# Enron The Smartest Guys In The Room 2005 1080p

https://www.youtube.com/watch?v=jeUu4XTHltQ

[00:25] thank you
[00:37] building in there
[00:41] what the hell is he building in
[00:46] taken Enron 16 years to go from about 10
[00:50] taken Enron 16 years to go from about 10 billion of assets to 65 billion of
[00:53] billion of assets to 65 billion of assets and took him 24 days to go
[00:55] assets and took him 24 days to go bankrupt
[01:00] collapsed so quickly and so entirely I
[01:03] collapsed so quickly and so entirely I mean it was into bankruptcy within a
[01:05] mean it was into bankruptcy within a matter of weeks it just immediately had
[01:08] matter of weeks it just immediately had all the makings of a gigantic Scandal
[01:11] all the makings of a gigantic Scandal he's hiding something from the rest of
[01:13] he's hiding something from the rest of us the Fatal flaw at Enron if there is
[01:17] us the Fatal flaw at Enron if there is one you say it was Pride but then it was
[01:20] one you say it was Pride but then it was arrogance intolerance greed
[01:24] Arrogance, intolerance, greed. So many of them were blinded by the money.
[01:26] So many of them were blinded by the money that they didn't see that they were sinking their own life.
[01:30] But we have a right to know.
[01:32] It just got hungrier and hungrier.
[01:35] Sooner or later they were doomed to go off that cliff at 90 miles an hour.
[01:39] It's astounding that they got away with it for so long.
[01:43] In reality, Enron was a house of cards.
[01:46] What we didn't know is that the house of cards had been built over a pool of gasoline.
[01:52] It all sort of became smoke and mirrors.
[01:57] Committee will come to order.
[02:00] This is a case of America's largest corporate bankruptcy.
[02:02] The question here is what happened.
[02:04] Who was responsible for it happening and what can we do to prevent this sort of thing from happening again?
[02:19] Complicated transactions, but in reality, it's a story about people and it's really a human tragedy.
[02:41] that's got his own.
[02:50] yes the strong gets more while the weak.
[02:55] yes the strong gets more while the weak one's fade.
[02:56] one's fade empty Pockets nose ever make the grave.
[03:03] empty Pockets nose ever make the grave Mama may have far from here.
[03:10] Mama may have far from here but God blessed the child that's got his own.
[03:14] but God blessed the child that's got his own.
[03:15] own it's got his own.
[03:22] money you got lots of friends.
[03:29] money you got lots of friends.
[03:41] on this date at 2 23 a.m Sugarland.
[03:43] on this date at 2 23 a.m Sugarland police discovered John C Baxter.
[03:46] police discovered John C Baxter located inside his vehicle when the.
[03:48] located inside his vehicle when the parent gunshot wounded the head.
[03:50] parent gunshot wounded the head at this time it has been a suicide note.
[03:53] at this time it has been a suicide note located.
[03:57] we do know that he was an Enron employee.
[03:59] we do know that he was an Enron employee but as far as any other indications of.
[04:01] but as far as any other indications of why he committed suicide no we do not.
[04:10] Mr scaling let me uh touch on something.
[04:13] Mr scaling let me uh touch on something that is sort of sad and that's of course.
[04:14] that is sort of sad and that's of course the suicide of Cliff Baxter and you you.
[04:18] the suicide of Cliff Baxter and you you mentioned he was your best friend in.
[04:19] mentioned he was your best friend in your opening statement.
[04:20] your opening statement before he uh died did you have many.
[04:24] before he uh died did you have many conversations with him.
[04:26] conversations with him yes and were any um relative to Enron.
[04:33] yes.
[04:35] yes yes.
[04:37] yes there's no one that knew cliff toward.
[04:40] there's no one that knew cliff toward the end that didn't realize that he was.
[04:41] the end that didn't realize that he was heartbroken by what had happened.
[04:45] heartbroken by what had happened and Cliff came over to my house.
[04:48] and Cliff came over to my house and he said they're calling us child.
[04:49] and he said they're calling us child molesters.
[04:50] molesters he says that will never wash off.
[04:55] he says that will never wash off but Mrs killing you don't believe that I.
[04:57] but Mrs killing you don't believe that I don't believe what you don't believe.
[04:59] don't believe what you don't believe that the press and everybody.
[05:02] that the press and everybody calling Cliff Baxter or yourself or.
[05:06] calling Cliff Baxter or yourself or anybody on the board directors.
[05:08] anybody on the board directors denigrating or attaining you you don't.
[05:10] denigrating or attaining you you don't think it's accurate it's what you're.
[05:12] think it's accurate it's what you're saying to us here today I do not believe.
[05:16] saying to us here today I do not believe did not do anything wrong that was not.
[05:19] did not do anything wrong that was not in the interest and all the time that I.
[05:20] in the interest and all the time that I worked for Enron Corporation that was in.
[05:22] worked for Enron Corporation that was in the interest of the shareholders of the.
[05:23] the interest of the shareholders of the company.
[05:25] company ultimately who was responsible for the.
[05:28] ultimately who was responsible for the downfall of Enron.
[05:33] only a few years ago Enron was the.
[05:36] only a few years ago Enron was the nation's seventh largest corporation.
[05:38] nation's seventh largest corporation valued at almost 70 billion dollars.
[05:41] valued at almost 70 billion dollars pundits praised the company as a new.
[05:44] Pundits praised the company as a new business model.
[05:46] Business model this trading floor was manned by.
[05:48] This trading floor was manned by America's best and brightest charting.
[05:50] America's best and brightest charting the futures of energy and power.
[05:54] The futures of energy and power and high above each with a private.
[05:56] And high above each with a private staircase Ken Lay and Jeff Skilling had.
[05:59] Staircase Ken Lay and Jeff Skilling had built their own plush staterooms.
[06:02] They built their own plush staterooms.
[06:03] They were known as the smartest guys in the room.
[06:07] Captains of a ship too powerful to ever go down.
[06:10] In the Titanic the captain went down with a ship.
[06:12] In Enron looks to me like the captain first gave himself.
[06:15] And some friends a bonus then lowered himself and the top folks down in the.
[06:17] Lifeboat and then hung it up and said by.
[06:19] The way everything's going to be just fine.
[06:20] Fine like Skilling Ken Lay said he hadn't.
[06:23] Done anything wrong.
[06:26] CNN really not this morning beyond the financial issues.
[06:29] Some suspected a political conspiracy.
[06:32] Enron had been the largest corporate contributor to the first presidential campaign of George W.
[06:34] Bush this is not a political issue it is.
[06:44] Bush, this is not a political issue. It is a business issue. You know Enron had made a business issue.
[06:47] You know Enron had made contributions to a lot of people around Washington D.C.
[06:51] And if they came to this administration looking for help, they didn't find any.
[06:55] To see no help here. It is like I did not have political relations with that man.
[07:03] Mr. Lee, what about the fact that George W. Bush calls Ken Lay, 'Kenny boy'?
[07:08] That's my nickname for my husband, which he overheard, so it wasn't original with the president.
[07:12] Certainly wasn't it, according to published reports.
[07:14] Your husband earned about 300 million dollars in compensation and stocks from Enron over the last four years.
[07:22] What happened to all that money?
[07:25] And it's gone.
[07:28] There's nothing left.
[07:33] This is the shredded evidence that we got that came out of Enron.
[07:38] We very quickly determined that the insiders had sold off a billion dollars of their stock in the preceding several months.
[07:44] Did you convert stock worth 66 million?
[07:48] did you convert stock worth 66 million dollars
[07:52] uh I don't know but that'd be dollars uh I don't know but that'd be surprising to you to learn that you did
[07:53] surprising to you to learn that you did that no that would that would not be
[07:55] that no that would that would not be surprising
[07:56] surprising Fasto got only 30 million in stock
[08:00] Fasto got only 30 million in stock proceeds from Enron
[08:01] proceeds from Enron but he took another 30 million out
[08:04] but he took another 30 million out with his side deals I think there was
[08:07] with his side deals I think there was just an immediate sense of outrage
[08:11] just an immediate sense of outrage lay and Skilling and fast style when
[08:15] lay and Skilling and fast style when people realized how much they had
[08:17] people realized how much they had profited and how completely artificial
[08:20] profited and how completely artificial the appearance of this company had been
[08:24] the appearance of this company had been news of shredding at Enron raised more
[08:26] news of shredding at Enron raised more questions
[08:27] questions what answers were lost in the torn
[08:30] what answers were lost in the torn documents twenty thousand employees had
[08:33] documents twenty thousand employees had lost their jobs
[08:35] lost their jobs two billion dollars in pensions and
[08:37] two billion dollars in pensions and retirement funds had disappeared
[08:39] retirement funds had disappeared was Enron the work of a few bad men or
[08:43] was Enron the work of a few bad men or the dark shadow of the American dream
[08:46] the dark shadow of the American dream
[08:55] Lei comes to the story of Enron from very humble roots.
[08:59] My father was a Baptist Minister and and he was ordained a Baptist Minister while I was very young, probably two, three years old.
[09:09] Ken Lay was a Baptist Preacher's Son, a family that had been poor all its life and he throughout his life worked several jobs as a kid and clearly had in mind that things could be better and wanted things to be better.
[09:20] It had a huge ambition to make wealth for himself.
[09:25] He told a story later about sitting on a tractor dreaming about the world of business and how different it could be from the way things were for him and his family.
[09:34] Lay was a PhD in economics and he became very early on a real Apostle for deregulation.
[09:40] He was way ahead of the curve on this.
[09:44] He was thinking about energy markets that would be deregulated and in particular a natural gas industry that was shackleby regulation and he pushed aggressively in Washington to
[09:52] pushed aggressively in Washington to change all of that.
[09:58] Washington lay became part of a new.
[10:00] Washington lay became part of a new crusade to liberate businessmen from the.
[10:03] crusade to liberate businessmen from the rules and regulations of government.
[10:05] rules and regulations of government government is not the solution to our.
[10:08] government is not the solution to our problem.
[10:09] problem government is the problem the societies.
[10:12] government is the problem the societies which have achieved the most spectacular.
[10:14] which have achieved the most spectacular broad-based economic progress in the.
[10:16] broad-based economic progress in the shortest period of time.
[10:17] shortest period of time are not the most tightly controlled not.
[10:20] are not the most tightly controlled not necessarily the biggest in size or the.
[10:22] necessarily the biggest in size or the wealthiest in natural resources.
[10:25] wealthiest in natural resources no what unites them all is their.
[10:27] no what unites them all is their willingness to believe in the magic of.
[10:30] willingness to believe in the magic of the marketplace.
[10:38] the magic power of deregulation pushed.
[10:41] the magic power of deregulation pushed can lay to found Enron in 1985.
[10:45] can lay to found Enron in 1985. through a merger of vast networks of.
[10:47] through a merger of vast networks of natural gas pipelines lay thought Enron.
[10:50] natural gas pipelines lay thought Enron would be poised to take advantage of the.
[10:52] would be poised to take advantage of the government's decision to let gas prices float with the currents of the market.
[10:59] [Music] Candlelight had a view of deregulation from the standpoint of all the money that he thought could be made.
[11:06] Ken Lay wasn't alone a couple of Texas oilmen shared his views on how to get government out of the energy business.
[11:13] I think they could sort of understand each other.
[11:15] it was you know professional courtesy between a Sidewinder and a timber rattlesnake.
[11:18] lay was closer to the father but while he was governor of Texas George W Bush was only too happy to make phone calls for Ken Lay.
[11:29] this absolutely has no precedent.
[11:32] this is by far and away the most important major relationship of a presidential family with a single Corporation in American history.
[11:40] when Rich Kinder one of enron's Executives left the company lay arranged for a video Valentine.
[11:45] Rich I've been asked to think of one thing I could say to you on your departure from Enron and
[11:53] to you on your departure from Enron and to be this.
[11:54] to be this don't leave Texas Rich you have been fantastic to the Bush family.
[11:57] I don't think anybody did more than you did to support George and of course at this stage in my life and Barbara's too.
[12:03] that's what really matters your family your friends.
[12:07] early on George Bush Senior helped secure billions in government subsidies for Enron International and he helped promote lay as deregulations.
[12:19] Ambassador at Large.
[12:21] Enron is a company that deals with everyone with absolute Integrity.
[12:24] we want people to leave a transaction with Enron thinking that they've been dealt with in the highest possible way as far as integrity and truthfulness.
[12:34] he always wrapped himself in the cloak of moral rectitude but there was one episode early on that raised questions about whether he was actually walking the walk.
[12:40] this was the Enron oil Scandal also known as the Valhalla scandal.
[12:47] while you were at Arthur Anderson were you involved in an investigation at a
[12:55] you involved in an investigation at a company called Enron oil?
[12:57] company called Enron oil? yes I was.
[13:00] yes I was the issue with the company in 1987 involved the misappropriation of monies by two traders in 1987.
[13:03] two oil traders made bets for Enron on whether the price of oil would rise or fall.
[13:07] oil trading is like gambling sometimes.
[13:09] you win sometimes you lose.
[13:15] but Enron oil always seemed to win much to Ken Lay's Delight.
[13:17] I tried to explain to Ken Lay in a tremendous risk that you have in that market.
[13:21] you can lose 10 times your original investment.
[13:24] a veteran trader Mike muckelroy was suspicious of Enron oil's steady High profits.
[13:26] well this oil trading business had profits that nobody could really understand.
[13:30] and in fact that many lieutenants questioned they said this business can't be making this much money legitimately.
[13:32] something weird is going on.
[13:35] something weird was going on.
[13:38] the first hint came from an anonymous tip about the president of the company.
[13:56] tip about the president of the company Louis burgette de Burgett had taken some.
[13:59] Louis burgette de Burgett had taken some three plus million dollars of corporate funds and put it in a personal account of his.
[14:05] there were offshore accounts phony books and a trail that led from the company's Treasurer Tom mastroeni to a mysterious Lebanese Speculator no one could find M.
[14:15] yes.
[14:16] what name did you suspect that was my ass you know and uh M smart I said.
[14:21] that's Maxwell Smart I mean these guys are playing games.
[14:25] borget and mastroeni were summoned to Houston first they presented falsified bank records to Enron then they admitted they had diverted company profits to personal accounts.
[14:38] it was brought to the attention of the Enron board Auditors were brought in as well to look at the whole thing at the board meeting the Auditors told lay that borget and his Traders were manipulating earnings destroying daily trading records and probably gambling Way Beyond their limits.
[14:52] the next day we found out that delay's decision wasn't basically
[14:56] delay's decision wasn't basically changed nothing as far as the operation.
[14:59] changed nothing as far as the operation is concerned and the reason he gave was that this was the only part of the combined company that was making any money and that he could not you know kill the Golden Goose.
[15:04] the Traders weren't fired or even disciplined instead Enron sent a Telex to borget please keep making us Millions.
[15:16] instead of reducing enron's risk lay encouraged his traders to gamble more then their luck changed.
[15:26] then their luck changed two months later here I got this Panic call that they had drawn down 90 million dollars in the previous five days.
[15:36] what we could do is just try to find out what kind of gorilla we had loose up there.
[15:42] McElroy hopped on the next plane to New York he knew mastroeni had another set of books and he would do whatever it took to get them.
[15:49] and I basically stood over Tom and I told him one of two things was going to happen either one of the trading.
[15:58] happen either one of the trading partners that was crooked with Bourget.
[16:00] partners that was crooked with Bourget who was a German arms dealer was going.
[16:02] who was a German arms dealer was going to kill him or I was I said I'll track.
[16:05] to kill him or I was I said I'll track you down and find you no matter where.
[16:07] you down and find you no matter where you go and sooner or later I'll get you.
[16:11] you go and sooner or later I'll get you the next day mastroeni came in with the.
[16:13] the next day mastroeni came in with the real books the Traders had gambled away.
[16:16] real books the Traders had gambled away all of enron's Reserves.
[16:19] all of enron's Reserves by acting fast muckleroy bluffed the.
[16:22] by acting fast muckleroy bluffed the market and managed to save the company.
[16:26] market and managed to save the company after Valhalla Ken Lay maintained that.
[16:28] after Valhalla Ken Lay maintained that he had been shocked that the Traders had.
[16:30] he had been shocked that the Traders had gambled so recklessly but Ken Lay had.
[16:32] gambled so recklessly but Ken Lay had known all along about the risks that.
[16:34] known all along about the risks that were taken he had seen the reports.
