> 01:16:55,204
the state of California
$30 billion dollars.

1670
01:16:57,246 --> 01:17:01,012
The markets in California are
the most regulated market

1671
01:17:01,284 --> 01:17:03,309
in North America today.

1672
01:17:03,553 --> 01:17:05,885
And that's what's
causing the problem.

1673
01:17:06,289 --> 01:17:08,587
California,
it never deregulated.

1674
01:17:08,858 --> 01:17:10,849
Enron, buy stock today.

1675
01:17:12,061 --> 01:17:13,653
Thank you very much.

1676
01:17:13,930 --> 01:17:15,124
We are doing the right thing.

1677
01:17:15,464 --> 01:17:16,829
You're the good guys.

1678
01:17:17,099 --> 01:17:19,659
We are the good guys.
We are on the side of angels.

1679
01:17:20,469 --> 01:17:21,436
Oh, I can't help myself.

1680
01:17:21,671 --> 01:17:22,603
You know what the
difference is between

1681
01:17:22,805 --> 01:17:24,898
the state of California
and the Titanic?

1682
01:17:28,878 --> 01:17:30,869
This being a web cast,
I know I'm going to regret this.

1683
01:17:31,147 --> 01:17:32,842
At least when the
Titanic went down,

1684
01:17:33,115 --> 01:17:34,446
the lights were on.

1685
01:17:38,020 --> 01:17:41,683
Jeffery Skilling,
how's it feel to make a killing?

1686
01:17:41,891 --> 01:17:44,257
A top executive at one of
America's biggest power

1687
01:17:44,493 --> 01:17:48,259
companies received a raucous
welcome in San Francisco tonight.

1688
01:17:48,497 --> 01:17:51,022
Protestors heckled Enron's CEO,

1689
01:17:51,234 --> 01:17:53,464
Jeffery Skilling
outside and inside

1690
01:17:53,603 --> 01:17:55,503
during his appearance
at Commonwealth Club.

1691
01:17:55,771 --> 01:17:57,966
One of the protestors even
brought a blueberry pie

1692
01:17:58,174 --> 01:17:59,607
and delivered it herself.

1693
01:18:01,510 --> 01:18:02,408
Police!

1694
01:18:03,346 --> 01:18:06,406
A hundred and thirty two
million dollars is what he made.

1695
01:18:06,616 --> 01:18:09,983
We had a fifty percent hike
in utility rates.

1696
01:18:10,186 --> 01:18:12,120
Consumers in California
are angry.

1697
01:18:12,455 --> 01:18:13,422
And they should be.

1698
01:18:13,623 --> 01:18:14,817
And if we had anything
to do with this,

1699
01:18:15,024 --> 01:18:17,515
then we are the stupidest
people in the world.

1700
01:18:18,027 --> 01:18:19,722
I work for an organization.

1701
01:18:19,962 --> 01:18:21,327
Every day people call saying

1702
01:18:21,597 --> 01:18:23,224
they can't pay their
electricity bills!

1703
01:18:23,466 --> 01:18:26,333
You made millions of dollars
off of California...

1704
01:18:26,569 --> 01:18:27,297
Get out! Go to jail.

1705
01:18:27,503 --> 01:18:29,494
When the tidal
wave of public anger

1706
01:18:29,772 --> 01:18:32,070
started to grow
Ken Lay flew out here

1707
01:18:32,275 --> 01:18:34,140
and convened
a meeting of friends

1708
01:18:34,477 --> 01:18:36,775
and I guess he had a little
more foresight than we did.

1709
01:18:37,013 --> 01:18:39,174
He, he invited
Arnold Schwarzenegger.

1710
01:18:39,482 --> 01:18:40,744
Brought them together
at the Peninsula Hotel

1711
01:18:40,983 --> 01:18:41,813
and had a lunch meeting.

1712
01:18:42,051 --> 01:18:45,452
The notes from that meeting
really still have never surfaced,

1713
01:18:45,655 --> 01:18:47,782
but we know that
Ken Lay's pitch was

1714
01:18:48,090 --> 01:18:49,250
we've got to stay the course

1715
01:18:49,492 --> 01:18:51,983
with deregulation and
the market will correct itself

1716
01:18:52,228 --> 01:18:53,855
and everything will
turn out fine.

1717
01:18:54,497 --> 01:18:56,226
Now at... at the time
we didn't understand

1718
01:18:56,499 --> 01:18:57,864
really why he was so concerned.

1719
01:18:58,134 --> 01:18:58,725
But now we do.

1720
01:18:59,035 --> 01:19:00,229
The fact is that
Ken Lay was out here

1721
01:19:00,503 --> 01:19:01,834
because he understood that

1722
01:19:02,104 --> 01:19:03,867
Enron itself was
a house of cards

1723
01:19:04,106 --> 01:19:07,041
And if deregulation
were to collapse,

1724
01:19:07,276 --> 01:19:08,937
then Enron itself
would collapse.

1725
01:19:09,812 --> 01:19:11,575
But Ken Lay had a trump card.

1726
01:19:11,881 --> 01:19:14,145
In the midst of the energy
crisis his friend,

1727
01:19:14,450 --> 01:19:17,010
George W. Bush,
became president

1728
01:19:17,353 --> 01:19:20,288
I, George Walker Bush,
do solemnly swear.

1729
01:19:20,556 --> 01:19:22,547
I, George Walker Bush,
do solemnly swear.

1730
01:19:22,758 --> 01:19:24,316
Ken Lay's going to be
Secretary of Energy.

1731
01:19:25,461 --> 01:19:26,621
Get out of here.

1732
01:19:27,163 --> 01:19:29,324
How great would that be for
all the players in the market?

1733
01:19:29,598 --> 01:19:30,121
Lt'd be great.

1734
01:19:30,466 --> 01:19:32,593
I'd love to see Ken Lay be
Secretary of Energy.

1735
01:19:32,935 --> 01:19:36,462
Ken Lay did have easy access
to the Bush administration.

1736
01:19:36,739 --> 01:19:37,637
On April 17th,

1737
01:19:37,840 --> 01:19:39,740
he met with Vice
President Dick Cheney,

1738
01:19:40,076 --> 01:19:42,169
and strongly argued
against the imposition of

1739
01:19:42,545 --> 01:19:44,604
Federal price caps
in California.

1740
01:19:44,847 --> 01:19:46,678
We're doing everything
we can to help in California

1741
01:19:46,983 --> 01:19:48,814
on the short term basis.
There's not a lot you can do.

1742
01:19:49,051 --> 01:19:50,609
You can't manufacture kilowatts

1743
01:19:50,820 --> 01:19:51,946
in the West wing of
the White House.

1744
01:19:52,154 --> 01:19:54,122
We're fighting with both hands
tied behind our back.

1745
01:19:54,357 --> 01:19:55,915
We no longer have
the power to stop this.

1746
01:19:56,192 --> 01:19:57,523
If the federal government
doesn't help us,

1747
01:19:57,760 --> 01:19:58,692
we're a dead duck.