[16:37] were taken he had seen the reports warning him about the Trader's Behavior.
[16:40] warning him about the Trader's Behavior since the fall of Enron Ken Lay has said.
[16:42] since the fall of Enron Ken Lay has said he can't be responsible for things he.
[16:44] he can't be responsible for things he didn't know about sounds like what he.
[16:46] didn't know about sounds like what he said about Valhalla do you believe that.
[16:49] said about Valhalla do you believe that he didn't know.
[16:50] he didn't know I can answer only for one I can answer.
[16:52] I can answer only for one I can answer for Valhalla because Canada did in fact.
[16:54] for Valhalla because Canada did in fact know about this thing because I had told.
[16:56] know about this thing because I had told him myself the Auditors adamantly told.
[16:59] him myself the Auditors adamantly told Mr Ken Lay that the two Rogue Traders should be fired.
[17:06] Lay read the report and he read his budget and estimated how much they the two Rogue Executives made.
[17:10] And if they were fired what he could lose.
[17:12] My conclusion was that this guy is a guy who puts earnings before Scruples.
[17:16] Rather than reacting to the dishonesty right in front of him.
[17:20] Received a suspended sentence.
[17:23] Bourget was convicted of Fraud and spent one year in jail.
[17:27] With his biggest Money Maker Now Behind Bars.
[17:29] Ken Lay had a problem.
[17:32] Who could he find to make money for Enron.
[17:35] Every year, every day, every week you have to come up with new ideas.
[17:50] The guy who had the answer to what the future of the natural gas business was supposed to be.
[17:56] Kenley is also a guy who considers himself a Visionary and he liked other people he thought of as
[18:00] liked other people he thought of as Visionaries he liked people with big.
[18:01] Visionaries he liked people with big ideas and Jeff Skilling was a person.
[18:04] ideas and Jeff Skilling was a person with the biggest ideas of all.
[18:06] with the biggest ideas of all Jeff skilling's biggest single idea was.
[18:09] Jeff skilling's biggest single idea was to find a new way to deliver energy.
[18:11] to find a new way to deliver energy rather than be bound by the physical.
[18:13] rather than be bound by the physical flow of the pipeline Enron would become.
[18:16] flow of the pipeline Enron would become a kind of stock market for natural gas.
[18:18] a kind of stock market for natural gas it was a magical new idea transform.
[18:21] it was a magical new idea transform energy into financial instruments that.
[18:24] energy into financial instruments that could be traded like stocks and bonds so.
[18:27] could be traded like stocks and bonds so that was the one good idea in 1992 using.
[18:30] that was the one good idea in 1992 using that good idea we became the largest.
[18:32] that good idea we became the largest buyer and seller of natural gas in North.
[18:34] buyer and seller of natural gas in North America Jeff was like the prophet he.
[18:37] America Jeff was like the prophet he came in and said there's a whole new.
[18:39] came in and said there's a whole new world out there forget about this.
[18:40] world out there forget about this pipeline stuff you know the State.
[18:42] pipeline stuff you know the State Pipeline in the ground and gas in and.
[18:44] Pipeline in the ground and gas in and gas out we we can recreate this entire.
[18:48] gas out we we can recreate this entire industry.
[18:49] industry an attorney from Vincent and Elkins.
[18:51] an attorney from Vincent and Elkins Amanda Martin was one of the first.
[18:53] Amanda Martin was one of the first Executives hired by Jeff Skilling and.
[18:56] Executives hired by Jeff Skilling and became part of his inner circle.
[18:59] became part of his inner circle the excitement was palpable you cannot.
[19:01] The excitement was palpable. You cannot imagine how proud we all were to be there.
[19:06] And then of course we had a leader who imbued us with a sense of confidence that if we were smart, anything could be accomplished.
[19:14] And then the bottom line we began to make money.
[19:16] And that in and of itself was a reaffirmation that this could be big.
[19:25] Skilling saw the opportunity to build an industry new and to start a business from scratch.
[19:29] But he had one specific condition that had to be met before he joined Enron.
[19:31] And it was that he'd be allowed to use a certain kind of accounting known as Mark to Market.
[19:38] Arthur Anderson signed off in the SEC approved it.
[19:40] I remember walking in and going, 'What's going on?'
[19:43] And cozy and everybody, I mean everyone was so excited.
[19:47] And then came the champagne and we'd got Mark to Market accounting treatment.
[19:51] And I often think about how clear my memory was about that event.
[19:52] And that was the beginning of a major cog in the downfall ultimately of Enron.
[20:02] Mark to Market accounting allowed Enron.
[20:05] Mark to Market accounting allowed Enron to book potential future profits on the very day a deal was signed no matter how little cash actually came in the door to the outside world.
[20:16] Enron's profits could be whatever Enron said they were, very subjective.
[20:26] It left it open to manipulation and they were saying that we're going to sell power out of this power plant in 10 years for X dollars per kilowatt.
[20:38] And there was no way anybody could prove that they could do it.
[20:48] Well, hey, we've been working hard on this and we've really pulled out all the stops.
[20:50] Look what we got origination, we did 20 million last year, I think we can do 120 million dollars this year.
[20:57] Trading, we did 10 million last year, we think we can do 64 this year.
[21:02] This is the key, we're going to move from Mark to
[21:04] key we're going to move from Mark to Market accounting to something I call
[21:07] Market accounting to something I call hfv
[21:08] hfv hypothetical future value accounting
[21:12] hypothetical future value accounting whoa if we do that we can add a
[21:14] whoa if we do that we can add a gazillion dollars to the bottom line
[21:18] gazillion dollars to the bottom line oh Jeff
[21:19] oh Jeff all right that sounds fantastic oh Jeff
[21:23] all right that sounds fantastic oh Jeff thank you that's just superb performance
[21:26] thank you that's just superb performance and you're going to go far my boy
[21:28] and you're going to go far my boy probably president of the company one
[21:30] probably president of the company one day you think so I think he really
[21:32] day you think so I think he really believed that the idea was everything
[21:34] believed that the idea was everything and that when you came up with an idea
[21:36] and that when you came up with an idea you should be able to book the profits
[21:37] you should be able to book the profits from that idea right away because
[21:40] from that idea right away because otherwise some lesser man was taking the
[21:42] otherwise some lesser man was taking the profits from the idea that some greater
[21:44] profits from the idea that some greater man had come up with in the past
[21:47] man had come up with in the past when Jeff Skilling applied to Harvard
[21:49] when Jeff Skilling applied to Harvard Business School the professor asked him
[21:51] Business School the professor asked him if he was smart he replied I'm [ __ ]
[21:54] if he was smart he replied I'm [ __ ] smart
[21:56] smart one of his favorite books was the
[21:58] one of his favorite books was the selfish Gene about the ways human nature
[22:01] selfish Gene about the ways human nature is steered by greed and competition in
[22:03] is steered by greed and competition in the service of passing on our genes
[22:06] the service of passing on our genes at Enron Skilling wanted to set free the
[22:09] at Enron Skilling wanted to set free the Basic Instincts of survival of the
[22:11] Basic Instincts of survival of the fittest
[22:14] Jeff had a very darwinian view of how
[22:17] Jeff had a very darwinian view of how the world worked he was famous for
[22:19] the world worked he was famous for saying once an enron's early years that
[22:20] saying once an enron's early years that money was the only thing that motivated
[22:22] money was the only thing that motivated people
[22:24] people skilling's notion of how the world
[22:26] skilling's notion of how the world should work really trickled down and
[22:28] should work really trickled down and affected everything about how Enron did
[22:30] affected everything about how Enron did business he instituted a system known as
[22:32] business he instituted a system known as the PRC or performance review
[22:34] the PRC or performance review commit required that people be graded
[22:36] commit required that people be graded from a one two of five and roughly 10
[22:38] from a one two of five and roughly 10 percent of people had to be a five and
[22:40] percent of people had to be a five and those people were supposed to be fired
[22:42] those people were supposed to be fired hence this came to be known as Rank and
[22:44] hence this came to be known as Rank and yank I personally am convinced that the
[22:48] yank I personally am convinced that the PRC process is the most important
[22:50] PRC process is the most important process
[22:51] process that we conduct as a company I've never
[22:54] that we conduct as a company I've never heard of a company yet that would be
[22:55] heard of a company yet that would be successful terminating 15 percent of
[22:57] successful terminating 15 percent of their people every year just to satisfy
[23:00] their people every year just to satisfy the fact that the other employees had to
[23:02] the fact that the other employees had to vote on them and so when you're being
[23:03] vote on them and so when you're being evaluated by that group you are getting
[23:05] evaluated by that group you are getting direct communication from Ken and may
[23:09] direct communication from Ken and may about what the objectives of the company
[23:10] about what the objectives of the company are and how you fit with those
[23:12] are and how you fit with those objectives it was a brutal process the
[23:15] objectives it was a brutal process the ability for a 25 year old to go in and
[23:18] ability for a 25 year old to go in and to be reviewed and to be superior
[23:22] to be reviewed and to be superior and as a consequence get a five million
[23:24] and as a consequence get a five million dollar bonus
[23:25] dollar bonus I don't think that's repeated in many
[23:27] I don't think that's repeated in many places in Corporate America our culture
[23:29] places in Corporate America our culture is is a tough culture it is a very uh
[23:32] is is a tough culture it is a very uh very aggressive culture
[23:36] very aggressive culture that Enron no one was more aggressive
[23:39] that Enron no one was more aggressive than the Traders
[23:41] than the Traders if I'm on the way to my boss's office
[23:43] if I'm on the way to my boss's office talking about my compensation and if I
[23:46] talking about my compensation and if I step on somebody's throat on the way
[23:47] step on somebody's throat on the way that doubles it well I'll stomp on the
[23:49] that doubles it well I'll stomp on the guy's throat you know that that's how
[23:53] guy's throat you know that that's how people work
[23:54] people work on the trading side we got to be the
[23:57] on the trading side we got to be the biggest baddest house in town
[24:00] biggest baddest house in town and by necessity if you wanted to be in
[24:02] and by necessity if you wanted to be in the market you had to deal with Enron
[24:08] 's Traders were like the super powerful
[24:11] 's Traders were like the super powerful High School click that even the
[24:12] High School click that even the principal doesn't dare to reign in they
[24:15] principal doesn't dare to reign in they did become the major engine of at least
[24:17] did become the major engine of at least reported profits at the company they
[24:20] reported profits at the company they took Jeff Skilling and Ken Lay's belief
[24:22] took Jeff Skilling and Ken Lay's belief in free markets and turned it into an
[24:24] in free markets and turned it into an ideology but they pitch it almost as a
[24:27] ideology but they pitch it almost as a new economic religion
[24:31] and Run online will change the markets
[24:34] and Run online will change the markets or many many commodities it is creating
[24:37] or many many commodities it is creating an open transparent Marketplace that
[24:40] an open transparent Marketplace that replaces the dark blind system that
[24:43] replaces the dark blind system that existed it is real simple you turn on
[24:47] existed it is real simple you turn on your computer and it's right there
[24:49] your computer and it's right there that's our vision we're trying to change
[24:51] that's our vision we're trying to change the world
[24:52] the world [Music]
[24:57] I think Jeff Skilling had a desperate
[24:59] I think Jeff Skilling had a desperate need to believe that Enron was a success
[25:01] need to believe that Enron was a success I think he identified with Enron he
[25:03] I think he identified with Enron he proclaimed at one point I am Enron
[25:07] proclaimed at one point I am Enron the other thing about people at Enron is
[25:09] the other thing about people at Enron is a lot of them were former nerds and
[25:11] a lot of them were former nerds and including Jeff Skilling he had been
[25:13] including Jeff Skilling he had been Punchy he had big glasses he losing his
[25:16] Punchy he had big glasses he losing his hair and Jeff Skilling one day kind of
[25:18] hair and Jeff Skilling one day kind of woke up and decided to change himself
[25:20] woke up and decided to change himself and he started working out lost a lot of
[25:22] and he started working out lost a lot of weight but he really did remake himself
[25:24] weight but he really did remake himself through sheer will and force of
[25:26] through sheer will and force of personality
[25:28] personality when Jeff got Lasix on his eyes
[25:30] when Jeff got Lasix on his eyes everybody at Enron got Lasik so nobody
[25:32] everybody at Enron got Lasik so nobody was wearing glasses
[25:35] I think Jeff skelling is really a tragic
[25:38] I think Jeff skelling is really a tragic figure in a classic sense of the word
[25:40] figure in a classic sense of the word he's a guy that people describe as
[25:42] he's a guy that people describe as incandescently brilliant but he's also a
[25:44] incandescently brilliant but he's also a guy who is radically different than he
[25:46] guy who is radically different than he at times portrays himself he's portrayed
[25:48] at times portrays himself he's portrayed himself as somebody who was very tightly
[25:50] himself as somebody who was very tightly monitored risk in reality he's a gambler
[25:52] monitored risk in reality he's a gambler he gambled away huge sums of money
[25:54] he gambled away huge sums of money before he was 20 years old by making
[25:56] before he was 20 years old by making wild bets on the market
[26:01] to Jeff Skilling risk was glamorous he
[26:03] to Jeff Skilling risk was glamorous he was a huge risk taker he actually talked
[26:05] was a huge risk taker he actually talked about wanting to go on a trips that were
[26:07] about wanting to go on a trips that were so perilous that someone could actually
[26:08] so perilous that someone could actually die
[26:09] die [Music]
[26:13] this manifests itself in trips that Jeff
[26:16] this manifests itself in trips that Jeff Skilling lad for a small group of
[26:18] Skilling lad for a small group of friends and customers
[26:23] [Music]
[26:29] [Music] Andy fasta would go Ken rice would go
[26:32] Andy fasta would go Ken rice would go the trips were Legend you know we can
[26:34] the trips were Legend you know we can sit and think about what strange
[26:36] sit and think about what strange insecurities that we're trying to
[26:38] insecurities that we're trying to overcome but it made them feel good as
[26:40] overcome but it made them feel good as men
[26:41] men and they took a particularly memorable
[26:43] and they took a particularly memorable trip to the Baja 1200 miles a very
[26:46] trip to the Baja 1200 miles a very rugged terrain in Mexico
[26:51] this is a trip where people crash bikes
[26:54] this is a trip where people crash bikes Ken left is on the trip and he busted a
[26:56] Ken left is on the trip and he busted a lamp and acquired a bunch of stitches
[26:58] lamp and acquired a bunch of stitches people broke bones one guy flipped a
[27:01] people broke bones one guy flipped a Jeep and then almost got killed both
[27:04] Jeep and then almost got killed both sorts of stories at Enron became Legend
[27:06] sorts of stories at Enron became Legend and it fed the whole Macho culture of a
[27:08] and it fed the whole Macho culture of a place
[27:11] [Music]
[27:19] [Music] deaf Skilling had a way of describing
[27:21] deaf Skilling had a way of describing people that he liked he said I like guys
[27:22] people that he liked he said I like guys with spikes he liked somebody with
[27:24] with spikes he liked somebody with something extreme about them
[27:29] Ken rice was one of the men with spikes
[27:30] Ken rice was one of the men with spikes was a Salesman of the group very amiable
[27:33] was a Salesman of the group very amiable fun man's man and was the guy out
[27:37] fun man's man and was the guy out selling deals to energy companies in the
[27:40] selling deals to energy companies in the case of Cliff Baxter the company's Chief
[27:42] case of Cliff Baxter the company's Chief deal maker he was extraordinarily
[27:43] deal maker he was extraordinarily talented at just doing a deal but he was
[27:46] talented at just doing a deal but he was a manic depressive
[27:48] a manic depressive Baxter was a very bright guy very blunt
[27:52] Baxter was a very bright guy very blunt with teleskilling whatever he thought
[27:54] with teleskilling whatever he thought was closest to Skilling personally than
[27:56] was closest to Skilling personally than anyone else at the company
[27:57] anyone else at the company there was a guy named lupai who was a
[28:00] there was a guy named lupai who was a key Skilling Lieutenant helped build the
[28:02] key Skilling Lieutenant helped build the trading business in the early years went
[28:03] trading business in the early years went on to run and runs doomed effort called
[28:06] on to run and runs doomed effort called Enron Energy Services
[28:09] as you read uh it was to sell Energy
[28:13] as you read uh it was to sell Energy Services to end users industrial end
[28:16] Services to end users industrial end users lupai is the guy that's going tap
[28:18] users lupai is the guy that's going tap to run the EES business because this was
[28:21] to run the EES business because this was this was so important to the company
[28:22] this was so important to the company into skilling's future he called Lupi my
[28:25] into skilling's future he called Lupi my ICBM and lupai dispatched his enemies
[28:28] ICBM and lupai dispatched his enemies with Incredible skill and if that meant
[28:31] with Incredible skill and if that meant leaving bodies behind him Skilling was
[28:33] leaving bodies behind him Skilling was certainly fine about that not feeling
[28:35] certainly fine about that not feeling anything
[28:36] anything blue pie was kind of a mysterious figure
[28:39] blue pie was kind of a mysterious figure he's kind of like the invisible
[28:41] he's kind of like the invisible CEO for a while he was located on the
[28:44] CEO for a while he was located on the seventh floor and there was this long
[28:48] seventh floor and there was this long office and it was all glass enclosed and
[28:51] office and it was all glass enclosed and you would walk by there and it was just
[28:53] you would walk by there and it was just almost all the time it was empty
[28:57] Tales didn't interest Lou pie only two
[29:01] Tales didn't interest Lou pie only two things seemed to motivate pie money and
[29:04] things seemed to motivate pie money and the peculiar fascination with strippers
[29:07] the peculiar fascination with strippers for pie it was all about the numbers
[29:17] he was there every night after work and
[29:19] he was there every night after work and he usually brought some of the Traders
[29:20] he usually brought some of the Traders along with him he spent quite a lot of