1748
01:19:59,228 --> 01:20:01,753
At the time,
Gray Davis was a likely candidate

1749
01:20:01,998 --> 01:20:03,192
to run for president.

1750
01:20:03,432 --> 01:20:06,060
Ken Lay knew that might give
his friend George Bush

1751
01:20:06,335 --> 01:20:08,826
a political reason
to oppose California's

1752
01:20:09,071 --> 01:20:11,505
appeals for federal
price controls.

1753
01:20:11,774 --> 01:20:14,538
They know full well
my administration's belief

1754
01:20:14,744 --> 01:20:18,202
that price controls will not
solve the problem.

1755
01:20:18,514 --> 01:20:20,414
His view was that
the Federal government

1756
01:20:20,649 --> 01:20:22,674
really shouldn't get involved.
This is California's problem.

1757
01:20:23,352 --> 01:20:25,377
And I'm saying,
'with all due... due respect,

1758
01:20:25,588 --> 01:20:28,022
Mr. President, our law said

1759
01:20:28,257 --> 01:20:30,122
the Federal government
regulates this,

1760
01:20:30,359 --> 01:20:31,519
so it is your problem.

1761
01:20:31,794 --> 01:20:33,694
And you make appointments to the
Federal Deregulatory Commission.

1762
01:20:33,929 --> 01:20:36,329
So, we had a polite,
but spirited discussion on that.

1763
01:20:36,632 --> 01:20:37,064
And he says,

1764
01:20:37,299 --> 01:20:38,288
'I just can't be of help
to you on that.'

1765
01:20:38,534 --> 01:20:40,399
As I said from the very beginning
of my administration,

1766
01:20:40,603 --> 01:20:42,127
we'll work to help California,

1767
01:20:42,438 --> 01:20:43,962
in any way we can.

1768
01:20:44,373 --> 01:20:47,069
And the best way we can is
to be good citizens.

1769
01:20:48,544 --> 01:20:51,945
FERC, the federal agency which
regulates energy in America,

1770
01:20:52,181 --> 01:20:53,671
refused to intervene.

1771
01:20:54,450 --> 01:20:57,851
What was FERC doing and why
was it not taking action?

1772
01:20:58,087 --> 01:21:00,180
The chairman of FERC
was Pat Wood,

1773
01:21:00,489 --> 01:21:03,947
the man Ken Lay had personally
recommended for the job.

1774
01:21:04,226 --> 01:21:06,524
It was easy for FERC
to do Enron's bidding

1775
01:21:06,762 --> 01:21:08,252
because all it had
to do was do nothing

1776
01:21:08,497 --> 01:21:09,657
which they did very well.

1777
01:21:09,965 --> 01:21:11,956
Federal Regulators are
being pressured to act

1778
01:21:12,234 --> 01:21:14,702
by the now Democratic
controlled Senate where here...

1779
01:21:14,937 --> 01:21:18,930
A Democratic Senate forced FERC
to impose regional price caps.

1780
01:21:19,175 --> 01:21:22,611
That ended the energy crisis,
but not the political one.

1781
01:21:22,878 --> 01:21:25,472
Did Ken Lay and George Bush
have a political agenda to

1782
01:21:25,714 --> 01:21:27,511
blame the energy crisis
on Gray Davis?

1783
01:21:27,850 --> 01:21:30,011
Oh hello.

1784
01:21:30,719 --> 01:21:33,483
It's one of those
'only in California' stories.

1785
01:21:33,689 --> 01:21:35,281
The state's unpopular Governor,

1786
01:21:35,524 --> 01:21:38,015
Gray Davis,
beset by an ailing economy

1787
01:21:38,260 --> 01:21:40,490
and thirty eight billion
dollar budget deficit,

1788
01:21:40,663 --> 01:21:42,392
faces possible recall.

1789
01:21:42,731 --> 01:21:45,700
And rumored as a possible
replacement for Davis,

1790
01:21:45,935 --> 01:21:48,062
movie star
Arnold Schwarzenegger.

1791
01:21:48,437 --> 01:21:49,699
The Terminator?

1792
01:21:49,972 --> 01:21:51,667
We'll see whether
he's back or not.

1793
01:21:51,907 --> 01:21:53,704
Gray Davis has
terminated opportunities

1794
01:21:53,976 --> 01:21:56,103
and now it's time
we terminate Gray Davis!

1795
01:21:56,879 --> 01:22:00,246
No Recall! No Recall!

1796
01:22:03,486 --> 01:22:05,954
Could I predict
a phony energy crisis

1797
01:22:06,222 --> 01:22:07,246
as a result of deregulation?

1798
01:22:07,590 --> 01:22:10,252
Yes. Could I predict that
Arnold Schwartzerneger

1799
01:22:10,526 --> 01:22:12,756
would be our Governor
as a result of deregulation?

1800
01:22:13,395 --> 01:22:14,453
Never would have
come up with that.

1801
01:22:14,663 --> 01:22:15,925
That's like a bad
science fiction movie.

1802
01:22:16,198 --> 01:22:18,359
Apparently we have
all been wrong,

1803
01:22:18,734 --> 01:22:21,498
it is pronounced Caly-forn-ya.

1804
01:22:21,837 --> 01:22:22,826
Ladies and gentlemen,

1805
01:22:23,038 --> 01:22:25,233
the Governor of the great
state of California,

1806
01:22:25,508 --> 01:22:26,975
Arnold Schwarzenegger!

1807
01:22:42,658 --> 01:22:44,649
We could just hear rumbles
all the way up and down

1808
01:22:45,661 --> 01:22:47,652
Main Street here
and all throughout the city

1809
01:22:47,863 --> 01:22:50,855
that things were
very difficult at Enron.

1810
01:22:51,100 --> 01:22:53,728
One guy who a year before had
come to me and said,

1811
01:22:53,936 --> 01:22:54,664
I'm working for Enron,

1812
01:22:54,870 --> 01:22:57,100
and was very excited
but within a year

1813
01:22:57,373 --> 01:22:59,432
was waking up every night
with nightmares.

1814
01:22:59,608 --> 01:23:01,473
'I've got no life left

1815
01:23:01,744 --> 01:23:03,939
and I feel like I'm being
consumed by this company.'

1816
01:23:04,813 --> 01:23:07,281
As doubts began to surface
about the company

1817
01:23:07,516 --> 01:23:09,882
and the erratic
behavior of its CEO

1818
01:23:10,152 --> 01:23:12,484
Enron's stock began to fall.

1819
01:23:13,122 --> 01:23:14,646
I remember one of
the most poignant meetings

1820
01:23:14,857 --> 01:23:15,915
I'd ever had with Jeff.

1821
01:23:16,125 --> 01:23:17,251
I had left Enron

1822
01:23:17,560 --> 01:23:19,255
and I had come over to
talk about whether or not

1823
01:23:19,495 --> 01:23:20,689
I would return to Enron.

1824
01:23:20,963 --> 01:23:22,760
And I said, 'Jeff,
you've got a real problem.

1825
01:23:23,098 --> 01:23:25,566
The traders,
they will cut your throat,

1826
01:23:25,834 --> 01:23:28,462
if they think it will get them
to the trough sooner.'

1827
01:23:29,004 --> 01:23:30,471
Jeff was silent.

1828
01:23:30,773 --> 01:23:33,071
And he looked out the window

1829
01:23:33,509 --> 01:23:35,477
and he looked back
at me and he said,

1830
01:23:35,678 --> 01:23:38,841
'Yeah Amanda,
you're most likely right.'

1831
01:23:40,216 --> 01:23:43,083
By the end,
the traders ran Enron.

1832
01:23:43,352 --> 01:23:45,479
You know, the inmates had
taken over the asylum.

1833
01:23:48,524 --> 01:23:51,789
All through the summer,
the stock continued to decline.

1834
01:23:52,228 --> 01:23:54,924
There was a buzz that a major

1835
01:23:55,164 --> 01:23:57,029
announcement was
going to take place.

1836
01:23:57,299 --> 01:24:01,565
But we all thought that
Ken Lay was leaving

1837
01:24:02,037 --> 01:24:04,198
Enron and that he had been

1838
01:24:04,540 --> 01:24:09,443
asked by the Bush administration
to join his administration.

1839
01:24:09,745 --> 01:24:11,610
But that wasn't
the case at all.

1840
01:24:11,847 --> 01:24:13,337
It was Jeff Skilling
announcing that

1841
01:24:13,616 --> 01:24:15,846
he was stepping down
as the CEO.

1842
01:24:16,118 --> 01:24:18,814
And that took everyone
by surprise.

1843
01:24:19,088 --> 01:24:20,646
No one could believe that.

1844
01:24:21,523 --> 01:24:23,184
CEO's generally,

1845
01:24:23,392 --> 01:24:25,451
don't just resign
out of the blue

1846
01:24:25,761 --> 01:24:29,356
without a well orchestrated PR
campaign beforehand

1847
01:24:29,665 --> 01:24:31,895
to pave the way
so there's no disruptions,

1848
01:24:32,101 --> 01:24:34,262
there's no questions,
there's no front page stories,

1849
01:24:34,503 --> 01:24:36,801
which is, of course,
exactly what happened.

1850
01:24:38,741 --> 01:24:40,709
It was at that point
that I knew,

1851
01:24:41,043 --> 01:24:42,601
the architect of
the disaster knows that

1852
01:24:42,878 --> 01:24:46,211
it's crumbling and the rat is
leaving the sinking ship.

1853
01:24:47,683 --> 01:24:50,880
Two days later
I met with him and Ken Lay

1854
01:24:51,120 --> 01:24:52,144
because I had
informed the company

1855
01:24:52,388 --> 01:24:53,616
that I was going to
downgrade the stock

1856
01:24:53,889 --> 01:24:56,016
on Skilling's resignation.

1857
01:24:56,258 --> 01:24:57,247
I asked Jeff Skilling,

1858
01:24:57,526 --> 01:24:59,153
'are there any more
shoes to drop.

1859
01:24:59,395 --> 01:25:00,521
Have we seen the worst of it.'

1860
01:25:00,729 --> 01:25:02,526
And I was concerned
about the energy crisis

1861
01:25:02,731 --> 01:25:04,426
that was occurring
in California.

1862
01:25:05,801 --> 01:25:08,964
Well, Skilling convinced me
that it was for personal reasons.

1863
01:25:09,238 --> 01:25:12,571
I left his meeting feeling
sort of emotional

1864
01:25:12,775 --> 01:25:15,243
because of the concern
that he seemed to be

1865
01:25:15,477 --> 01:25:18,344
showing about the relationship
he had with his family.

1866
01:25:18,647 --> 01:25:20,308
He appeared to be distraught.

1867
01:25:20,516 --> 01:25:22,177
And I remember saying
to an investor

1868
01:25:22,851 --> 01:25:25,046
'lf he's not telling the truth,

1869
01:25:25,321 --> 01:25:27,255
then it's a good thing
he quit his day job

1870
01:25:27,489 --> 01:25:28,956
because he needs to go
to Hollywood.

1871
01:25:29,325 --> 01:25:30,986
I left Enron on
August fourteenth,

1872
01:25:31,193 --> 01:25:33,320
2001 for personal reasons.

1873
01:25:33,662 --> 01:25:36,096
Mr. Skilling
a massive earthquake

1874
01:25:37,066 --> 01:25:39,091
struck Enron right
after your departure.

1875
01:25:39,702 --> 01:25:44,264
And people in far
inferior positions to you

1876
01:25:44,807 --> 01:25:46,604
could see cracks in the walls,

1877
01:25:46,875 --> 01:25:49,810
feel the tremors,
feel the windows rattling,

1878
01:25:50,312 --> 01:25:51,779
and you want us to believe

1879
01:25:52,081 --> 01:25:54,276
you sat there
in your office and didn't...

1880
01:25:54,516 --> 01:25:56,381
and had no clue

1881
01:25:56,618 --> 01:25:57,983
that this place was
about to collapse?

1882
01:25:58,520 --> 01:26:01,421
On the day I left,
on August fourteenth,

1883
01:26:01,623 --> 01:26:04,421
2001, I believed
the company was in strong,

1884
01:26:04,593 --> 01:26:05,491
financial condition.

1885
01:26:05,694 --> 01:26:07,286
I think he was smart enough

1886
01:26:07,529 --> 01:26:08,655
and he didn't even have
to be that smart,

1887
01:26:08,864 --> 01:26:12,163
he had seen documents that
I think predicted the future.

1888
01:26:12,468 --> 01:26:14,231
I think he was smart
enough to think

1889
01:26:14,503 --> 01:26:16,437
I can get out now
and this company

1890
01:26:16,672 --> 01:26:19,732
isn't going to collapse
for a year,

1891
01:26:19,942 --> 01:26:23,275
maybe a year and a half,
so I won't get the blame.

1892
01:26:23,512 --> 01:26:26,003
It was working fine
when I left, guys.

1893
01:26:27,616 --> 01:26:30,141
After Skilling resigned,
Enron's chairman,

1894
01:26:30,386 --> 01:26:32,581
Ken Lay took over as CEO.

1895
01:26:39,595 --> 01:26:41,324
Boy, I didn't expect that.

1896
01:26:43,298 --> 01:26:44,458
But thank you.

1897
01:26:44,600 --> 01:26:45,692
Thank you very much.

1898
01:26:46,034 --> 01:26:47,797
Well, I'm delighted to be back.

1899
01:26:48,504 --> 01:26:50,699
I'm sorry Jeff did resign.

1900
01:26:50,973 --> 01:26:52,964
It was a stunning announcement,

1901
01:26:53,308 --> 01:26:55,970
that he was stepping
down as CEO.

1902
01:26:56,245 --> 01:26:57,906
And I think the flags

1903
01:26:59,715 --> 01:27:02,013
started going up at
that point for everybody.

1904
01:27:02,284 --> 01:27:03,717
We are facing
a number of challenges,

1905
01:27:03,919 --> 01:27:05,614
but we're managing them.