[29:22] along with him he spent quite a lot of money there as well much of a charge to
[29:25] money there as well much of a charge to the Enron expense accounts there were
[29:27] the Enron expense accounts there were rumors that he brought strippers up to
[29:28] rumors that he brought strippers up to the trading floor
[29:30] the trading floor almost everyone knew the story the story
[29:32] almost everyone knew the story the story is that because he's kind of a mild
[29:35] is that because he's kind of a mild soft-spoken almost Meek individual that
[29:38] soft-spoken almost Meek individual that maybe the the strippers didn't even
[29:41] maybe the the strippers didn't even believe he was the CEO so he took him up
[29:45] believe he was the CEO so he took him up to his office and I guess they they put
[29:48] to his office and I guess they they put on a little show for him there
[29:54] one night he was at a club and one of
[29:56] one night he was at a club and one of the guys said you know Lou all the rest
[29:58] the guys said you know Lou all the rest of us are single you know we don't have
[30:00] of us are single you know we don't have any problem but how do you keep your
[30:01] any problem but how do you keep your wife from smelling the stripper's
[30:03] wife from smelling the stripper's perfume on you and Lou said oh I've got
[30:05] perfume on you and Lou said oh I've got a secret so I stopped into the gas
[30:07] a secret so I stopped into the gas station on the way home and I spill a
[30:09] station on the way home and I spill a little gasoline on myself and it kills
[30:11] little gasoline on myself and it kills the scent so the other guy shot back
[30:13] the scent so the other guy shot back said but Lou doesn't your wife then
[30:15] said but Lou doesn't your wife then think you're [ __ ] the gas station
[30:16] think you're [ __ ] the gas station attendant in in the context of Lou pie
[30:18] attendant in in the context of Lou pie everyone was horrified that Paul
[30:21] everyone was horrified that Paul fell over the table because Lou pie was
[30:23] fell over the table because Lou pie was not a man to trifle with two days later
[30:25] not a man to trifle with two days later the guy who told the joke as an inland
[30:27] the guy who told the joke as an inland Legend has it was dispatched to Calgary
[30:29] Legend has it was dispatched to Calgary Canada
[30:35] lupai lost all interest in running EES
[30:38] lupai lost all interest in running EES as soon as the numbers got high enough
[30:44] for 100 million dollars
[30:46] for 100 million dollars I don't know if that number's accurate
[30:49] I don't know if that number's accurate plus or minus 20 million and he actually
[30:51] plus or minus 20 million and he actually left Enron with more money than anybody
[30:53] left Enron with more money than anybody 250 million dollars because he sold all
[30:56] 250 million dollars because he sold all his stock in Enron after he got a
[30:59] his stock in Enron after he got a divorce from his wife in order to marry
[31:00] divorce from his wife in order to marry his stripper girlfriend who had had his
[31:02] his stripper girlfriend who had had his child
[31:06] exit from Enron was as mysterious as his
[31:11] exit from Enron was as mysterious as his presence there just sort of one day we
[31:15] presence there just sort of one day we all learned that Lou pie was no longer
[31:17] all learned that Lou pie was no longer the CEO of EES
[31:21] the CEO of EES the lupai flew away from Enron with 250
[31:25] the lupai flew away from Enron with 250 million dollars the divisions he left
[31:28] million dollars the divisions he left behind lost a total of nearly 1 billion
[31:31] behind lost a total of nearly 1 billion but Enron managed to disguise that fact
[31:34] but Enron managed to disguise that fact lupai became the second largest
[31:37] lupai became the second largest landowner in Colorado
[31:43] it's making those numbers and looking
[31:45] it's making those numbers and looking you know to me the real mythology is
[31:48] you know to me the real mythology is high school mythology that you know you
[31:50] high school mythology that you know you wanted to be the most popular guy on
[31:52] wanted to be the most popular guy on Wall Street and you were going to do
[31:52] Wall Street and you were going to do whatever you had to do to stay there and
[31:56] whatever you had to do to stay there and Jeff understood those rules better than
[31:57] Jeff understood those rules better than I think anyone else
[32:01] thank you
[32:03] thank you [Music]
[32:05] [Music] Americans are making
[32:08] Americans are making a dog the stock market soared to near
[32:10] a dog the stock market soared to near record highs yesterday the stock market
[32:12] record highs yesterday the stock market continued it's Bull Run Thursday the Dow
[32:14] continued it's Bull Run Thursday the Dow Rose at nearly 61 points even the person
[32:17] Rose at nearly 61 points even the person with very little disposable income all
[32:20] with very little disposable income all of a sudden began to play in the stock
[32:21] of a sudden began to play in the stock market because nobody could fail because
[32:23] market because nobody could fail because stock prices were just going up and up
[32:25] stock prices were just going up and up and up another day another record and
[32:28] and up another day another record and the internet and Technology stuck just
[32:30] the internet and Technology stuck just going wild gained more than 100 points
[32:32] going wild gained more than 100 points to close at 7 8 95.81 the highest finish
[32:35] to close at 7 8 95.81 the highest finish ever it was a time where we had the
[32:38] ever it was a time where we had the biggest bull market in the history of
[32:40] biggest bull market in the history of the world Ken Lay was right there acting
[32:44] the world Ken Lay was right there acting as a cheerleader obviously our stock has
[32:46] as a cheerleader obviously our stock has been doing very well I think there's a
[32:47] been doing very well I think there's a fairly good chance we could see the
[32:49] fairly good chance we could see the stock price double again over the next
[32:50] stock price double again over the next year at 18 months
[32:54] you love me
[33:00] Enron mounted a campaign to capture the
[33:03] Enron mounted a campaign to capture the hearts and minds of stock analysts the
[33:06] hearts and minds of stock analysts the natural gas stocks include Enron We're
[33:08] natural gas stocks include Enron We're Never Satisfied and I don't want us to
[33:11] Never Satisfied and I don't want us to ever be satisfied with the stock price
[33:12] ever be satisfied with the stock price it should always be higher in run posted
[33:15] it should always be higher in run posted a 30 Jump in second quarter profits as
[33:17] a 30 Jump in second quarter profits as web-based trading boosted its wholesale
[33:19] web-based trading boosted its wholesale energy business the game was played on
[33:22] energy business the game was played on Wall Street and such an established way
[33:24] Wall Street and such an established way throughout the 1990s as long as a
[33:26] throughout the 1990s as long as a company met or exceeded the analyst
[33:29] company met or exceeded the analyst projections for quarterly earnings per
[33:30] projections for quarterly earnings per share the stock went higher the game was
[33:33] share the stock went higher the game was called pump and dump
[33:35] called pump and dump top execs would push the stock price up
[33:37] top execs would push the stock price up and then cash in their multi-million
[33:40] and then cash in their multi-million dollar options people at Enron got paid
[33:42] dollar options people at Enron got paid in large part through stock everyone had
[33:44] in large part through stock everyone had a huge stake in seeing the stock price
[33:46] a huge stake in seeing the stock price go up and it was driven very clearly by
[33:49] go up and it was driven very clearly by the profits every single quarter they're
[33:51] the profits every single quarter they're exceedingly conscious of that Skilling
[33:53] exceedingly conscious of that Skilling was and everyone else in the company was
[33:54] was and everyone else in the company was they posted the stock price in the
[33:56] they posted the stock price in the elevator you were surrounded by the
[33:59] elevator you were surrounded by the health of the company what's the stock
[34:01] health of the company what's the stock price doing we were consumed by it
[34:06] this company was fixated on its stock
[34:09] this company was fixated on its stock price and fixated on a massive public
[34:13] price and fixated on a massive public relations campaign to convince the
[34:16] relations campaign to convince the investment community that they were new
[34:18] investment community that they were new different Innovative almost heralding a
[34:22] different Innovative almost heralding a new era of corporate Enterprise
[34:29] encourage our people to do new things
[34:31] encourage our people to do new things try new things experiment
[34:33] try new things experiment step out We Begin by attracting the kind
[34:36] step out We Begin by attracting the kind of people that are more comfortable in
[34:37] of people that are more comfortable in an environment to change
[34:39] an environment to change you know when you work for Enron you're
[34:41] you know when you work for Enron you're going to see the newest thinking you're
[34:43] going to see the newest thinking you're going to see the newest markets opening
[34:44] going to see the newest markets opening up Enron online a fabulous fabulous
[34:47] up Enron online a fabulous fabulous story probably put on they were so good
[34:49] story probably put on they were so good at their acting that they convinced
[34:51] at their acting that they convinced Corporate America that they were smarter
[34:53] Corporate America that they were smarter than anyone else Alan with our sincere
[34:55] than anyone else Alan with our sincere thanks and admiration we are pleased and
[34:59] thanks and admiration we are pleased and indeed honored toward you the Enron
[35:01] indeed honored toward you the Enron prize for distinguished public service
[35:08] businesses
[35:09] businesses give you 25 they continue to sell the
[35:11] give you 25 they continue to sell the company as being a very stable place
[35:13] company as being a very stable place where it could predictably increase
[35:15] where it could predictably increase profits 10 to 15 percent a year in fact
[35:18] profits 10 to 15 percent a year in fact to get to those numbers everyone was
[35:20] to get to those numbers everyone was doing all sorts of questionable things
[35:22] doing all sorts of questionable things taking enormous risks we like Risk
[35:25] taking enormous risks we like Risk because you make money by taking risks
[35:33] by all accounts Enron was soaring
[35:39] but in reality profits weren't going up
[35:42] but in reality profits weren't going up they were headed in the opposite
[35:44] they were headed in the opposite direction
[35:45] direction Enron had vast natural gas operations
[35:48] Enron had vast natural gas operations all over the world they had cost
[35:50] all over the world they had cost billions to build and most were
[35:52] billions to build and most were performing terribly
[35:54] performing terribly but in other places in the world in
[35:56] but in other places in the world in India great quarter and great year in
[35:58] India great quarter and great year in India phase one of the Ebola is in
[36:01] India phase one of the Ebola is in operation a generating power phase two
[36:04] operation a generating power phase two is financed and is under construction
[36:06] is financed and is under construction my experience indicated there were
[36:08] my experience indicated there were certain places that you assiduously
[36:10] certain places that you assiduously stayed away from and one of them as an
[36:12] stayed away from and one of them as an example was India they built this the
[36:14] example was India they built this the planted India nobody else would do that
[36:16] planted India nobody else would do that at the time they were terrified of
[36:18] at the time they were terrified of investing in India Enron did it and did
[36:20] investing in India Enron did it and did it in a big way
[36:22] it in a big way but Enron had failed to see something
[36:24] but Enron had failed to see something basic India couldn't afford to pay for
[36:27] basic India couldn't afford to pay for the power enron's plant produced
[36:30] the power enron's plant produced now dab Hall is a ruin
[36:34] now dab Hall is a ruin though it lost a billion dollars on the
[36:36] though it lost a billion dollars on the project Enron paid out multi-million
[36:39] project Enron paid out multi-million dollar bonuses to Executives based on
[36:41] dollar bonuses to Executives based on imaginary profits that never arrived
[36:44] imaginary profits that never arrived where was the real money going to come
[36:47] where was the real money going to come from
[36:48] from of course the pressure was enormous you
[36:51] of course the pressure was enormous you had to come up with the next idea that
[36:52] had to come up with the next idea that would break through failure was not an
[36:55] would break through failure was not an option a flurry of buyouts in the
[36:58] option a flurry of buyouts in the corporate world the biggest Enron
[36:59] corporate world the biggest Enron announcing a buyout of Portland General
[37:03] announcing a buyout of Portland General the merger with PGE put Enron in the
[37:05] the merger with PGE put Enron in the electricity business and Portland
[37:07] electricity business and Portland General's position on the west coast
[37:09] General's position on the west coast gave Enron access to the newly
[37:12] gave Enron access to the newly deregulated Market of California
[37:15] deregulated Market of California the merger we think of uniquely
[37:17] the merger we think of uniquely positions us to ultimately become the
[37:20] positions us to ultimately become the largest marketer of electricity and
[37:22] largest marketer of electricity and natural gas at both the wholesale and
[37:24] natural gas at both the wholesale and Retail level Nationwide
[37:27] Retail level Nationwide what brought all this on was with
[37:28] what brought all this on was with deregulation they said that we would not
[37:30] deregulation they said that we would not survive unless we joined forces Enron
[37:33] survive unless we joined forces Enron I'd never heard of them until they were
[37:34] I'd never heard of them until they were going to buy us they slid in here and
[37:36] going to buy us they slid in here and when they purchased PGE all the PGE
[37:39] when they purchased PGE all the PGE stock became Enron just went through
[37:41] stock became Enron just went through stamped every one of them I looked
[37:43] stamped every one of them I looked around me and all the guys that were
[37:44] around me and all the guys that were buying all this Enron they were doubling
[37:46] buying all this Enron they were doubling their money in that whole time since
[37:47] their money in that whole time since then I put the maximum I could into my
[37:50] then I put the maximum I could into my 401 and savings Portland General again
[37:53] 401 and savings Portland General again good earnings and cash flow it's what
[37:56] good earnings and cash flow it's what they call them Wall Street a trust me
[37:58] they call them Wall Street a trust me story people that have been gas pipeline
[38:00] story people that have been gas pipeline workers for decades kept all their money
[38:01] workers for decades kept all their money in the company because I thought it was
[38:03] in the company because I thought it was as traditional and you know safe and
[38:06] as traditional and you know safe and investment as it had always been and it
[38:08] investment as it had always been and it was wasn't anything close to that should
[38:10] was wasn't anything close to that should we invest all of our 401k and Enron
[38:12] we invest all of our 401k and Enron stock absolutely
[38:14] stock absolutely don't you guys agree
[38:16] don't you guys agree [Laughter]
[38:21] [Laughter] [Music]
[38:29] Enron is a big winner today one of the
[38:31] Enron is a big winner today one of the things that fascinated me was that
[38:33] things that fascinated me was that almost all of the Wall Street analysts
[38:35] almost all of the Wall Street analysts who covered Enron had by ratings are
[38:37] who covered Enron had by ratings are strong by ratings on the company's stock
[38:39] strong by ratings on the company's stock why were the analysts blinded to the
[38:43] why were the analysts blinded to the company's deceit we relied on the
[38:46] company's deceit we relied on the information that was available at the
[38:47] information that was available at the time I trusted the Integrity of the
[38:49] time I trusted the Integrity of the company's certified financial statements
[38:51] company's certified financial statements and the representations of the company's
[38:53] and the representations of the company's management and we've been absolutely
[38:55] management and we've been absolutely upfront with the analysts killing was
[38:58] upfront with the analysts killing was the critical component in creating the
[39:00] the critical component in creating the Enron illusion time and time again when
[39:03] Enron illusion time and time again when we had a question to the sell side
[39:05] we had a question to the sell side analysts that they couldn't answer the
[39:07] analysts that they couldn't answer the response was I'll give Jeff a call I'll
[39:10] response was I'll give Jeff a call I'll run this by Jeff by giving Jeff a call
[39:13] run this by Jeff by giving Jeff a call the analysts weren't analyzing at all
[39:16] the analysts weren't analyzing at all they were willing to believe virtually
[39:18] they were willing to believe virtually anything Enron told them
[39:23] [Music]
[39:25] [Music] most of the analysts right now have the
[39:27] most of the analysts right now have the Target price on us from 100 to 115
[39:30] Target price on us from 100 to 115 dollars a share any analyst who didn't
[39:32] dollars a share any analyst who didn't buy the company line became an enemy of
[39:34] buy the company line became an enemy of Enron enron's CFO Andy Fastow had his
[39:38] Enron enron's CFO Andy Fastow had his eye on John Olson one of the only
[39:40] eye on John Olson one of the only analysts skeptical of the Enron story
[39:43] analysts skeptical of the Enron story Enron loved analyst strong buy
[39:45] Enron loved analyst strong buy recommendations Merrill was informed by
[39:48] recommendations Merrill was informed by fast child either you get somebody who
[39:51] fast child either you get somebody who is on board with us and has a strong buy
[39:53] is on board with us and has a strong buy recommendation and loves us at this time
[39:57] recommendation and loves us at this time or we don't do any business with you I
[40:00] or we don't do any business with you I knew that my days were numbered this is
[40:03] knew that my days were numbered this is an abuse Merrill Lynch fired John Olson
[40:06] an abuse Merrill Lynch fired John Olson soon after Fastow rewarded the bank with
[40:10] soon after Fastow rewarded the bank with two Investment Banking Jobs worth 50
[40:12] two Investment Banking Jobs worth 50 million dollars analysts were routinely
[40:15] million dollars analysts were routinely getting large bonuses from the
[40:16] getting large bonuses from the investment banking departments to bring
[40:18] investment banking departments to bring in Investment Banking deals once that
[40:21] in Investment Banking deals once that happens you know never was heard a
[40:23] happens you know never was heard a discouraging word
[40:25] discouraging word while enron's stock kept Rising its
[40:29] while enron's stock kept Rising its businesses kept losing money
[40:31] businesses kept losing money looking at the soaring stocks of the
[40:33] looking at the soaring stocks of the dot-coms Skilling decided to take Enron
[40:36] dot-coms Skilling decided to take Enron into cyberspace
[40:38] into cyberspace we're now in the process of seeing if we