1906
01:27:05,921 --> 01:27:08,549
Indeed I think the worst
of that's behind us.

1907
01:27:09,124 --> 01:27:11,183
And the business is
doing great.

1908
01:27:11,693 --> 01:27:13,183
We're not the only stock

1909
01:27:13,462 --> 01:27:14,929
that's decreased
in value this year.

1910
01:27:15,164 --> 01:27:16,756
It's just that we've been
hit a little harder than...

1911
01:27:16,999 --> 01:27:17,931
than many others.

1912
01:27:18,167 --> 01:27:20,294
If a few of these
other problems disappear,

1913
01:27:20,669 --> 01:27:22,603
like California, like India.

1914
01:27:22,938 --> 01:27:25,304
I think the worst is over.

1915
01:27:25,741 --> 01:27:27,265
And I'm excited.

1916
01:27:27,576 --> 01:27:29,510
August fourteenth 2001,

1917
01:27:29,945 --> 01:27:31,640
Jeff Skilling abruptly resigns.

1918
01:27:31,947 --> 01:27:33,244
And that made me angry.

1919
01:27:33,482 --> 01:27:35,814
It made loads of
employees angry.

1920
01:27:36,218 --> 01:27:38,311
I mean, there was
a real sense of betrayal

1921
01:27:38,587 --> 01:27:40,521
by the employees.
I mean, this was, you know,

1922
01:27:40,889 --> 01:27:42,914
Jim Jones feeding
us the Kool-Aid

1923
01:27:43,125 --> 01:27:45,059
and then deciding not to
drink it himself.

1924
01:27:49,765 --> 01:27:51,460
The day after
Skilling resigned,

1925
01:27:51,733 --> 01:27:54,600
Sherron Watkins
sent a letter to Ken Lay.

1926
01:27:54,870 --> 01:27:56,701
We will begin with Ms. Watkins.

1927
01:27:56,972 --> 01:27:58,269
I am Sherron Watkins.

1928
01:27:58,507 --> 01:28:00,498
Would you identify your
counsel for the committee.

1929
01:28:01,009 --> 01:28:03,068
Yes. My counsel is
Mr. Philip Hilder.

1930
01:28:03,545 --> 01:28:05,274
When you hear the story
for the first time,

1931
01:28:05,547 --> 01:28:07,208
it's unbelievable.

1932
01:28:07,449 --> 01:28:10,816
What Sherron was telling me
it was more than accounting

1933
01:28:11,053 --> 01:28:12,179
irregularities, as such.

1934
01:28:12,454 --> 01:28:16,117
I mean, it was a massive
fraud of enormous proportions.

1935
01:28:16,458 --> 01:28:18,653
In mid to late June of 2001,

1936
01:28:18,927 --> 01:28:21,452
upon the resignation
of Cliff Baxter,

1937
01:28:21,697 --> 01:28:23,858
I went to work directly
for Mr. Fastow.

1938
01:28:24,066 --> 01:28:27,866
It has evolved to the corporate
crime of the century.

1939
01:28:28,136 --> 01:28:31,264
I was highly alarmed by the
information I was receiving.

1940
01:28:32,608 --> 01:28:34,075
What Sherron Watkins discovered

1941
01:28:34,343 --> 01:28:37,779
began the unraveling of
Fastow's complex partnerships.

1942
01:28:38,146 --> 01:28:40,876
Andy put me in charge of
this asset listing.

1943
01:28:41,250 --> 01:28:45,983
And there were about a dozen
assets that had been hedged

1944
01:28:46,221 --> 01:28:49,520
with one of Andy's entities,
the Raptors.

1945
01:28:49,858 --> 01:28:52,326
So I was working with
this spreadsheet and,

1946
01:28:52,728 --> 01:28:54,855
you know,
the math just didn't add up.

1947
01:28:55,130 --> 01:28:56,654
It didn't make sense to me.

1948
01:28:56,865 --> 01:28:58,730
I mean, accounting doesn't
get that creative.

1949
01:28:59,001 --> 01:29:00,127
You know,
I couldn't believe that

1950
01:29:00,335 --> 01:29:01,495
Arthur Andersen had
signed off on it.

1951
01:29:01,837 --> 01:29:04,738
I couldn't believe that so
many people were going along.

1952
01:29:05,908 --> 01:29:07,603
Behind Fastow's partnerships

1953
01:29:07,943 --> 01:29:10,935
were enormous guarantees
of Enron's stock.

1954
01:29:11,346 --> 01:29:13,780
Fastow had gambled
Enron's future

1955
01:29:13,982 --> 01:29:16,951
on the hope that its stock
would never fall.

1956
01:29:17,352 --> 01:29:21,311
My first reaction was that
I should warn Ken Lay.

1957
01:29:21,790 --> 01:29:23,155
The day after Skilling left,

1958
01:29:23,358 --> 01:29:25,553
I sent this one page
anonymous letter.

1959
01:29:25,827 --> 01:29:27,988
But within a week
I was meeting with Ken Lay.

1960
01:29:28,230 --> 01:29:29,697
I identified myself

1961
01:29:29,965 --> 01:29:31,990
in the hopes of really
making my point

1962
01:29:32,267 --> 01:29:34,258
that Enron really needed to
address this situation.

1963
01:29:34,503 --> 01:29:36,869
Companies rarely get away
with cooking the books.

1964
01:29:37,139 --> 01:29:39,505
But when they do survive,
it's when they come clean.

1965
01:29:39,741 --> 01:29:42,335
Not when they're exposed
from the outside.

1966
01:29:42,711 --> 01:29:44,542
Ms. Watkins, I went through...

1967
01:29:44,780 --> 01:29:46,475
Ms. Watkins did not talk
to me, Senator.

1968
01:29:46,748 --> 01:29:50,149
Well, Ms. Watkins said
Clifford Baxter told her

1969
01:29:50,485 --> 01:29:54,046
that he met with you repeatedly
to express his concern.

1970
01:29:54,356 --> 01:29:57,450
Cliff and Andy have had a...
they didn't like each other.

1971
01:29:57,759 --> 01:30:00,523
They had a very strained
personal relationship

1972
01:30:00,862 --> 01:30:03,558
and Cliff's issue
had nothing to do

1973
01:30:03,899 --> 01:30:05,093
with the appropriateness

1974
01:30:05,334 --> 01:30:06,631
or inappropriateness of
the transactions

1975
01:30:06,868 --> 01:30:10,269
I mentioned Cliff Baxter
in these memos.

1976
01:30:10,472 --> 01:30:12,406
And I remember
I made the comment to him,

1977
01:30:12,941 --> 01:30:14,499
'you're one of the good guys,

1978
01:30:14,776 --> 01:30:15,674
you know,
you're one of the people

1979
01:30:15,877 --> 01:30:19,677
fighting against this.
And it'd be alright.'

1980
01:30:19,915 --> 01:30:21,007
And he said,

1981
01:30:21,249 --> 01:30:22,273
'oh I don't think
it's going to be alright

1982
01:30:22,517 --> 01:30:24,451
for any of us involved.'