[40:40] we're now in the process of seeing if we can create a bandwidth trading Market
[40:43] can create a bandwidth trading Market Enron is using its knowledge of trading
[40:45] Enron is using its knowledge of trading gas to barter other forms of energy even
[40:48] gas to barter other forms of energy even space on the information superhighway
[40:49] space on the information superhighway called bandwidth henris has worked at
[40:52] called bandwidth henris has worked at Enron for 20 years van run has found a
[40:55] Enron for 20 years van run has found a way to stay ahead of the Curve
[40:57] way to stay ahead of the Curve 7pm
[41:04] one of our themes around here is to
[41:06] one of our themes around here is to always be asking why why something's
[41:09] always be asking why why something's done a certain way or why it's not done
[41:11] done a certain way or why it's not done a different way
[41:17] commodity
[41:18] commodity pork belly
[41:23] why
[41:28] just last week Enron captivated Wall
[41:30] just last week Enron captivated Wall Street with its bold move into Broadband
[41:33] Street with its bold move into Broadband teaming up with Blockbuster to deliver
[41:35] teaming up with Blockbuster to deliver movies on demand it was like being at a
[41:39] movies on demand it was like being at a religious cult meeting people started
[41:41] religious cult meeting people started jumping up from their seats with their
[41:43] jumping up from their seats with their cell phones and their blackberries
[41:44] cell phones and their blackberries running out to the Halls to call their
[41:47] running out to the Halls to call their bosses one analyst summed up his
[41:49] bosses one analyst summed up his recommendation to investors in one word
[41:52] recommendation to investors in one word wow Enron stock soared 34 percent in two
[41:57] wow Enron stock soared 34 percent in two days
[41:58] days and you can tell from the response in
[42:00] and you can tell from the response in the stock market that they like the
[42:01] the stock market that they like the strategy it makes sense they announced
[42:03] strategy it makes sense they announced that they had developed the technology
[42:05] that they had developed the technology it would be in test markets by the end
[42:06] it would be in test markets by the end of the year and the technology works the
[42:09] of the year and the technology works the quality is great and the customers like
[42:11] quality is great and the customers like it so we've made a lot of progress the
[42:13] it so we've made a lot of progress the truth was that Enron was just struggling
[42:15] truth was that Enron was just struggling with the technology for video on demand
[42:18] with the technology for video on demand the technology didn't work and the deal
[42:21] the technology didn't work and the deal with Blockbuster soon collapsed but with
[42:24] with Blockbuster soon collapsed but with the magic of Mark to Market Enron used
[42:27] the magic of Mark to Market Enron used future projections to book 53 million
[42:30] future projections to book 53 million dollars in earnings on a deal that
[42:32] dollars in earnings on a deal that didn't make a penny by the end of the
[42:35] didn't make a penny by the end of the year 2000 Enron was running out of ways
[42:37] year 2000 Enron was running out of ways to make the Broadband business look
[42:38] to make the Broadband business look successful they'd tried every trick in
[42:41] successful they'd tried every trick in the bag to to try to create the illusion
[42:43] the bag to to try to create the illusion of a business where there was none and
[42:45] of a business where there was none and the people who were working there were
[42:46] the people who were working there were getting increasingly desperate the
[42:48] getting increasingly desperate the executive started selling their stock by
[42:51] executive started selling their stock by enron's collapse Ken rice had sold 53
[42:54] enron's collapse Ken rice had sold 53 million
[42:55] million Ken Lay had sold 300 million Cliff
[42:59] Ken Lay had sold 300 million Cliff Baxter 35 million Jeff Skilling 200
[43:02] Baxter 35 million Jeff Skilling 200 million
[43:03] million as the fraud is perpetuated all the
[43:06] as the fraud is perpetuated all the various lies and artifices begin to
[43:09] various lies and artifices begin to convince the ringmaster if you will
[43:11] convince the ringmaster if you will himself
[43:12] himself that it's this own bizarre reality that
[43:16] that it's this own bizarre reality that in fact the fraud is the reality the
[43:18] in fact the fraud is the reality the perception is the reality and as long as
[43:20] perception is the reality and as long as you can keep the perception going on it
[43:22] you can keep the perception going on it really isn't a fraud let's talk about
[43:24] really isn't a fraud let's talk about bandwidth trading what about weather
[43:26] bandwidth trading what about weather options or Futures how is that market
[43:29] options or Futures how is that market yeah we have a marketing weather
[43:34] when Enron announced its latest plan to
[43:37] when Enron announced its latest plan to trade weather people wondered whether it
[43:39] trade weather people wondered whether it was good science or science fiction
[43:43] was good science or science fiction did the weather guys get punished here
[43:45] did the weather guys get punished here if the weather is wrong I mean they're
[43:47] if the weather is wrong I mean they're projecting whip marks on your back there
[43:49] projecting whip marks on your back there Mike unfortunately that's a good call
[43:53] Jeff as time went on had a harder time
[43:55] Jeff as time went on had a harder time admitting things were wrong
[43:58] admitting things were wrong and I have to believe
[44:00] and I have to believe that you know when the lights went out
[44:03] that you know when the lights went out at night he knew what was coming
[44:10] I would liken it to the Titanic when you
[44:13] I would liken it to the Titanic when you got a captain who's saying maintain full
[44:15] got a captain who's saying maintain full speed and they bump into a couple
[44:17] speed and they bump into a couple icebergs and then they still keep full
[44:19] icebergs and then they still keep full speed going
[44:22] speed going the captain of this ship Enron he
[44:25] the captain of this ship Enron he ignored all the warning signs and there
[44:27] ignored all the warning signs and there were plenty of them and the captain of
[44:29] were plenty of them and the captain of the ship was Kenneth Lee
[44:32] foreign
[44:39] [Music]
[44:43] Wall Street history shares plummeted 31
[44:46] Wall Street history shares plummeted 31 percent stocks LED Friday's Fierce
[44:48] percent stocks LED Friday's Fierce sell-off this is really a great wake-up
[44:51] sell-off this is really a great wake-up call millions of nervous investors
[44:53] call millions of nervous investors following the huge drop on Friday the
[44:55] following the huge drop on Friday the Dow Jones Iran was especially a big deal
[44:58] Dow Jones Iran was especially a big deal by the end of the year 2000 because by
[45:00] by the end of the year 2000 because by then most internet companies had already
[45:02] then most internet companies had already begun to fall and everybody on Wall
[45:04] begun to fall and everybody on Wall Street was looking for the next big
[45:05] Street was looking for the next big thing and here you had Enron which
[45:07] thing and here you had Enron which appeared to be this shining star of a
[45:10] appeared to be this shining star of a new economy company at stock price went
[45:11] new economy company at stock price went up 90 percent in the year 2000 and had
[45:14] up 90 percent in the year 2000 and had gone up over 50 percent the year before
[45:16] gone up over 50 percent the year before that it was an ID stock on Wall Street
[45:18] that it was an ID stock on Wall Street one of those companies that can
[45:20] one of those companies that can seemingly do no wrong
[45:23] seemingly do no wrong we were the poster child for the new
[45:25] we were the poster child for the new economy we had this culture that had a
[45:27] economy we had this culture that had a lot of focus on reminding us how good we
[45:30] lot of focus on reminding us how good we were and as that culture emerged then we
[45:32] were and as that culture emerged then we get to Fortune Magazine telling us we
[45:34] get to Fortune Magazine telling us we were the most Innovative Corporation in
[45:36] were the most Innovative Corporation in America then we rarely began to feel
[45:38] America then we rarely began to feel good about ourselves well you all did it
[45:41] good about ourselves well you all did it again
[45:42] again Enron was just recently chosen again for
[45:46] Enron was just recently chosen again for the sixth year in a row in the most
[45:48] the sixth year in a row in the most admired company survey by Fortune
[45:51] admired company survey by Fortune Magazine as the most Innovative company
[45:54] Magazine as the most Innovative company in America
[45:55] in America well deserved well-deserved
[45:58] well deserved well-deserved the sales pitch still sounded good but
[46:01] the sales pitch still sounded good but one investor saw something in enron's
[46:03] one investor saw something in enron's numbers that the stock analysts had
[46:06] numbers that the stock analysts had missed by and large the analysts
[46:08] missed by and large the analysts admitted to us in person it's a black
[46:10] admitted to us in person it's a black box you have to take it on faith who
[46:11] box you have to take it on faith who knows where the earnings come from they
[46:13] knows where the earnings come from they just pop out and all we know is they're
[46:14] just pop out and all we know is they're always good
[46:15] always good and I kept pointing out well yeah isn't
[46:18] and I kept pointing out well yeah isn't that the whole point of if if uh if the
[46:21] that the whole point of if if uh if the black box is there to fool you the
[46:23] black box is there to fool you the numbers are always going to be good
[46:24] numbers are always going to be good until they're not
[46:25] until they're not I'm not a beat reporter so I would have
[46:27] I'm not a beat reporter so I would have had no reason to look at Enron but
[46:31] had no reason to look at Enron but but I should take a closer look at
[46:32] but I should take a closer look at enron's financial statements and it
[46:34] enron's financial statements and it wasn't clear from enron's financial
[46:36] wasn't clear from enron's financial statements that there was fraud here but
[46:37] statements that there was fraud here but what was clear is that something didn't
[46:40] what was clear is that something didn't didn't add up in March 2001 Bethany
[46:43] didn't add up in March 2001 Bethany McLean reported with Fortune Magazine
[46:45] McLean reported with Fortune Magazine first raised questions about enron's
[46:48] first raised questions about enron's financial condition she asked a simple
[46:50] financial condition she asked a simple question in the article that no one
[46:52] question in the article that no one could seem to answer how exactly does
[46:55] could seem to answer how exactly does Enron make its money
[47:00] I very specifically uh remember the
[47:03] I very specifically uh remember the telephone conversation that I had with
[47:05] telephone conversation that I had with uh with the fortune reporter she called
[47:08] uh with the fortune reporter she called up and started asking some very very
[47:10] up and started asking some very very specific questions about accounting
[47:12] specific questions about accounting treatment on things I am not an
[47:13] treatment on things I am not an accountant and I could not answer them
[47:15] accountant and I could not answer them he became really really agitated he said
[47:18] he became really really agitated he said that people who raised questions like
[47:20] that people who raised questions like this were just trying to throw rocks at
[47:21] this were just trying to throw rocks at the company and that I was not ethical
[47:24] the company and that I was not ethical because I hadn't done enough homework
[47:25] because I hadn't done enough homework and if I had done enough homework I
[47:27] and if I had done enough homework I would understand how off base my
[47:28] would understand how off base my questions were Mr Skilling it appears as
[47:32] questions were Mr Skilling it appears as if you were trying to bully someone who
[47:35] if you were trying to bully someone who was asking very basic questions about
[47:38] was asking very basic questions about Enron I said I said to her I have got
[47:41] Enron I said I said to her I have got six minutes left before I have to be in
[47:43] six minutes left before I have to be in a meeting and I can't get into the
[47:46] a meeting and I can't get into the details and I'm not an accountant and
[47:48] details and I'm not an accountant and she said well that's fine we're going to
[47:49] she said well that's fine we're going to do the article anyway and I said if you
[47:52] do the article anyway and I said if you do that I personally think that's
[47:53] do that I personally think that's unethical but then the next day let me
[47:56] unethical but then the next day let me enter the financial officer and our
[47:57] enter the financial officer and our chief Accounting Office sir flew to New
[48:00] chief Accounting Office sir flew to New York at enron's expense to sit down not
[48:02] York at enron's expense to sit down not with the editors but to sit down with
[48:04] with the editors but to sit down with the reporter on that story and help her
[48:06] the reporter on that story and help her understand the questions that she was
[48:08] understand the questions that she was asking and the next day we sat in the
[48:10] asking and the next day we sat in the small dark windowless conference room
[48:12] small dark windowless conference room for about three hours going through the
[48:14] for about three hours going through the various aspects of the company's
[48:15] various aspects of the company's business and I'll never forget this when
[48:17] business and I'll never forget this when the um when the interview was over the
[48:19] the um when the interview was over the other two Executives packed up their
[48:21] other two Executives packed up their things and had left the room and Andy
[48:23] things and had left the room and Andy Fastow turned around and looked at my
[48:24] Fastow turned around and looked at my editor and me and said I don't care what
[48:26] editor and me and said I don't care what you write about the company just don't
[48:28] you write about the company just don't make me look bad
[48:30] make me look bad Fastow had good reasons for not wanting
[48:33] Fastow had good reasons for not wanting to look bad
[48:35] to look bad there were these Partnerships that were
[48:37] there were these Partnerships that were run by Andy Fastow that were doing
[48:39] run by Andy Fastow that were doing business with Enron and these were
[48:41] business with Enron and these were disclosed in the company's financial
[48:42] disclosed in the company's financial statements but I didn't mention them in
[48:44] statements but I didn't mention them in the story I wrote Because I thought well
[48:46] the story I wrote Because I thought well the accountants in the board of
[48:47] the accountants in the board of directors have said that this is okay so
[48:49] directors have said that this is okay so I must be crazy to think there's
[48:50] I must be crazy to think there's anything wrong with this
[48:52] anything wrong with this the story I ran was actually pretty Meek
[48:55] the story I ran was actually pretty Meek the title was is Enron overpriced but in
[48:58] the title was is Enron overpriced but in the end I couldn't prove that it was
[49:00] the end I couldn't prove that it was anything more than an overvalued stock
[49:01] anything more than an overvalued stock and I was probably too naive to suspect
[49:03] and I was probably too naive to suspect that it was anything anything more than
[49:05] that it was anything anything more than that and was her article critical
[49:07] that and was her article critical yes it was
[49:09] yes it was a Fortune magazine article that's out
[49:11] a Fortune magazine article that's out the headline is is Enron stock
[49:12] the headline is is Enron stock overvalued the gist of the article is
[49:15] overvalued the gist of the article is that Enron is sort of a black box which
[49:19] that Enron is sort of a black box which sorry it's true I mean it's just
[49:21] sorry it's true I mean it's just difficult for us to show people the
[49:24] difficult for us to show people the specifics of how money flows through
[49:26] specifics of how money flows through particularly the wholesale business the
[49:28] particularly the wholesale business the entire reason that this analysis was
[49:30] entire reason that this analysis was done by Fortune Magazine is because
[49:32] done by Fortune Magazine is because businessweek had a favorable article
[49:34] businessweek had a favorable article about Enron the week before and there's
[49:37] about Enron the week before and there's this competition that the news the news
[49:39] this competition that the news the news magazines have where one says something
[49:41] magazines have where one says something good the other one has to come and find
[49:43] good the other one has to come and find something bad so I think that was kind
[49:44] something bad so I think that was kind of the Genesis of it so I the the
[49:46] of the Genesis of it so I the the criticism I think is is kind of
[49:48] criticism I think is is kind of ridiculous when Bethany McLean at
[49:51] ridiculous when Bethany McLean at Fortune
[49:52] Fortune started analyzing cash flows and she had
[49:54] started analyzing cash flows and she had this wonderful article saying take a
[49:56] this wonderful article saying take a look at first quarter second quarter
[49:58] look at first quarter second quarter third quarter and end of year
[50:00] third quarter and end of year cash flows there's a reason she didn't
[50:02] cash flows there's a reason she didn't invest in Enron because the financials
[50:04] invest in Enron because the financials didn't make sense but you have to be
[50:06] didn't make sense but you have to be willing to say that the emperor doesn't
[50:08] willing to say that the emperor doesn't have any clothes and
[50:10] have any clothes and this Emperor was pretty powerful
[50:13] this Emperor was pretty powerful we are going to unveil this morning a
[50:16] we are going to unveil this morning a new corporate Vision okay you ready one
[50:19] new corporate Vision okay you ready one two three
[50:23] how's this
[50:25] how's this [Applause]
[50:28] [Applause] it's really hard to know when Enron
[50:30] it's really hard to know when Enron first crossed the line into outright
[50:33] first crossed the line into outright fraud but there isn't any doubt about
[50:34] fraud but there isn't any doubt about who the guy was who led them there was a
[50:37] who the guy was who led them there was a protege of Jeff skillings by the name of
[50:39] protege of Jeff skillings by the name of Andy Fausto
[50:42] Andy Fausto [Music]
[50:48] Andy Fastow was enron's Chief Financial
[50:50] Andy Fastow was enron's Chief Financial Officer his job was to cover up the fact
[50:53] Officer his job was to cover up the fact that Enron was becoming a financial
[50:56] that Enron was becoming a financial Fantasy Land
[50:57] Fantasy Land Enron essentially was losing money on a
[50:59] Enron essentially was losing money on a cash basis year after year and yet it
[51:02] cash basis year after year and yet it was reporting profits so it was defying
[51:04] was reporting profits so it was defying the laws of financial gravity and the
[51:06] the laws of financial gravity and the way he was doing it was with something
[51:07] way he was doing it was with something called structured finance and the
[51:10] called structured finance and the Maestro of all that at Enron was Andy
[51:12] Maestro of all that at Enron was Andy fast down
[51:13] fast down Andy was very young he was hired by Jeff
[51:15] Andy was very young he was hired by Jeff Skilling probably before he was even 30.