1983
01:30:27,756 --> 01:30:29,724
When I started working
on the book with Sherron,

1984
01:30:30,025 --> 01:30:31,788
I was interested in writing
about a whistleblower.

1985
01:30:32,027 --> 01:30:34,222
People don't really appreciate

1986
01:30:34,863 --> 01:30:38,094
what she did and the bravery
that it took in that company.

1987
01:30:38,367 --> 01:30:40,892
Andy Fastow would not
have put his hands

1988
01:30:41,169 --> 01:30:43,865
in the Enron candy jar
without an explicit

1989
01:30:44,072 --> 01:30:47,041
or implicit approval to do
so by Mr. Skilling.

1990
01:30:47,275 --> 01:30:49,675
I can't for the life of me
see what basis she

1991
01:30:49,878 --> 01:30:52,039
would have for suggesting
that I would know some...

1992
01:30:52,280 --> 01:30:54,180
I mean, how would
she know that?

1993
01:30:54,383 --> 01:30:56,146
And I don't see that
it's at all inconsistent that

1994
01:30:56,351 --> 01:30:58,216
there would be some things
that I don't know

1995
01:30:58,487 --> 01:31:01,786
if some people purposely kept me
from knowing some things

1996
01:31:02,090 --> 01:31:05,617
I felt like I was one lone voice
within Enron saying,

1997
01:31:05,827 --> 01:31:07,590
'look, we've...
we've committed horrible fraud.'

1998
01:31:07,796 --> 01:31:09,127
And of course
all hell broke loose.

1999
01:31:09,331 --> 01:31:12,823
Within six short weeks Enron
was spinning out of control.

2000
01:31:17,706 --> 01:31:19,230
Probably in more
normal circumstances

2001
01:31:19,508 --> 01:31:20,998
I would have
a few more words to say

2002
01:31:21,243 --> 01:31:22,767
about September the eleventh.

2003
01:31:23,045 --> 01:31:26,173
Just like America is
under attack by terrorism,

2004
01:31:26,915 --> 01:31:29,509
I think we're under attack.
And of course.

2005
01:31:30,786 --> 01:31:35,985
Now we've got the SEC inquiry,
informal inquiry...

2006
01:31:36,825 --> 01:31:38,793
The SEC launched
an investigation

2007
01:31:39,061 --> 01:31:40,551
When the Wall Street
Journal published

2008
01:31:40,829 --> 01:31:43,821
articles revealing
Fastow's murky deals.

2009
01:31:44,166 --> 01:31:46,930
Enron announced massive
financial restatements.

2010
01:31:47,536 --> 01:31:49,504
Investors began to
worry that billions

2011
01:31:49,738 --> 01:31:53,071
in mark-to-market profits
were really losses.

2012
01:31:55,610 --> 01:31:57,271
As you can see foresee,

2013
01:31:57,546 --> 01:32:02,108
the underlying fundamentals of
our businesses are very strong.

2014
01:32:02,484 --> 01:32:04,509
Indeed the strongest
they've ever been.

2015
01:32:05,787 --> 01:32:07,516
But regrettably,

2016
01:32:08,223 --> 01:32:10,316
that's not what Wall Street
is focusing on.

2017
01:32:11,159 --> 01:32:13,457
And I doubt that's what
you're focusing on.

2018
01:32:13,695 --> 01:32:15,822
This inquiry will
take a lot of time

2019
01:32:16,231 --> 01:32:19,029
on the part of our accountants
and lawyers and others.

2020
01:32:21,303 --> 01:32:24,238
But it will finally
put these issues to rest.

2021
01:32:25,874 --> 01:32:28,866
At the very moment Ken Lay
was talking to employees,

2022
01:32:29,144 --> 01:32:32,170
only a few blocks away,
Enron's accounting firm,

2023
01:32:32,414 --> 01:32:33,346
Arthur Andersen,

2024
01:32:33,548 --> 01:32:35,948
had begun destroying
its Enron files.

2025
01:32:36,918 --> 01:32:38,510
On October 23rd,

2026
01:32:38,787 --> 01:32:41,847
Andersen shredded more than
one ton of paper.

2027
01:32:44,526 --> 01:32:46,858
Despite the rumors,
despite the speculation,

2028
01:32:47,129 --> 01:32:50,792
the company is doing well both
financially and operationally.

2029
01:32:50,999 --> 01:32:52,591
He was making
all kinds of statements.

2030
01:32:52,868 --> 01:32:54,893
Reassuring employees
and not just employees,

2031
01:32:55,137 --> 01:32:56,604
reassuring investors,

2032
01:32:56,838 --> 01:33:00,672
'we have no
accounting irregularities,

2033
01:33:00,876 --> 01:33:02,537
the company's in the best shape
it's ever been in'

2034
01:33:02,778 --> 01:33:04,439
From the standpoint
of Enron stock,

2035
01:33:04,613 --> 01:33:05,910
we're going to bring it back...

2036
01:33:06,181 --> 01:33:07,546
we're going to bring it back.

2037
01:33:07,783 --> 01:33:09,751
Alright,
we're down to questions.

2038
01:33:09,985 --> 01:33:11,452
I've got a few of them here.

2039
01:33:11,620 --> 01:33:13,884
'I would like to know
if you are on crack?

2040
01:33:17,692 --> 01:33:19,182
If so,
that would explain a lot.

2041
01:33:19,494 --> 01:33:20,756
If not. You may want to start

2042
01:33:20,996 --> 01:33:22,486
because it's going
to be a long time

2043
01:33:22,731 --> 01:33:24,198
before we trust you again.'

2044
01:33:24,900 --> 01:33:26,834
It certainly wasn't clear
to anyone at Enron,

2045
01:33:27,102 --> 01:33:28,296
much less anyone
outside of Enron

2046
01:33:28,537 --> 01:33:31,995
it wasn't really clear
what was going on or...

2047
01:33:32,274 --> 01:33:33,741
what was going to happen.

2048
01:33:33,975 --> 01:33:35,306
I know this is a lot...

2049
01:33:35,610 --> 01:33:38,170
There is a lot of speculation
about Andy's involvement

2050
01:33:38,513 --> 01:33:41,141
I and the board are
also sure that

2051
01:33:41,383 --> 01:33:44,284
Andy has operated
in the most ethical

2052
01:33:44,553 --> 01:33:46,521
and appropriate manner possible.

2053
01:33:47,122 --> 01:33:49,852
The next day,
Andy Fastow was fired

2054
01:33:50,192 --> 01:33:51,887
when the Enron board
discovered that

2055
01:33:52,194 --> 01:33:54,321
he had made more than
$45 million dollars

2056
01:33:54,563 --> 01:33:56,497
from his LJM partnerships.

2057
01:33:56,898 --> 01:33:59,492
The question, Mr. Fastow,
is how could you believe

2058
01:33:59,935 --> 01:34:03,063
that your actions were
in any way consistent

2059
01:34:03,305 --> 01:34:05,432
with your fiduciary
duties to Enron

2060
01:34:05,707 --> 01:34:08,267
and its shareholders
or with common sense

2061
01:34:08,510 --> 01:34:11,638
notions of corporate ethics
and propriety?