[51:18] Skilling probably before he was even 30. and he idolized Jeff Skilling and he
[51:21] and he idolized Jeff Skilling and he certainly wanted to please the boss
[51:24] certainly wanted to please the boss to please the boss fast now had to
[51:27] to please the boss fast now had to figure out a way to keep the stock price
[51:29] figure out a way to keep the stock price up by hiding the fact that Enron was 30
[51:32] up by hiding the fact that Enron was 30 billion dollars in debt
[51:35] billion dollars in debt people pressured by the need to keep the
[51:38] people pressured by the need to keep the stock price up begin to cheat a little
[51:40] stock price up begin to cheat a little bit but then the next quarter comes
[51:43] bit but then the next quarter comes along and you have to cheat a little
[51:44] along and you have to cheat a little more to
[51:46] more to do the new cheating to make up for the
[51:48] do the new cheating to make up for the old cheating
[51:50] old cheating and before long
[51:52] and before long you've created a
[51:55] you've created a momentum that now you can't stop
[51:58] momentum that now you can't stop fast out created hundreds of special
[52:00] fast out created hundreds of special companies to perform a magic trick prop
[52:03] companies to perform a magic trick prop up Enron stock by making its depth
[52:05] up Enron stock by making its depth disappear
[52:06] disappear do outside investors it looked like cash
[52:09] do outside investors it looked like cash was coming in the door in fact Enron was
[52:12] was coming in the door in fact Enron was just stashing its debt in fastao's
[52:15] just stashing its debt in fastao's companies where investors couldn't see
[52:16] companies where investors couldn't see it
[52:18] it it was black magic it really was you
[52:20] it was black magic it really was you were pulling some rabbits out of a hat
[52:25] [Music]
[52:27] [Music] they could bury debt they could bury
[52:29] they could bury debt they could bury losses many of the companies had exotic
[52:32] losses many of the companies had exotic names Jedi chuko Raptors ljm was
[52:37] names Jedi chuko Raptors ljm was fastau's most ambitious creation it
[52:40] fastau's most ambitious creation it would work magic for Enron and it would
[52:42] would work magic for Enron and it would allow Fastow to conjure 45 million
[52:45] allow Fastow to conjure 45 million dollars for himself
[52:48] 450 million dollars
[52:51] 450 million dollars Andy in many ways was someone we all
[52:54] Andy in many ways was someone we all knew didn't have a strong moral compass
[52:56] knew didn't have a strong moral compass it's almost like Jeff Skilling said okay
[52:59] it's almost like Jeff Skilling said okay we're hitting some troubled times let's
[53:01] we're hitting some troubled times let's set up Andy so we can fill the earnings
[53:04] set up Andy so we can fill the earnings holes when we need to knowing that Andy
[53:07] holes when we need to knowing that Andy would probably skim a little bit off
[53:09] would probably skim a little bit off each transaction for himself there's a
[53:12] each transaction for himself there's a body heat kind of angle to this you know
[53:16] body heat kind of angle to this you know where Skilling is
[53:17] where Skilling is Kathleen Turner and Andy is William Hurt
[53:20] Kathleen Turner and Andy is William Hurt You Know in the end he got suckered into
[53:24] You Know in the end he got suckered into helping all the executives meet their
[53:26] helping all the executives meet their earnings what I wish you know in
[53:28] earnings what I wish you know in retrospect I would have never heard of
[53:29] retrospect I would have never heard of ljm is it your contention that you knew
[53:31] ljm is it your contention that you knew of it and it was appropriate Arthur
[53:33] of it and it was appropriate Arthur Anderson and our lawyers had taken a
[53:35] Anderson and our lawyers had taken a very hard look at this structure and
[53:36] very hard look at this structure and they believed it was appropriate but if
[53:38] they believed it was appropriate but if the theory is that fast out went rogue
[53:40] the theory is that fast out went rogue somewhere deep in the jungles of Enron
[53:42] somewhere deep in the jungles of Enron and was a sole agent of the Apocalypse I
[53:46] and was a sole agent of the Apocalypse I just don't buy it Skilling lay and the
[53:49] just don't buy it Skilling lay and the Enron board had signed off on fastau's
[53:52] Enron board had signed off on fastau's ljm funds they saw the benefits of
[53:55] ljm funds they saw the benefits of letting fast dial do deals with himself
[53:58] letting fast dial do deals with himself it is
[54:01] in a secret videotape that surfaced
[54:03] in a secret videotape that surfaced after the bankruptcy fastau can be seen
[54:06] after the bankruptcy fastau can be seen selling ljm to a group of Merrill Lynch
[54:09] selling ljm to a group of Merrill Lynch Bankers he pitches them on the benefits
[54:11] Bankers he pitches them on the benefits of investing in a fund that only buys
[54:14] of investing in a fund that only buys assets from Enron
[54:22] fast down knew what kind of deal he was
[54:24] fast down knew what kind of deal he was offering was Enron CFO he could
[54:27] offering was Enron CFO he could guarantee profits for ljm
[54:33] he has a sort of Cheshire Cat grin on
[54:35] he has a sort of Cheshire Cat grin on his face as he talks about all the ways
[54:37] his face as he talks about all the ways that the fund is going to profit and he
[54:39] that the fund is going to profit and he talks about the informational advantages
[54:40] talks about the informational advantages that he's going to have in his dual role
[54:43] that he's going to have in his dual role as as enron's CFO and as the head of
[54:45] as as enron's CFO and as the head of these funds
[54:54] he was General partner of ljm while at
[54:56] he was General partner of ljm while at the same time being CFO of Enron now
[54:58] the same time being CFO of Enron now that's a whole nother ball of wax when
[55:00] that's a whole nother ball of wax when you want to talk about that conflict of
[55:01] you want to talk about that conflict of interest because you know no human being
[55:04] interest because you know no human being should be put in a situation where
[55:07] should be put in a situation where you know every single transaction they
[55:09] you know every single transaction they decide whether they're looking after
[55:10] decide whether they're looking after enron's best interests or their limited
[55:13] enron's best interests or their limited partners because this ljm partnership
[55:16] partners because this ljm partnership existed solely to do business with Enron
[55:21] financial officer
[55:29] and there are
[55:31] brand Banks who have stepped up this
[55:36] brand Banks who have stepped up this commit they did and why not fast style
[55:39] commit they did and why not fast style was letting them gamble with enron's
[55:41] was letting them gamble with enron's chips fast child was using Enron stock
[55:44] chips fast child was using Enron stock as collateral for a lot of these things
[55:47] as collateral for a lot of these things they are betting their own company on
[55:48] they are betting their own company on the transactions
[55:50] the transactions with the prospect of returns it would
[55:52] with the prospect of returns it would exceed two thousand percent 96
[55:55] exceed two thousand percent 96 individual Bankers invested in ljm and
[55:58] individual Bankers invested in ljm and America's major Banks put up as much as
[56:01] America's major Banks put up as much as 25 million each it's sort of a who's who
[56:04] 25 million each it's sort of a who's who of Wall Street JPMorgan Chase C.S first
[56:08] of Wall Street JPMorgan Chase C.S first Boston Citibank
[56:11] Boston Citibank Merrill Lynch
[56:13] Merrill Lynch Deutsche Bank these are some of the
[56:16] Deutsche Bank these are some of the Premier investment banks in the world
[56:24] it's just amazing how skilled Enron and
[56:27] it's just amazing how skilled Enron and Andy fasta were at working Wall Street
[56:30] Andy fasta were at working Wall Street playing on wall Street's greed in order
[56:32] playing on wall Street's greed in order to get money out of them
[56:34] to get money out of them quote
[56:36] quote Lenin
[56:37] Lenin they were the investment bankers useful
[56:41] they were the investment bankers useful idiots
[56:45] Iran's own misconduct is the growing
[56:48] Iran's own misconduct is the growing evidence that leading U.S financial
[56:50] evidence that leading U.S financial institutions not only took part in
[56:53] institutions not only took part in enron's deceptive practices
[56:56] enron's deceptive practices but at times designed Advanced and
[56:59] but at times designed Advanced and profited from them the Enron fraud is
[57:02] profited from them the Enron fraud is the story of synergistic corruption
[57:04] the story of synergistic corruption there are supposed to be checks and
[57:06] there are supposed to be checks and balances in the system the lawyers are
[57:08] balances in the system the lawyers are supposed to say no the accountants are
[57:11] supposed to say no the accountants are supposed to say no the bankers are
[57:13] supposed to say no the bankers are supposed to say no but no one who is
[57:15] supposed to say no but no one who is supposed to say no said no they all took
[57:18] supposed to say no said no they all took their share of the money from the fraud
[57:19] their share of the money from the fraud and put it in their pockets Enron paid
[57:22] and put it in their pockets Enron paid its advisors well in 2001 the accounting
[57:25] its advisors well in 2001 the accounting firm Arthur Anderson received 1 million
[57:28] firm Arthur Anderson received 1 million a week enron's Law Firm Vincent and
[57:31] a week enron's Law Firm Vincent and Elkins did nearly as well
[57:34] Elkins did nearly as well [Music]
[57:35] [Music] they hand out at the table
[57:38] they hand out at the table paid and as long as Enron continued they
[57:42] paid and as long as Enron continued they received their fees
[57:44] received their fees they were a part of the process so it's
[57:47] they were a part of the process so it's hard now to say oh we didn't know
[57:49] hard now to say oh we didn't know anything had we known then what we know
[57:52] anything had we known then what we know now about enron's practices we would not
[57:55] now about enron's practices we would not have engaged in these transactions with
[57:56] have engaged in these transactions with Enron the facts that we now have come to
[57:58] Enron the facts that we now have come to light about Enron however were not known
[58:00] light about Enron however were not known at the time I believe that the Citigroup
[58:02] at the time I believe that the Citigroup professionals involved with these
[58:04] professionals involved with these transactions acted in good faith I'd
[58:06] transactions acted in good faith I'd like you here to look at one city email
[58:09] like you here to look at one city email exhibit 333 I the email Trail here is
[58:14] exhibit 333 I the email Trail here is all too lurid oh for instance one email
[58:17] all too lurid oh for instance one email I remember where the banker writes Enron
[58:20] I remember where the banker writes Enron loves these deals they produce cash but
[58:24] loves these deals they produce cash but they don't have to show the debt on the
[58:25] they don't have to show the debt on the balance sheet now a high school student
[58:27] balance sheet now a high school student can figure out that the banks were all
[58:30] can figure out that the banks were all knowing participants in this wrongdoing
[58:34] knowing participants in this wrongdoing Merrill Lynch assisted Enron in cooking
[58:36] Merrill Lynch assisted Enron in cooking its books by pretending to purchase an
[58:39] its books by pretending to purchase an existing Enron asset when it was really
[58:42] existing Enron asset when it was really engaged in a loan
[58:45] engaged in a loan the accounting sham involved the sale of
[58:47] the accounting sham involved the sale of an interest in three Nigerian barges
[58:50] an interest in three Nigerian barges Nigeria is a long way from Manhattan yet
[58:54] Nigeria is a long way from Manhattan yet for some reason toward the end of the
[58:55] for some reason toward the end of the fourth quarter in 1999 Merrill Lynch
[58:58] fourth quarter in 1999 Merrill Lynch suddenly decided to buy three Nigerian
[59:01] suddenly decided to buy three Nigerian power barges from Enron Nigerian power
[59:04] power barges from Enron Nigerian power barges have nothing to do with Merrill
[59:06] barges have nothing to do with Merrill Lynch's business it was a blatantly
[59:08] Lynch's business it was a blatantly illegal transaction that was just taking
[59:11] illegal transaction that was just taking the barges getting them off enron's
[59:13] the barges getting them off enron's books having Merrill Lynch if you will
[59:16] books having Merrill Lynch if you will Warehouse them for five months and then
[59:18] Warehouse them for five months and then buying them back Mr Martin you you've
[59:21] buying them back Mr Martin you you've testified here today that there was no
[59:24] testified here today that there was no guarantee and you said that under oath
[59:27] guarantee and you said that under oath here's a document
[59:29] here's a document saying that the head of your whole
[59:31] saying that the head of your whole division here was going to confirm
[59:35] division here was going to confirm that understanding
[59:38] that understanding [Music]
[59:40] [Music] over the year 2001 Skilling became
[59:42] over the year 2001 Skilling became increasingly despondent he'd always been
[59:45] increasingly despondent he'd always been a moody guy but people who knew him said
[59:47] a moody guy but people who knew him said he became just increasingly volatile
[59:49] he became just increasingly volatile soap for work unshaven looking
[59:51] soap for work unshaven looking blurry-eyed and I think it was the
[59:52] blurry-eyed and I think it was the Battle of holding these two totally
[59:54] Battle of holding these two totally disjointed thoughts in his mind at the
[59:57] disjointed thoughts in his mind at the same time one is Enron a superstar
[59:59] same time one is Enron a superstar company and the other of feeling like it
[01:00:01] company and the other of feeling like it was all crumbling away
[01:00:03] was all crumbling away the first cracks in skilling's Public
[01:00:06] the first cracks in skilling's Public Image appeared in a conference call with
[01:00:08] Image appeared in a conference call with analysts in April 2001. and then Jeff's
[01:00:11] analysts in April 2001. and then Jeff's killing uh took questions and uh about
[01:00:14] killing uh took questions and uh about Midway through the session uh there was
[01:00:16] Midway through the session uh there was a question who was sort of aggressively
[01:00:19] a question who was sort of aggressively wondering out loud why it was that Enron
[01:00:22] wondering out loud why it was that Enron as a financial services company in
[01:00:25] as a financial services company in effect could not release a balance sheet
[01:00:28] effect could not release a balance sheet with its earnings statement like most
[01:00:30] with its earnings statement like most financial institutions do you're the
[01:00:32] financial institutions do you're the only financial institution that can't
[01:00:33] only financial institution that can't produce a balance sheet or a cash flow
[01:00:35] produce a balance sheet or a cash flow statement with their earnings
[01:00:42] [ __ ]
[01:00:46] and then quite audibly you could hear
[01:00:48] and then quite audibly you could hear Skilling say [ __ ] and then he said
[01:00:51] Skilling say [ __ ] and then he said [ __ ] as I understand you call him an
[01:00:54] [ __ ] as I understand you call him an [ __ ]
[01:00:55] [ __ ] and this just caused unbelievable
[01:00:57] and this just caused unbelievable amounts of consternation all across Wall
[01:00:59] amounts of consternation all across Wall Street because people thought a Fortune
[01:01:01] Street because people thought a Fortune 500 CEO losing it like this publicly
[01:01:04] 500 CEO losing it like this publicly calling a publicly calling an investor
[01:01:06] calling a publicly calling an investor an [ __ ] if I could go back and redo
[01:01:08] an [ __ ] if I could go back and redo things I would not
[01:01:10] things I would not now have used the term that I used Mark
[01:01:13] now have used the term that I used Mark Palmer and runs Chief Pierre guy even
[01:01:15] Palmer and runs Chief Pierre guy even ran a note up to Skilling telling him to
[01:01:17] ran a note up to Skilling telling him to apologize and he just took the piece of
[01:01:19] apologize and he just took the piece of paper and tucked it under the pile of
[01:01:21] paper and tucked it under the pile of papers on his desk and afterwards and
[01:01:23] papers on his desk and afterwards and runs traders who had erupted in cheers
[01:01:24] runs traders who had erupted in cheers one skill and called this guy an [ __ ]
[01:01:26] one skill and called this guy an [ __ ] made him a sign there was a play off
[01:01:28] made him a sign there was a play off enron's motto ask why and the sign said
[01:01:30] enron's motto ask why and the sign said ask why [ __ ]
[01:01:33] ask why [ __ ] my personal feeling was that Jeff looked