2062
01:34:12,347 --> 01:34:13,143
How do you answer, sir?

2063
01:34:13,381 --> 01:34:15,781
Mr. Chairman on
the advice of my counsel,

2064
01:34:16,051 --> 01:34:18,076
I respectfully decline to
answer the questions

2065
01:34:18,620 --> 01:34:20,349
based on the protection
afforded me

2066
01:34:20,622 --> 01:34:22,647
under the United States
Constitution.

2067
01:34:26,728 --> 01:34:28,457
Andy, in many ways,

2068
01:34:28,730 --> 01:34:30,960
I think he was set up
as the fall guy.

2069
01:34:31,266 --> 01:34:34,827
All of the Enron executives
were saying,

2070
01:34:35,036 --> 01:34:37,334
'there's your man, Andy Fastow.
He's the crook.

2071
01:34:37,606 --> 01:34:39,369
You know, he's the one
that stole from Enron,

2072
01:34:39,608 --> 01:34:40,472
stole from LJM.

2073
01:34:40,675 --> 01:34:42,006
He's the one that
cooked the books.

2074
01:34:42,277 --> 01:34:43,369
Go after him.'

2075
01:34:43,945 --> 01:34:45,469
How will you plead, Mr. Fastow?

2076
01:34:46,214 --> 01:34:48,273
I've thought about this
and thought about this.

2077
01:34:48,516 --> 01:34:51,542
And it couldn't have
just been a few executives

2078
01:34:51,786 --> 01:34:54,186
at Enron that made this happen.

2079
01:34:54,422 --> 01:34:58,552
If you think of the banks
involved Chase,

2080
01:34:59,461 --> 01:35:01,793
Morgan, Citibank

2081
01:35:03,765 --> 01:35:07,667
the billions in loans
Arthur Andersen...

2082
01:35:07,936 --> 01:35:09,426
What about Vincent and Elkins,

2083
01:35:09,671 --> 01:35:12,834
the lawyers that
represented us?

2084
01:35:13,108 --> 01:35:15,906
There had to have been
complicity across the board.

2085
01:35:16,478 --> 01:35:18,605
Because it was all too easy;

2086
01:35:18,980 --> 01:35:21,175
all too easy.

2087
01:35:25,687 --> 01:35:28,178
The Enron collapse was
an enormous tragedy.

2088
01:35:28,957 --> 01:35:32,518
This is a company that had
over thirty thousand employees,

2089
01:35:32,894 --> 01:35:34,555
and clearly with
a company that size

2090
01:35:34,829 --> 01:35:36,456
you have a lot of
senior officers

2091
01:35:36,631 --> 01:35:39,759
that have a lot of authority in
which you place enormous trust.

2092
01:35:40,035 --> 01:35:42,469
But in the case
there was at least one,

2093
01:35:42,837 --> 01:35:45,670
Andy Fastow,
that betrayed that trust

2094
01:35:46,241 --> 01:35:47,469
to the extent that

2095
01:35:47,676 --> 01:35:49,268
I did not know
what he was doing,

2096
01:35:49,511 --> 01:35:51,570
he obviously didn't share
with me what he was doing,

2097
01:35:52,314 --> 01:35:55,909
then indeed I cannot take
responsibility for what he did

2098
01:35:56,151 --> 01:35:57,140
I never heard him say,

2099
01:35:57,352 --> 01:35:58,649
'I take responsibility'
for a thing.

2100
01:35:58,853 --> 01:36:02,254
It sounded to me like
the wonderful movie, 'Chicago'.

2101
01:36:02,891 --> 01:36:05,155
I was reminded of
the puppet strings

2102
01:36:05,460 --> 01:36:07,428
and the dancers
and the tap dancing

2103
01:36:07,595 --> 01:36:09,290
and pointing at the gun,
the gun, the gun.

2104
01:36:09,597 --> 01:36:13,431
I mean. Everybody's
in step with Johnny.

2105
01:36:13,702 --> 01:36:17,297
I continue to grieve,
as does my family,

2106
01:36:18,173 --> 01:36:20,038
over the loss of the company.

2107
01:36:20,308 --> 01:36:22,469
Linda and I saw
our net worth reduced

2108
01:36:22,677 --> 01:36:24,645
from several hundred
million dollars down to

2109
01:36:24,980 --> 01:36:26,675
something less than
twenty million dollars

2110
01:36:26,915 --> 01:36:27,939
on a net worth basis.

2111
01:36:28,183 --> 01:36:29,115
And of course,
as... as you said,

2112
01:36:29,317 --> 01:36:32,115
about a million dollars
or less in liquidity.

2113
01:36:33,755 --> 01:36:36,986
I don't know whether
I'd rather be shot as a crook

2114
01:36:37,258 --> 01:36:39,556
or as an idiot.

2115
01:36:40,061 --> 01:36:44,794
I believe the only venue for me
is the 'Ride of Broken Dreams.'

2116
01:36:45,066 --> 01:36:46,499
Oh, you mean the Enron ride!

2117
01:36:46,768 --> 01:36:47,234
Let's go!

2118
01:36:47,535 --> 01:36:48,900
Enron hit the National psyche.

2119
01:36:49,137 --> 01:36:51,833
It hit it as sort of,
the time-tested lesson.

2120
01:36:52,107 --> 01:36:53,938
And that is,
if it looks too good to be true,

2121
01:36:54,242 --> 01:36:55,607
sometimes it is.

2122
01:36:58,279 --> 01:36:59,871
We're all going to be rich!

2123
01:37:02,517 --> 01:37:03,814
We broke even.

2124
01:37:12,727 --> 01:37:14,627
It is my belief that
Enron's failure was

2125
01:37:14,829 --> 01:37:17,297
due to a classic
run on the bank.

2126
01:37:19,100 --> 01:37:20,931
Don't look now but there's
something funny going on

2127
01:37:21,169 --> 01:37:22,431
over there at the bank, George.

2128
01:37:22,604 --> 01:37:23,536
I've never really seen one,

2129
01:37:23,738 --> 01:37:25,706
but that's got all the
earmarks of being a run.

2130
01:37:34,182 --> 01:37:36,047
On December 2nd 2001,

2131
01:37:36,351 --> 01:37:39,184
less than four months
after Skilling's resignation

2132
01:37:39,521 --> 01:37:41,614
Enron declared bankruptcy.

2133
01:37:43,758 --> 01:37:46,921
I remember
it was just a strange,

2134
01:37:47,162 --> 01:37:48,561
kind of surreal day.

2135
01:37:48,797 --> 01:37:51,891
We learned around nine thirty
about the bankruptcy

2136
01:37:52,200 --> 01:37:54,225
and that we were
all being let go.

2137
01:37:55,737 --> 01:37:58,467
We all felt like
we were on the Titanic

2138
01:37:58,773 --> 01:38:01,606
and the last lifeboats
had long gone

2139
01:38:01,843 --> 01:38:05,438
and we were just now
on the sinking ship.