[01:01:36] my personal feeling was that Jeff looked at the numbers
[01:01:37] at the numbers and he knew
[01:01:39] and he knew that we were in a massive hole
[01:01:43] that we were in a massive hole it was the only time but I saw him truly
[01:01:46] it was the only time but I saw him truly truly worried about keeping the stock
[01:01:48] truly worried about keeping the stock price up and he just kept saying to me I
[01:01:51] price up and he just kept saying to me I don't know what the hell I'm going to do
[01:01:57] the Broadband business was in complete
[01:01:58] the Broadband business was in complete meltdown and there are all sorts of
[01:02:00] meltdown and there are all sorts of other problems that Jeff Skilling as the
[01:02:02] other problems that Jeff Skilling as the company's Chief Operating Officer was
[01:02:04] company's Chief Operating Officer was wrestling with in the middle of all of
[01:02:06] wrestling with in the middle of all of this Ken Lay walks into Jeff skillings
[01:02:08] this Ken Lay walks into Jeff skillings at office holding up fabric swatches for
[01:02:11] at office holding up fabric swatches for the new G5 45 Million Dollar corporate
[01:02:13] the new G5 45 Million Dollar corporate jet he wanted to buy and he said that
[01:02:16] jet he wanted to buy and he said that Jeff asked him a very important question
[01:02:18] Jeff asked him a very important question which of these cabin configurations do
[01:02:20] which of these cabin configurations do you like best Jeff
[01:02:23] you like best Jeff while Ken Lay was stressing over the
[01:02:25] while Ken Lay was stressing over the corporate jet EES was headed for a crash
[01:02:29] corporate jet EES was headed for a crash landing
[01:02:30] landing facing 500 million in losses lupai's top
[01:02:33] facing 500 million in losses lupai's top Lieutenant Tom white wondered how EES
[01:02:36] Lieutenant Tom white wondered how EES could show a profit by the end of the
[01:02:38] could show a profit by the end of the quarter
[01:02:39] quarter one of the things that was always a
[01:02:42] one of the things that was always a strange Occurrence at Enron was
[01:02:45] strange Occurrence at Enron was for weeks before a quarterly report
[01:02:49] for weeks before a quarterly report we would be under the impression that we
[01:02:52] we would be under the impression that we weren't going to make our numbers
[01:02:54] weren't going to make our numbers but then somehow miraculously we always
[01:02:56] but then somehow miraculously we always made the numbers and then some but then
[01:03:00] made the numbers and then some but then a question was asked to Tom white how is
[01:03:03] a question was asked to Tom white how is it that we made the numbers and his
[01:03:06] it that we made the numbers and his answer was one word California
[01:03:10] answer was one word California [Music]
[01:03:15] California Here We Come the first Clues
[01:03:20] California Here We Come the first Clues to enron's new strategy hit California
[01:03:22] to enron's new strategy hit California with a jolt
[01:03:24] with a jolt it started at noon rolling across the
[01:03:27] it started at noon rolling across the state Sacramento San Francisco Beverly
[01:03:29] state Sacramento San Francisco Beverly Hills Long Beach San Diego 26
[01:03:33] Hills Long Beach San Diego 26 000 miles of California power mines
[01:03:35] 000 miles of California power mines enough to circle the Earth but for the
[01:03:37] enough to circle the Earth but for the second day in a row not enough
[01:03:39] second day in a row not enough electricity for America's largest state
[01:03:41] electricity for America's largest state and the world's sixth largest economy
[01:03:44] and the world's sixth largest economy the first thing we heard about this
[01:03:45] the first thing we heard about this energy crisis is where our lights are
[01:03:46] energy crisis is where our lights are going to go off in the middle of winter
[01:03:47] going to go off in the middle of winter when we're using half the electricity we
[01:03:49] when we're using half the electricity we normally use during the summer the Bay
[01:03:51] normally use during the summer the Bay Area got hit by not one but two rolling
[01:03:54] Area got hit by not one but two rolling blackouts we only need 28 000 to 30 000
[01:03:57] blackouts we only need 28 000 to 30 000 megawatts in December we have an
[01:04:00] megawatts in December we have an installed capacity in California at the
[01:04:01] installed capacity in California at the time of forty five thousand megawatts
[01:04:03] time of forty five thousand megawatts plenty of power to meet our electric
[01:04:05] plenty of power to meet our electric demand of course we have blackouts in
[01:04:08] demand of course we have blackouts in December the people who control
[01:04:09] December the people who control California's power grids say once again
[01:04:12] California's power grids say once again they're worried about having to black
[01:04:13] they're worried about having to black out the northern half of the state when
[01:04:16] out the northern half of the state when the rolling blackouts started in
[01:04:17] the rolling blackouts started in California there was definitely a lot of
[01:04:18] California there was definitely a lot of excitement in the air it was something
[01:04:20] excitement in the air it was something new it was something that hadn't been
[01:04:22] new it was something that hadn't been encountered before it was how is the
[01:04:24] encountered before it was how is the event going to affect the price of power
[01:04:26] event going to affect the price of power controlled rotating outages are being
[01:04:29] controlled rotating outages are being implemented I knew I knew that there was
[01:04:32] implemented I knew I knew that there was illegality going on I could feel it I
[01:04:34] illegality going on I could feel it I could smell it I could sense it and
[01:04:36] could smell it I could sense it and there was no other explanation because
[01:04:37] there was no other explanation because the numbers just didn't add up we had
[01:04:40] the numbers just didn't add up we had enough power in California it was never
[01:04:42] enough power in California it was never about lack of Supply when I ran for
[01:04:44] about lack of Supply when I ran for governor in 1998 not one human being
[01:04:46] governor in 1998 not one human being asked me about electricity this thing
[01:04:48] asked me about electricity this thing kind of came out of the woods as far as
[01:04:49] kind of came out of the woods as far as I was concerned and I was trying in the
[01:04:51] I was concerned and I was trying in the early days to learn what was happening
[01:04:53] early days to learn what was happening how we could fix the problem
[01:04:57] California was selected by Enron as the
[01:05:00] California was selected by Enron as the prime place to experiment with this new
[01:05:03] prime place to experiment with this new concept of deregulated electricity
[01:05:05] concept of deregulated electricity reducing electricity cost is only one
[01:05:07] reducing electricity cost is only one benefit
[01:05:08] benefit from choice and competition in 1996
[01:05:11] from choice and competition in 1996 under pressure from energy companies
[01:05:13] under pressure from energy companies Governor Pete Wilson and the California
[01:05:15] Governor Pete Wilson and the California legislature passed a bill allowing for
[01:05:17] legislature passed a bill allowing for the deregulation of electricity I wasn't
[01:05:20] the deregulation of electricity I wasn't in the legislature in 1996 but I can
[01:05:22] in the legislature in 1996 but I can tell you that there isn't a legislator
[01:05:24] tell you that there isn't a legislator alive that can tell you with any
[01:05:27] alive that can tell you with any sophistication how a deregulated
[01:05:29] sophistication how a deregulated electricity Market ought to work not a
[01:05:32] electricity Market ought to work not a one
[01:05:33] one California's deregulated system was a
[01:05:35] California's deregulated system was a bizarre compromise between legislators
[01:05:37] bizarre compromise between legislators and free market Advocates the rules were
[01:05:40] and free market Advocates the rules were complicated and hard to follow
[01:05:43] complicated and hard to follow inside Enron California's system was
[01:05:46] inside Enron California's system was little more than a joke and once in
[01:05:48] little more than a joke and once in place Enron made sure that the joke
[01:05:51] place Enron made sure that the joke would be on California I remember the
[01:05:54] would be on California I remember the conversation I'd had with Ken at the end
[01:05:56] conversation I'd had with Ken at the end of it he says well there you go buddy
[01:05:57] of it he says well there you go buddy let me just tell you it doesn't matter
[01:06:00] let me just tell you it doesn't matter really to us what cookie rules you
[01:06:02] really to us what cookie rules you California's put in place I got a bunch
[01:06:05] California's put in place I got a bunch of really smart people down there to
[01:06:06] of really smart people down there to figure out how to make money anyhow
[01:06:10] figure out how to make money anyhow one of the smartest guys at Enron was
[01:06:12] one of the smartest guys at Enron was Tim Belden who ran the West Coast
[01:06:14] Tim Belden who ran the West Coast Trading desk
[01:06:22] [Music]
[01:06:25] [Music] history looking for loopholes that Enron
[01:06:27] history looking for loopholes that Enron could exploit to make money
[01:06:29] could exploit to make money he found plenty after the bankruptcy a
[01:06:32] he found plenty after the bankruptcy a confidential memo surfaced revealing the
[01:06:34] confidential memo surfaced revealing the names of belden's strategies to game the
[01:06:37] names of belden's strategies to game the California market wheel out Get Shorty
[01:06:40] California market wheel out Get Shorty fat boy
[01:06:42] fat boy recently audio tapes of the Enron
[01:06:44] recently audio tapes of the Enron Traders were discovered what do you want
[01:06:46] Traders were discovered what do you want to call this project I had to catchy
[01:06:49] to call this project I had to catchy name for that how about you know
[01:06:51] name for that how about you know something friendly like death star
[01:06:58] the tapes revealed enron's contempt for
[01:07:01] the tapes revealed enron's contempt for any values except one making money
[01:07:05] any values except one making money [Music]
[01:07:10] out of California he just steals only
[01:07:13] out of California he just steals only from California to the tune of a million
[01:07:16] from California to the tune of a million okay he Arbitrage is the California
[01:07:18] okay he Arbitrage is the California Market to the tune of a million bucks or
[01:07:20] Market to the tune of a million bucks or two a day
[01:07:26] an Arbitrage opportunity has been
[01:07:28] an Arbitrage opportunity has been defined to me as any opportunity to make
[01:07:30] defined to me as any opportunity to make abnormal profit so an abnormal profit
[01:07:32] abnormal profit so an abnormal profit would be returns above and beyond the
[01:07:36] would be returns above and beyond the norm I was told that a good Trader is a
[01:07:39] norm I was told that a good Trader is a creative Trader and a creative Trader is
[01:07:41] creative Trader and a creative Trader is a Trader that can find Arbitrage
[01:07:43] a Trader that can find Arbitrage opportunities
[01:07:45] opportunities one of those opportunities was called
[01:07:47] one of those opportunities was called Ricochet I'll see you guys I'm taking
[01:07:50] Ricochet I'll see you guys I'm taking mine to the desert in the midst of the
[01:07:52] mine to the desert in the midst of the energy shortages Enron Traders started
[01:07:55] energy shortages Enron Traders started to export power out of the state when
[01:07:57] to export power out of the state when prices soared they brought it back in
[01:08:00] prices soared they brought it back in yeah
[01:08:08] Traders would stay after a 12-hour shift
[01:08:11] Traders would stay after a 12-hour shift and pour over maps of the Western Energy
[01:08:14] and pour over maps of the Western Energy grid what are the permutations and
[01:08:16] grid what are the permutations and combinations of ways to move power
[01:08:18] combinations of ways to move power around the west and I think that's
[01:08:20] around the west and I think that's something that Enron knew better than
[01:08:22] something that Enron knew better than any other energy marketer in the country
[01:08:24] any other energy marketer in the country period we know all of the California
[01:08:27] period we know all of the California Imports you know all of the California
[01:08:29] Imports you know all of the California road
[01:08:32] road you said you were getting a little
[01:08:33] you said you were getting a little scared of making a little too much and I
[01:08:35] scared of making a little too much and I I tend to agree with you
[01:08:38] I tend to agree with you these are two Traders
[01:08:41] these are two Traders t-r-a-d-e-r-s this is what they say what
[01:08:44] t-r-a-d-e-r-s this is what they say what we did was overbook the transmission
[01:08:45] we did was overbook the transmission line we had the rights on and said to
[01:08:48] line we had the rights on and said to California utilities if you want to use
[01:08:50] California utilities if you want to use the line pay us
[01:08:52] the line pay us by the time they agreed to meet our
[01:08:54] by the time they agreed to meet our price rolling blackouts had already hit
[01:08:56] price rolling blackouts had already hit California and the price for electricity
[01:08:59] California and the price for electricity went through the roof do you have any
[01:09:00] went through the roof do you have any knowledge that this was happening the
[01:09:02] knowledge that this was happening the only the only thing that I'm aware of
[01:09:04] only the only thing that I'm aware of senators there was uh there was a
[01:09:06] senators there was uh there was a difference of opinion on the rules of
[01:09:09] difference of opinion on the rules of the independent system operator it was
[01:09:10] the independent system operator it was just set up the rules weren't quite
[01:09:12] just set up the rules weren't quite quite clear we have Traders here from
[01:09:15] quite clear we have Traders here from Enron who were saying they did something
[01:09:17] Enron who were saying they did something wrong but you don't see anything wrong I
[01:09:19] wrong but you don't see anything wrong I would have one last question and then I
[01:09:21] would have one last question and then I am done
[01:09:22] am done Traders soon discovered that by shutting
[01:09:25] Traders soon discovered that by shutting down power plants they could create
[01:09:27] down power plants they could create artificial shortages that would push
[01:09:30] artificial shortages that would push prices even higher
[01:09:34] hey uh this is David up at Enron there's
[01:09:38] hey uh this is David up at Enron there's not much demand for power at all and
[01:09:40] not much demand for power at all and we're if we shut it down could you bring
[01:09:41] we're if we shut it down could you bring it back up in three or four hours oh
[01:09:43] it back up in three or four hours oh yeah why just go ahead and shut her down
[01:09:45] yeah why just go ahead and shut her down then if that's okay okay when you see
[01:09:48] then if that's okay okay when you see two three energy companies with 30 35
[01:09:51] two three energy companies with 30 35 percent of their entire capacity down
[01:09:53] percent of their entire capacity down for maintenance on a single day
[01:09:55] for maintenance on a single day and
[01:09:57] and as a result the price of electricity
[01:09:59] as a result the price of electricity skyrocking three or four hundred percent
[01:10:00] skyrocking three or four hundred percent and then a week later someone else does
[01:10:03] and then a week later someone else does it up in Northern California you begin
[01:10:05] it up in Northern California you begin to believe something's not smelling
[01:10:06] to believe something's not smelling right here I want you guys to get a
[01:10:09] right here I want you guys to get a little creative okay and come up with a
[01:10:10] little creative okay and come up with a reason to go down like a forced outage
[01:10:12] reason to go down like a forced outage type thing right those guys at the flip
[01:10:16] type thing right those guys at the flip of a switch could just yank the
[01:10:17] of a switch could just yank the California economy on its leash whenever
[01:10:19] California economy on its leash whenever they wanted to and they did it and they
[01:10:21] they wanted to and they did it and they did it and they did it and they made so
[01:10:22] did it and they did it and they made so much money the heart of it is that an
[01:10:25] much money the heart of it is that an industry that went for a hundred years
[01:10:27] industry that went for a hundred years from the days of Edison built the best
[01:10:30] from the days of Edison built the best electrical system in the world sold the
[01:10:33] electrical system in the world sold the power at reasonable prices to Consumers
[01:10:35] power at reasonable prices to Consumers and was very reliable was all of a
[01:10:38] and was very reliable was all of a sudden turned into a casino
[01:10:43] these strategies made some money for