2140
01:38:06,848 --> 01:38:09,146
We had thirty minutes
to leave the building

2141
01:38:09,350 --> 01:38:11,318
and at that point
it was no longer

2142
01:38:11,586 --> 01:38:13,520
like being on the Titanic.

2143
01:38:13,855 --> 01:38:16,415
It was kind of like being
on the Lusitania.

2144
01:38:16,558 --> 01:38:17,718
The torpedo had hit

2145
01:38:18,026 --> 01:38:20,824
and there's twenty minutes
to get out.

2146
01:38:23,798 --> 01:38:25,925
There's a lot of disbelief.

2147
01:38:26,201 --> 01:38:29,864
Very few of the rank and file
people ever dreamed that

2148
01:38:30,105 --> 01:38:32,096
Enron would
actually go bankrupt.

2149
01:38:36,945 --> 01:38:38,913
Then all of a sudden,
it was like a ghost town.

2150
01:38:41,349 --> 01:38:43,840
I can remember going
into the old building,

2151
01:38:44,085 --> 01:38:46,451
on certain floors,
ah, late in the,

2152
01:38:46,654 --> 01:38:48,781
afternoon or evening.
And it was scary.

2153
01:38:49,190 --> 01:38:50,782
There'd be like paper
blowing around,

2154
01:38:51,059 --> 01:38:51,991
and nobody there,

2155
01:38:52,293 --> 01:38:54,955
and it was just...
it was very eerie.

2156
01:39:01,536 --> 01:39:03,902
Mr. Skilling,
your opening statement was

2157
01:39:04,139 --> 01:39:07,131
extremely compassionate
to the employees.

2158
01:39:07,575 --> 01:39:09,839
And I want to show you a tape.

2159
01:39:10,078 --> 01:39:12,012
And I believe
we have it ready to go.

2160
01:39:12,313 --> 01:39:13,678
Listen to this.

2161
01:39:13,982 --> 01:39:16,212
Should we invest all of
our 401k in Enron Stock?

2162
01:39:16,451 --> 01:39:19,249
Absolutely.
Don't you guys agree?

2163
01:39:23,158 --> 01:39:26,321
Why is it that you had begun
unloading your stock?

2164
01:39:26,661 --> 01:39:29,255
Pretty heavily
before that date

2165
01:39:29,497 --> 01:39:31,522
and yet led
the employees to think that

2166
01:39:31,733 --> 01:39:33,633
they should keep buying stock?

2167
01:39:35,570 --> 01:39:36,093
Ms. Senator,

2168
01:39:36,371 --> 01:39:40,307
I have been a major shareholder
in Enron Corporation

2169
01:39:40,542 --> 01:39:42,009
and you can take
the videotape to mean

2170
01:39:42,210 --> 01:39:43,177
what you want it to mean.

2171
01:39:43,378 --> 01:39:45,107
I was a supporter of
Enron Corporation.

2172
01:39:45,313 --> 01:39:46,644
You know what happened
to those people.

2173
01:39:46,915 --> 01:39:47,939
They lost everything.

2174
01:39:48,183 --> 01:39:52,051
I feel terrible about
what happened to the employees.

2175
01:39:54,088 --> 01:39:57,057
Oh at one time,
things were really rosy for us.

2176
01:39:57,959 --> 01:40:00,257
And we all had some
really nice-looking 401ks

2177
01:40:00,495 --> 01:40:02,861
and pensions
and then it peaked.

2178
01:40:03,064 --> 01:40:04,827
And then it
just started going down,

2179
01:40:05,099 --> 01:40:06,726
and it went lower
and lower and lower.

2180
01:40:07,035 --> 01:40:09,799
At the peak
I had about 348 thousand.

2181
01:40:10,138 --> 01:40:12,368
I sold it all for 1200 dollars;

2182
01:40:12,607 --> 01:40:14,370
was what I got for it,
when it was done.

2183
01:40:18,780 --> 01:40:20,645
While Enron's stock
was plummeting,

2184
01:40:20,949 --> 01:40:22,849
the retirement
accounts of Enron's rank

2185
01:40:23,117 --> 01:40:25,108
and file workers were frozen.

2186
01:40:25,420 --> 01:40:26,887
We were frozen out of
our accounts.

2187
01:40:27,155 --> 01:40:29,623
It was right about
thirty two dollars, I believe.

2188
01:40:30,058 --> 01:40:31,616
And over that time,

2189
01:40:31,859 --> 01:40:33,520
from when it was frozen to
when it opened up,

2190
01:40:33,795 --> 01:40:35,126
I think it went down to nine.

2191
01:40:35,363 --> 01:40:36,625
And we could not access it.

2192
01:40:36,864 --> 01:40:38,263
And what came out
later that was so bad,

2193
01:40:38,466 --> 01:40:41,663
was the fact that
Ken Lay and Skilling

2194
01:40:41,869 --> 01:40:44,394
and all the top people were
movin' their money then.

2195
01:40:45,206 --> 01:40:46,503
But we couldn't.

2196
01:40:48,643 --> 01:40:52,443
The insiders had sold off
a billion dollars of their stock.

2197
01:40:52,714 --> 01:40:55,945
Compare that to the lineman
who worked for a staid,

2198
01:40:56,184 --> 01:40:58,482
old utility company
for most of his life;

2199
01:40:58,720 --> 01:41:00,585
put away money each month.

2200
01:41:00,822 --> 01:41:03,188
And what's he have to show,
at the end day,

2201
01:41:03,491 --> 01:41:05,891
for his years of hard
and decent labor?

2202
01:41:06,127 --> 01:41:07,458
He gets a big goose egg.

2203
01:41:08,062 --> 01:41:10,860
And Pai is out
in Hawaii somewhere,

2204
01:41:11,132 --> 01:41:13,225
with 350 million dollars
in the bank.

2205
01:41:13,501 --> 01:41:14,866
That's wrong.

2206
01:41:22,176 --> 01:41:26,237
There is still to this city
a layer of anger and upset.

2207
01:41:26,981 --> 01:41:28,608
I am still doing counseling,

2208
01:41:28,916 --> 01:41:30,781
three years later,
with some families.

2209
01:41:33,421 --> 01:41:36,117
Where some of those
who are most reflective,

2210
01:41:36,357 --> 01:41:37,688
it's gone to a deeper layer.

2211
01:41:37,892 --> 01:41:40,554
And they are looking
at the corporate culture itself

2212
01:41:40,862 --> 01:41:41,920
in this country.

2213
01:41:42,230 --> 01:41:43,993
You know,
you can gain the whole world

2214
01:41:44,532 --> 01:41:45,965
and all the trinkets

2215
01:41:46,200 --> 01:41:47,258
and all the trophies
of the world,

2216
01:41:47,535 --> 01:41:49,935
the corner office,
and all the perks

2217
01:41:50,204 --> 01:41:53,503
and you really can lose
your soul in the midst of this.

2218
01:41:54,876 --> 01:41:57,310
On January 25th, 2002,

2219
01:41:57,545 --> 01:41:59,877
seven weeks after
the Enron bankruptcy,

2220
01:42:00,114 --> 01:42:02,446
Cliff Baxter committed suicide.

2221
01:42:02,784 --> 01:42:04,581
With the media hounding him

2222
01:42:04,886 --> 01:42:06,979
because he was mentioned
in my memos

2223
01:42:07,188 --> 01:42:09,179
and the fact that
he'd been sued civilly

2224
01:42:09,490 --> 01:42:11,515
because he'd cashed
in for about

2225
01:42:11,726 --> 01:42:13,057
thirty million dollars
worth of stock

2226
01:42:13,294 --> 01:42:15,455
I guess it all came
crashing down on him.

2227
01:42:16,130 --> 01:42:18,894
I think Cliff's suicide
note tells it all.

2228
01:42:19,100 --> 01:42:21,933
You know,
Where there was once great pride,

2229
01:42:22,236 --> 01:42:23,635
now there is none.

2230
01:42:27,575 --> 01:42:29,566
It's very hard for me
to talk about Cliff.

2231
01:42:29,811 --> 01:42:31,574
We were very close
for many years.

2232
01:42:33,514 --> 01:42:36,574
And he was a wonderful,
wonderful man.

2233
01:42:36,918 --> 01:42:40,877
But a lot of who Cliff
was tied up in how

2234
01:42:41,122 --> 01:42:43,147
he had succeeded at Enron.

2235
01:42:43,658 --> 01:42:46,593
It is hard to look at
your life's work and say

2236
01:42:47,729 --> 01:42:49,094
it's failed.

2237
01:42:49,397 --> 01:42:53,595
But you have to take a long,
cold look at yourself and say,

2238
01:42:54,302 --> 01:42:56,998
'who was I? Who did I become? '

2239
01:42:58,439 --> 01:43:02,341
And realize that you may
have seen your shadow.

2240
01:43:04,379 --> 01:43:08,440
Andy Fastow pled guilty to
conspiracy to commit wire fraud.

2241
01:43:08,683 --> 01:43:12,050
He agreed to forfeit 23
million dollars in assets.

2242
01:43:12,587 --> 01:43:15,181
His sentence was
reduced to ten years

2243
01:43:15,490 --> 01:43:19,790
in exchange for testifying
against other Enron executives.

2244
01:43:21,596 --> 01:43:22,324
Why Enron?

2245
01:43:22,630 --> 01:43:25,861
Why not Worldcom or Tyco
or Global Crossings?

2246
01:43:26,100 --> 01:43:30,867
Ultimately in Enron the fatal
flaw was a sense that brains

2247
01:43:31,506 --> 01:43:34,168
and wiliness could
out-think the way

2248
01:43:34,409 --> 01:43:35,967
that the system
will eventually work.

2249
01:43:36,377 --> 01:43:40,313
In 2004, Jeff Skilling was
indicted for insider trading

2250
01:43:40,581 --> 01:43:42,742
and conspiracy to
defraud investors.

2251
01:43:43,217 --> 01:43:44,184
Pleading innocent,

2252
01:43:44,519 --> 01:43:46,282
he paid his
attorneys a retainer of

2253
01:43:46,521 --> 01:43:49,081
23 million dollars
to defend him.

2254
01:43:49,791 --> 01:43:53,955
Enron should not be viewed
as an aberration,

2255
01:43:54,195 --> 01:43:56,288
something that can't
happen anywhere else.

2256
01:43:56,531 --> 01:43:59,295
Because it's all about
the rationalization

2257
01:43:59,867 --> 01:44:01,425
that you're not doing
anything wrong.

2258
01:44:01,669 --> 01:44:04,433
We've involved Arthur Andersen,
we've involved the lawyers.

2259
01:44:04,639 --> 01:44:06,231
The bankers know
what we're doing.

2260
01:44:06,674 --> 01:44:09,734
There's a sense the
diffusion of responsibility.

2261
01:44:10,077 --> 01:44:11,806
Everyone was on the bandwagon.

2262
01:44:12,580 --> 01:44:13,979
And it can happen again.

2263
01:44:15,883 --> 01:44:17,282
Enron's accounting firm.

2264
01:44:17,485 --> 01:44:18,474
Arthur Andersen,

2265
01:44:18,686 --> 01:44:20,847
was convicted of
obstructing justice.

2266
01:44:21,789 --> 01:44:24,349
With its reputation
for honesty destroyed,

2267
01:44:24,659 --> 01:44:28,595
America's oldest accounting
firm fell along with Enron

2268
01:44:28,830 --> 01:44:32,129
and twenty nine thousand people
lost their jobs.

2269
01:44:32,500 --> 01:44:34,730
Enron's shareholders
are suing Enron

2270
01:44:35,002 --> 01:44:37,562
and its banks
for 20 billion dollars.

2271
01:44:41,609 --> 01:44:44,942
Ken Lay was also indicted
for conspiracy to commit fraud.

2272
01:44:45,246 --> 01:44:48,340
His attorney maintains that
no one has been hurt more

2273
01:44:48,616 --> 01:44:51,346
by the Enron bankruptcy
than Ken Lay.

2274
01:44:52,386 --> 01:44:54,320
Nice of all of you to
show up this morning.

2275
01:44:54,522 --> 01:44:56,285
With today's arrest of Ken Lay,

2276
01:44:57,425 --> 01:44:59,893
the top echelon at Enron

2277
01:45:00,261 --> 01:45:03,594
has now been called to
account for their crimes.

2278
01:45:03,898 --> 01:45:05,559
Mr. Lay, do you have
anything to say, sir?

2279
01:45:05,833 --> 01:45:07,425
A little later today I will.

2280
01:45:07,735 --> 01:45:08,702
Looking at Enron is like

2281
01:45:08,936 --> 01:45:11,461
looking at the flip side of
so much possibility

2282
01:45:11,706 --> 01:45:14,072
because like most things
that end terribly,

2283
01:45:14,308 --> 01:45:15,468
it didn't start out that way.

2284
01:45:15,676 --> 01:45:17,667
It started with
a lot of people who thought

2285
01:45:17,912 --> 01:45:19,072
they were changing the world.

2286
01:45:19,380 --> 01:45:22,315
And over time they became
victims of their own hubris,

2287
01:45:22,550 --> 01:45:23,778
victims of their own greed

2288
01:45:24,051 --> 01:45:26,485
and so it's like taking
so much promise and possibility

2289
01:45:26,687 --> 01:45:28,211
and looking at it
in a mirror and seeing

2290
01:45:28,489 --> 01:45:30,457
the flip side reflected
back at you.

2291
01:45:32,493 --> 01:45:34,723
I think the larger lesson was

2292
01:45:34,962 --> 01:45:39,228
what Enron asked of
its employees which was ask why.

2293
01:45:40,501 --> 01:45:44,528
And you know I didn't ask
myself why enough;

2294
01:45:44,772 --> 01:45:46,330
I didn't ask
managers why enough,

2295
01:45:46,574 --> 01:45:50,010
I didn't ask
my colleagues why enough.