[01:10:45] these strategies made some money for Enron but the real money was made by
[01:10:48] Enron but the real money was made by betting that the price of energy would
[01:10:50] betting that the price of energy would go up it did and the West Coast traders
[01:10:53] go up it did and the West Coast traders made nearly two billion dollars for
[01:10:55] made nearly two billion dollars for Enron that hello
[01:11:02] can't treat electricity like you treat
[01:11:04] can't treat electricity like you treat oranges it's the lifeblood of the
[01:11:06] oranges it's the lifeblood of the society it can't be stored you can't
[01:11:08] society it can't be stored you can't turn these people loose and let them
[01:11:10] turn these people loose and let them just have a quote free market because a
[01:11:14] just have a quote free market because a free market is God damn expensive to
[01:11:17] free market is God damn expensive to customers there would be ample Supply
[01:11:19] customers there would be ample Supply available at the [ __ ] thing
[01:11:22] available at the [ __ ] thing sure there was it wasn't just Enron
[01:11:23] sure there was it wasn't just Enron every company traded according to the to
[01:11:26] every company traded according to the to the rules that California put up there
[01:11:29] the rules that California put up there and where's the future of Enron and
[01:11:31] and where's the future of Enron and we're [ __ ] thinking
[01:11:33] we're [ __ ] thinking that's a billion dollars can you believe
[01:11:35] that's a billion dollars can you believe that
[01:11:37] that will definitely retire by 4 30. and
[01:11:40] will definitely retire by 4 30. and we're talking about a commodity that
[01:11:41] we're talking about a commodity that normally trades in the 35 to 45 dollar
[01:11:44] normally trades in the 35 to 45 dollar range high prices are when it gets in
[01:11:45] range high prices are when it gets in the 50s
[01:11:47] the 50s or a thousand dollars
[01:11:49] or a thousand dollars prices are existed
[01:11:51] prices are existed a thousand bucks forever
[01:11:54] a thousand bucks forever in the market now get rid of them and
[01:11:57] in the market now get rid of them and you know what the people who are strong
[01:11:58] you know what the people who are strong stick around it the Enron Traders never
[01:12:01] stick around it the Enron Traders never seem to step back and say wait is what
[01:12:04] seem to step back and say wait is what we're doing ethical is it in our best
[01:12:05] we're doing ethical is it in our best long-term interests does it help us if
[01:12:08] long-term interests does it help us if we totally rape California does that
[01:12:10] we totally rape California does that Advance our goals of Nationwide
[01:12:12] Advance our goals of Nationwide deregulation instead they sought out
[01:12:14] deregulation instead they sought out every every loophole they could in order
[01:12:16] every every loophole they could in order to profit from California's misery
[01:12:19] to profit from California's misery temperatures in California are hitting
[01:12:21] temperatures in California are hitting higher than 100 degrees fueling
[01:12:24] higher than 100 degrees fueling wildfires and fears that California's
[01:12:26] wildfires and fears that California's strained power grid could once again
[01:12:28] strained power grid could once again near collapse
[01:12:30] near collapse what's happening
[01:12:34] [Music]
[01:12:39] that's a beautiful thing
[01:12:44] I was never comfortable on the trading
[01:12:46] I was never comfortable on the trading floor at Enron
[01:12:48] floor at Enron and if I had questions I I didn't ask
[01:12:51] and if I had questions I I didn't ask them because I didn't want to know the
[01:12:53] them because I didn't want to know the answer
[01:12:55] answer no I didn't want confirmed what what I
[01:12:57] no I didn't want confirmed what what I suspected might be true that what I was
[01:13:00] suspected might be true that what I was doing was in fact unseemly
[01:13:04] doing was in fact unseemly um
[01:13:04] um or was
[01:13:07] or was at least unethical if if not worse
[01:13:11] why did the Traders do what they did was
[01:13:14] why did the Traders do what they did was it their multi-million dollar bonuses or
[01:13:17] it their multi-million dollar bonuses or had Enron found a way to exploit the
[01:13:20] had Enron found a way to exploit the darker side of human behavior
[01:13:28] of evil people was there an evil strain
[01:13:31] of evil people was there an evil strain or could normal people do really bad
[01:13:33] or could normal people do really bad things
[01:13:34] things and so he set up this experiment in the
[01:13:37] and so he set up this experiment in the experiment he had an actor playing an
[01:13:39] experiment he had an actor playing an experimental subject and a real
[01:13:41] experimental subject and a real experimental subject you want to step
[01:13:43] experimental subject you want to step right in here learner to have a seat
[01:13:45] right in here learner to have a seat they went into this room and he had an
[01:13:47] they went into this room and he had an experimenter say and we're going to see
[01:13:49] experimenter say and we're going to see if mild electric shocks will help people
[01:13:51] if mild electric shocks will help people memorize lists
[01:13:53] memorize lists incorrect you'll now get a shock of 75
[01:13:57] incorrect you'll now get a shock of 75 volts
[01:13:58] volts soft hair
[01:14:01] soft hair he kind of did some yelling in there the
[01:14:03] he kind of did some yelling in there the Milgram experiment has a lot to say
[01:14:04] Milgram experiment has a lot to say about Enron because I think people lost
[01:14:07] about Enron because I think people lost their sense of morality like Milgram
[01:14:10] their sense of morality like Milgram once you accepted the idea that behaving
[01:14:12] once you accepted the idea that behaving inhumanely was okay you could do
[01:14:14] inhumanely was okay you could do anything and the shocks increased with
[01:14:16] anything and the shocks increased with the number of mistakes that they made
[01:14:21] I'm not gonna kill that man the subject
[01:14:24] I'm not gonna kill that man the subject the real subject is begging the
[01:14:25] the real subject is begging the scientist looking person to stop too and
[01:14:28] scientist looking person to stop too and the scientist only says the experiment
[01:14:31] the scientist only says the experiment requires that you continue please
[01:14:33] requires that you continue please continue go on please
[01:14:34] continue go on please you accept all the responsibility the
[01:14:37] you accept all the responsibility the responsibility is mine correct please go
[01:14:39] responsibility is mine correct please go on in a way Skilling was almost like the
[01:14:42] on in a way Skilling was almost like the guy telling those people below him that
[01:14:44] guy telling those people below him that it was okay to up the power 420 volts
[01:14:48] it was okay to up the power 420 volts California's Electric utilities may have
[01:14:50] California's Electric utilities may have to pull the plug on millions of
[01:14:52] to pull the plug on millions of customers
[01:14:53] customers the [ __ ] coolest thing I've done
[01:14:58] oh
[01:14:59] oh 435 volts during the height of
[01:15:02] 435 volts during the height of Wednesday's blackout fire Crews had to
[01:15:05] Wednesday's blackout fire Crews had to Free People trapped in elevators
[01:15:21] 450 volts
[01:15:29] we must continue go on please you're
[01:15:31] we must continue go on please you're going to keep giving what 450 volts
[01:15:33] going to keep giving what 450 volts every shot now that's correct continue
[01:15:35] every shot now that's correct continue it's kind of hard to say well we should
[01:15:37] it's kind of hard to say well we should be you know we shouldn't do this even
[01:15:39] be you know we shouldn't do this even though it's allowed because
[01:15:41] though it's allowed because you know I mean that's what we do right
[01:15:44] you know I mean that's what we do right nothing that could happen is [ __ ] an
[01:15:46] nothing that could happen is [ __ ] an earthquake let that thing float out to
[01:15:48] earthquake let that thing float out to the Pacific and put them on [ __ ]
[01:15:49] the Pacific and put them on [ __ ] candles
[01:15:50] candles 450 volts
[01:15:53] 450 volts milgram's Discovery was disturbing 50 of
[01:15:56] milgram's Discovery was disturbing 50 of the subjects were willing to shock to
[01:15:58] the subjects were willing to shock to the death so long as the commands came
[01:16:00] the death so long as the commands came from a seemingly legitimate source
[01:16:12] tonight I'm declaring a state of
[01:16:13] tonight I'm declaring a state of emergency in California to give the
[01:16:16] emergency in California to give the state the authority and the resources to
[01:16:18] state the authority and the resources to keep the lights on in California the
[01:16:20] keep the lights on in California the governor who's been basically
[01:16:22] governor who's been basically capitulating to the demands of the
[01:16:24] capitulating to the demands of the energy companies and the utility
[01:16:25] energy companies and the utility companies needs to put his foot down we
[01:16:27] companies needs to put his foot down we wanted the governor to send in the State
[01:16:29] wanted the governor to send in the State Police or the National Guard to seize
[01:16:31] Police or the National Guard to seize control the power plants and put them
[01:16:33] control the power plants and put them back online and I thought we didn't take
[01:16:34] back online and I thought we didn't take over every plant we really only had to
[01:16:36] over every plant we really only had to take over one because then they would
[01:16:37] take over one because then they would know he meant it I'm going to get the
[01:16:40] know he meant it I'm going to get the nine billion dollars back the Enron
[01:16:42] nine billion dollars back the Enron Diner being Reliant stole from us and
[01:16:45] Diner being Reliant stole from us and get it back to you despite what the
[01:16:47] get it back to you despite what the people in California think enron's
[01:16:49] people in California think enron's making money despite California not
[01:16:51] making money despite California not because of California
[01:16:53] because of California the year-long energy crisis would cost
[01:16:55] the year-long energy crisis would cost the state of California 30 billion
[01:16:58] the state of California 30 billion dollars
[01:17:00] dollars the markets in California are the most
[01:17:03] the markets in California are the most regulated markets in North America today
[01:17:07] regulated markets in North America today that's what's causing the problems
[01:17:09] that's what's causing the problems California is never deregulated and run
[01:17:12] California is never deregulated and run by stock today
[01:17:16] we are doing the right thing you're the
[01:17:19] we are doing the right thing you're the good guys we are the good guys we were
[01:17:21] good guys we are the good guys we were on the side of angels oh I can't help
[01:17:24] on the side of angels oh I can't help myself you know what the difference is
[01:17:25] myself you know what the difference is between the state of California and the
[01:17:27] between the state of California and the Titanic
[01:17:32] and this is being webcast I know I'm
[01:17:33] and this is being webcast I know I'm going to regret this at least when the
[01:17:35] going to regret this at least when the Titanic went down the lights were on
[01:17:39] [Applause]
[01:17:44] a top executive at one of America's
[01:17:47] a top executive at one of America's biggest power companies received a
[01:17:49] biggest power companies received a raucous welcome in San Francisco tonight
[01:17:51] raucous welcome in San Francisco tonight protesters heckled Enron CEO Jeffrey
[01:17:55] protesters heckled Enron CEO Jeffrey Skilling outside and inside during his
[01:17:57] Skilling outside and inside during his appearance Commonwealth Club one of the
[01:17:59] appearance Commonwealth Club one of the protesters even brought a blueberry pie
[01:18:01] protesters even brought a blueberry pie and delivered it herself
[01:18:06] 32 million dollar is what he made we
[01:18:10] 32 million dollar is what he made we have a 50 hike and utility rates
[01:18:13] have a 50 hike and utility rates consumers in California are angry and
[01:18:16] consumers in California are angry and they should be and if we had anything to
[01:18:17] they should be and if we had anything to do with this then we are the stupidest
[01:18:19] do with this then we are the stupidest people in the world
[01:18:30] when the tidal wave of public anger
[01:18:32] when the tidal wave of public anger started to grow Ken Lay flew out here
[01:18:35] started to grow Ken Lay flew out here and convened a meeting of friends and
[01:18:37] and convened a meeting of friends and and I guess he had a little more
[01:18:39] and I guess he had a little more foresight than we did he he invited
[01:18:41] foresight than we did he he invited Arnold Schwarzenegger brought him
[01:18:42] Arnold Schwarzenegger brought him together at the Peninsula Hotel and had
[01:18:44] together at the Peninsula Hotel and had a lunch meeting the notes from that
[01:18:46] a lunch meeting the notes from that meeting really still have never surfaced
[01:18:48] meeting really still have never surfaced but we know that kenley's pitch was
[01:18:51] but we know that kenley's pitch was we've got to stay the course with
[01:18:52] we've got to stay the course with deregulation and the market will correct
[01:18:55] deregulation and the market will correct itself and everything will turn out fine
[01:18:57] itself and everything will turn out fine now at the time we didn't understand
[01:18:59] now at the time we didn't understand really why he was so concerned but now
[01:19:01] really why he was so concerned but now we do the fact is that Kenley was out
[01:19:03] we do the fact is that Kenley was out here because he understood that Enron
[01:19:05] here because he understood that Enron itself was a house of cards and if
[01:19:08] itself was a house of cards and if deregulation were to collapse that Enron
[01:19:11] deregulation were to collapse that Enron itself would collapse
[01:19:13] itself would collapse But Ken Lay had a trump card in the
[01:19:15] But Ken Lay had a trump card in the midst of the energy crisis his friend
[01:19:17] midst of the energy crisis his friend George W bush became president
[01:19:20] George W bush became president George Walker Bush do solemnly swear
[01:19:23] George Walker Bush do solemnly swear George Walker Bush do solemnly swear Ken
[01:19:26] George Walker Bush do solemnly swear Ken Lane is going to be Secretary of Energy
[01:19:28] Lane is going to be Secretary of Energy get out of here
[01:19:30] get out of here how great would that be for all the
[01:19:31] how great would that be for all the players in the market it'd be great I'd
[01:19:33] players in the market it'd be great I'd love to see Kim might be secretary
[01:19:35] love to see Kim might be secretary energy Ken Lay did have easy access to
[01:19:38] energy Ken Lay did have easy access to the Bush Administration on April 17th he
[01:19:41] the Bush Administration on April 17th he met with Vice President Dick Cheney and
[01:19:43] met with Vice President Dick Cheney and strongly argued against the imposition
[01:19:45] strongly argued against the imposition of federal price caps in California
[01:19:47] of federal price caps in California we're doing everything we can to help in
[01:19:49] we're doing everything we can to help in California on a short-term basis there's
[01:19:51] California on a short-term basis there's not a lot you can do you can't
[01:19:52] not a lot you can do you can't manufacture kilowatts in the west wing
[01:19:54] manufacture kilowatts in the west wing of the White House we're fighting with
[01:19:56] of the White House we're fighting with both hands tied behind our back we no
[01:19:57] both hands tied behind our back we no longer have the power to stop this and
[01:19:59] longer have the power to stop this and the federal government doesn't help us
[01:20:00] the federal government doesn't help us we're a dead duck
[01:20:02] we're a dead duck at the time Gray Davis was a likely
[01:20:04] at the time Gray Davis was a likely candidate to run for president Ken Lay
[01:20:07] candidate to run for president Ken Lay knew that might give his friend George
[01:20:09] knew that might give his friend George Bush a political reason to oppose
[01:20:11] Bush a political reason to oppose California's appeals for federal price
[01:20:13] California's appeals for federal price controls they know full well my
[01:20:16] controls they know full well my administration's belief that price
[01:20:19] administration's belief that price controls will not solve the problem his
[01:20:22] controls will not solve the problem his view was that the federal government
[01:20:23] view was that the federal government really shouldn't get involved this is
[01:20:25] really shouldn't get involved this is California's problem
[01:20:26] California's problem and I'm saying with all due respect Mr
[01:20:29] and I'm saying with all due respect Mr President our law said the federal
[01:20:32] President our law said the federal government regulates this so it is your
[01:20:34] government regulates this so it is your problem and you make appointments to the
[01:20:36] problem and you make appointments to the federal derogatory commission so we had
[01:20:37] federal derogatory commission so we had a polite but spirited discussion on that
[01:20:39] a polite but spirited discussion on that and he said I just can't be of helped
[01:20:41] and he said I just can't be of helped you on that as I said from the very
[01:20:42] you on that as I said from the very beginning of my Administration we'll
[01:20:44] beginning of my Administration we'll work to help California in any way we
[01:20:46] work to help California in any way we can
[01:20:47] can and the best way we can is to be good
[01:20:49] and the best way we can is to be good citizens
[01:20:51] citizens ferc the federal agency which regulates
[01:20:54] ferc the federal agency which regulates energy in America refused to intervene
[01:20:58] energy in America refused to intervene what was ferc doing and why was it not
[01:21:00] what was ferc doing and why was it not taking action the chairman of ferc was
[01:21:02] taking action the chairman of ferc was Pat wood the man Ken Lay had personally
[01:21:05] Pat wood the man Ken Lay had personally recommended for the job it was easy for
[01:21:08] recommended for the job it was easy for first to do enron's bidding because all
[01:21:10] first to do enron's bidding because all they had to do was do nothing which they
[01:21:12] they had to do was do nothing which they did very well
[01:21:13] did very well The Regulators are being pressured to
[01:21:15] The Regulators are being pressured to act by the now democratic-controlled
[01:21:17] act by the now democratic-controlled Senate where a Democratic Senate forced
[01:21:19] Senate where a Democratic Senate forced ferc to impose Regional price caps that
[01:21:22] ferc to impose Regional price caps that ended the energy crisis but not the
[01:21:25] ended the energy crisis but not the political one did Ken Lane George Bush
[01:21:27] political one did Ken Lane George Bush have a political agenda to blame the
[01:21:29] have a political agenda to blame the energy crisis on Gray day of the South
[01:21:32] energy crisis on Gray day of the South hello it's one of those only in
[01:21:35] hello it's one of those only in California Stories the state's unpopular
[01:21:38] California Stories the state's unpopular Governor Gray Davis be set by an ailing
[01:21:41] Governor Gray Davis be set by an ailing economy and a 38 billion dollar budget
[01:21:43] economy and a 38 billion dollar budget deficit faces possible recall and
[01:21:46] deficit faces possible recall and rumored as a possible replacement for
[01:21:48] rumored as a possible replacement for Davis movie star Arnold Schwarzenegger
[01:21:51] Davis movie star Arnold Schwarzenegger The Terminator
[01:21:53] The Terminator we'll see whether he's back or not great
[01:21:55] we'll see whether he's back or not great Davis has terminated opportunity now
[01:21:57] Davis has terminated opportunity now it's time to meet germinate Gray Davis
[01:21:59] it's time to meet germinate Gray Davis [Applause]
[01:22:06] could I predict a phony energy crisis as
[01:22:09] could I predict a phony energy crisis as a result of deregulation yes could I
[01:22:12] a result of deregulation yes could I predict that Arnold Schwarzenegger would
[01:22:13] predict that Arnold Schwarzenegger would be our governor as a result of
[01:22:15] be our governor as a result of deregulation never would have come up
[01:22:17] deregulation never would have come up with that that's like a bad science
[01:22:18] with that that's like a bad science fiction movie apparently
[01:22:29] [Applause]
[01:22:42] [Music]
[01:22:45] [Music] we could just hear rumbles all the way
[01:22:47] we could just hear rumbles all the way up and down
[01:22:48] up and down Main Street here and all throughout the
[01:22:50] Main Street here and all throughout the city that things were were very
[01:22:53] city that things were were very difficult at Enron one guy who a year
[01:22:56] difficult at Enron one guy who a year before had come to me and said I'm
[01:22:57] before had come to me and said I'm working for Enron I was very excited but
[01:22:59] working for Enron I was very excited but within a year was waking up every night
[01:23:01] within a year was waking up every night with nightmares I've got no life left
[01:23:04] with nightmares I've got no life left and I feel like I'm being consumed by
[01:23:06] and I feel like I'm being consumed by this company
[01:23:08] this company as doubts began to surface about the
[01:23:10] as doubts began to surface about the company and the erratic behavior of its
[01:23:12] company and the erratic behavior of its CEO Enron stock began to fall
[01:23:16] CEO Enron stock began to fall I remember one of the most poignant
[01:23:17] I remember one of the most poignant meetings I'd ever had with Jeff I had
[01:23:19] meetings I'd ever had with Jeff I had left Enron and I had come over to talk
[01:23:22] left Enron and I had come over to talk about whether or not I would return to
[01:23:23] about whether or not I would return to Enron I said Jeff you've got a real
[01:23:25] Enron I said Jeff you've got a real problem the Traders they will cut your
[01:23:28] problem the Traders they will cut your throat if they think it will get them to
[01:23:30] throat if they think it will get them to the trough sooner
[01:23:32] the trough sooner Jeff was silent
[01:23:34] Jeff was silent and he looked out the window
[01:23:36] and he looked out the window and he looked back at me and he said
[01:23:38] and he looked back at me and he said yeah Amanda
[01:23:40] yeah Amanda you're most likely right
[01:23:43] you're most likely right by the end the Traders ran Enron you
[01:23:46] by the end the Traders ran Enron you know the inmates had taken over the
[01:23:48] know the inmates had taken over the asylum
[01:23:51] all through the summer the stock
[01:23:53] all through the summer the stock continued to decline there was a buzz
[01:23:57] continued to decline there was a buzz that a major announcement was going to
[01:23:59] that a major announcement was going to take place but we all thought that Ken
[01:24:03] take place but we all thought that Ken Lay was leaving
[01:24:05] Lay was leaving Enron and that he had been asked by the
[01:24:08] Enron and that he had been asked by the Bush Administration to join his
[01:24:11] Bush Administration to join his administration but that wasn't the case
[01:24:14] administration but that wasn't the case at all it was Jeff Skilling announcing
[01:24:16] at all it was Jeff Skilling announcing that he was stepping down as a CEO and
[01:24:20] that he was stepping down as a CEO and that took Everyone by surprise no one
[01:24:22] that took Everyone by surprise no one could believe that
[01:24:24] could believe that CEOs generally don't just resign out of
[01:24:28] CEOs generally don't just resign out of the blue without a well-orchestrated PR
[01:24:31] the blue without a well-orchestrated PR campaign beforehand to pave the way so
[01:24:34] campaign beforehand to pave the way so there's no disruption there's no
[01:24:35] there's no disruption there's no questions there's no front page stories
[01:24:37] questions there's no front page stories which of course is exactly what happened
[01:24:41] which of course is exactly what happened it was at that point that I knew the
[01:24:44] it was at that point that I knew the architect of the disaster knows that
[01:24:46] architect of the disaster knows that it's crumbling and the rat is leaving
[01:24:48] it's crumbling and the rat is leaving the sinking ship
[01:24:51] the sinking ship two days later I met with him and Ken
[01:24:53] two days later I met with him and Ken Lay as I had informed the company that I
[01:24:56] Lay as I had informed the company that I was going to downgrade the stock on
[01:24:57] was going to downgrade the stock on skilling's resignation I asked Jeff
[01:25:00] skilling's resignation I asked Jeff Skilling are there any more shoes to
[01:25:02] Skilling are there any more shoes to drop that we've seen the worst of it and
[01:25:04] drop that we've seen the worst of it and I was concerned about the energy crisis
[01:25:06] I was concerned about the energy crisis that was occurring in California
[01:25:09] that was occurring in California well Skilling convinced me that it was
[01:25:11] well Skilling convinced me that it was for personal reasons I left his meeting
[01:25:13] for personal reasons I left his meeting feeling sort of emotional because of the
[01:25:17] feeling sort of emotional because of the concern that he seemed to be showing
[01:25:19] concern that he seemed to be showing about the relationship he had with his
[01:25:21] about the relationship he had with his family
[01:25:21] family he appeared to be distraught and I
[01:25:24] he appeared to be distraught and I remember saying to an investor
[01:25:26] remember saying to an investor if he's not telling the truth then it's
[01:25:29] if he's not telling the truth then it's a good thing he quit his day job because
[01:25:30] a good thing he quit his day job because he needs to go to Hollywood I left Enron
[01:25:33] he needs to go to Hollywood I left Enron on August 14 2001 for personal reasons
[01:25:36] on August 14 2001 for personal reasons was just going a massive earthquake
[01:25:40] was just going a massive earthquake struck Enron right after your departure
[01:25:42] struck Enron right after your departure and people in Far inferior positions to
[01:25:47] and people in Far inferior positions to you could see cracks in the walls feel
[01:25:50] you could see cracks in the walls feel the Tremors feel the windows rattling
[01:25:53] the Tremors feel the windows rattling and you want us to believe that you sat
[01:25:56] and you want us to believe that you sat there in your office and didn't and and
[01:25:58] there in your office and didn't and and had no clue that this place was about to
[01:26:01] had no clue that this place was about to collapse
[01:26:02] collapse on the day I left on August 14 2001 I
[01:26:06] on the day I left on August 14 2001 I believe the company was in strong
[01:26:07] believe the company was in strong financial condition I think he was smart
[01:26:10] financial condition I think he was smart enough and he didn't even have to be
[01:26:11] enough and he didn't even have to be that smart he had seen documents that I
[01:26:14] that smart he had seen documents that I think predicted the future
[01:26:16] think predicted the future I think he was smart enough to think I
[01:26:18] I think he was smart enough to think I can get out now and this company isn't
[01:26:20] can get out now and this company isn't going to collapse
[01:26:21] going to collapse for a year maybe a year and a half so I
[01:26:26] for a year maybe a year and a half so I won't get the blame it was working fine
[01:26:27] won't get the blame it was working fine when I left guys
[01:26:30] when I left guys after Skilling resigned enron's chairman
[01:26:33] after Skilling resigned enron's chairman Ken Lay took over as CEO
[01:26:36] Ken Lay took over as CEO [Applause]
[01:26:46] but thank you thank you very much well
[01:26:49] but thank you thank you very much well I'm delighted to be back
[01:26:51] I'm delighted to be back I'm sorry Jeff did resign it was a
[01:26:54] I'm sorry Jeff did resign it was a stunning announcement that he was
[01:26:57] stunning announcement that he was stepping down as a CEO and I think the
[01:27:00] stepping down as a CEO and I think the flags
[01:27:02] flags um started going up at that point for
[01:27:04] um started going up at that point for everybody we are facing a number of
[01:27:06] everybody we are facing a number of challenges but we're managing them
[01:27:08] challenges but we're managing them indeed I think the worse of that's
[01:27:10] indeed I think the worse of that's behind us
[01:27:12] behind us and the business is doing great we're
[01:27:15] and the business is doing great we're not the only stock that's decreasing
[01:27:17] not the only stock that's decreasing value this year it's just that we've
[01:27:18] value this year it's just that we've been hit a little harder than than many
[01:27:20] been hit a little harder than than many others if a few of these other problems
[01:27:22] others if a few of these other problems disappear uh like California like India
[01:27:26] disappear uh like California like India I think the worst is over and I'm
[01:27:29] I think the worst is over and I'm excited August 14 2001. Jeff Skilling
[01:27:34] excited August 14 2001. Jeff Skilling abruptly resigns when that made me angry
[01:27:36] abruptly resigns when that made me angry it made loads of employees angry I mean
[01:27:39] it made loads of employees angry I mean there was a real sense of betrayal by
[01:27:41] there was a real sense of betrayal by the employees I mean this was you know
[01:27:44] the employees I mean this was you know Jim Jones feeding us the Kool-Aid and
[01:27:46] Jim Jones feeding us the Kool-Aid and then deciding not to drink it himself
[01:27:52] the day after Skilling resigned Sharon
[01:27:55] the day after Skilling resigned Sharon Watkins sent a letter to Ken Lay we will
[01:27:58] Watkins sent a letter to Ken Lay we will begin with Ms Watkins I'm Sharon Watkins
[01:28:01] begin with Ms Watkins I'm Sharon Watkins would you identify your counsel for the
[01:28:03] would you identify your counsel for the committee my counsel is Mr Phillip
[01:28:05] committee my counsel is Mr Phillip Hilder when you hear the story for the
[01:28:08] Hilder when you hear the story for the first time it's unbelievable what Sharon
[01:28:11] first time it's unbelievable what Sharon was telling me
[01:28:12] was telling me was more than accounting regularities as
[01:28:15] was more than accounting regularities as such I mean it was a massive fraud of
[01:28:18] such I mean it was a massive fraud of enormous proportions in mid to late June
[01:28:20] enormous proportions in mid to late June of 2001 upon the resignation of Cliff
[01:28:24] of 2001 upon the resignation of Cliff Baxter I went to work directly for Mr
[01:28:26] Baxter I went to work directly for Mr Fastow it has evolved to the corporate
[01:28:30] Fastow it has evolved to the corporate crime of the century I was highly
[01:28:32] crime of the century I was highly alarmed by the information I was
[01:28:34] alarmed by the information I was receiving
[01:28:35] receiving what Sharon Watkins discovered began the
[01:28:38] what Sharon Watkins discovered began the unraveling of fastau's complex
[01:28:40] unraveling of fastau's complex Partnerships
[01:28:41] Partnerships Andy put me in charge of this asset
[01:28:44] Andy put me in charge of this asset listing and there were about a dozen
[01:28:46] listing and there were about a dozen assets
[01:28:47] assets that that had been hedged with one of
[01:28:50] that that had been hedged with one of Andy's
[01:28:51] Andy's entities the Raptors so I was working
[01:28:54] entities the Raptors so I was working with a spreadsheet and you know the math
[01:28:56] with a spreadsheet and you know the math just didn't add up it didn't make sense
[01:28:59] just didn't add up it didn't make sense to me I mean accounting doesn't get that
[01:29:01] to me I mean accounting doesn't get that creative you know I couldn't believe
[01:29:03] creative you know I couldn't believe that Arthur Anderson had signed off on
[01:29:04] that Arthur Anderson had signed off on it I couldn't believe that so many
[01:29:07] it I couldn't believe that so many people were going along
[01:29:08] people were going along behind fastau's Partnerships were
[01:29:11] behind fastau's Partnerships were enormous guarantees of Enron stock
[01:29:14] enormous guarantees of Enron stock fastile had gambled enron's future on
[01:29:17] fastile had gambled enron's future on the hope that its stock would never fall
[01:29:20] the hope that its stock would never fall my first reaction was that I should warn
[01:29:24] my first reaction was that I should warn kinlay the day after Skilling left I
[01:29:26] kinlay the day after Skilling left I sent this one-page Anonymous letter but
[01:29:29] sent this one-page Anonymous letter but within a week I was meeting with kinlay
[01:29:31] within a week I was meeting with kinlay I'd identified myself in the hopes of
[01:29:33] I'd identified myself in the hopes of really making my point that Enron needed
[01:29:36] really making my point that Enron needed to address this situation I mean
[01:29:37] to address this situation I mean companies rarely get away with cooking
[01:29:39] companies rarely get away with cooking the books but when they do survive it's
[01:29:41] the books but when they do survive it's when they come clean not when they're
[01:29:43] when they come clean not when they're exposed from the outside Ms Watkins I I
[01:29:47] exposed from the outside Ms Watkins I I went Ms Watkins did not talk to me
[01:29:49] went Ms Watkins did not talk to me Senator well Ms Watkins said Clifford
[01:29:52] Senator well Ms Watkins said Clifford Baxter told her that he met with you
[01:29:55] Baxter told her that he met with you repeatedly to express his concern cliff
[01:29:58] repeatedly to express his concern cliff and Andy had had a they didn't like each
[01:30:00] and Andy had had a they didn't like each other they had a very strained personal
[01:30:03] other they had a very strained personal relationship and
[01:30:05] relationship and issue had nothing to do with the
[01:30:07] issue had nothing to do with the appropriateness or inappropriateness of
[01:30:09] appropriateness or inappropriateness of the transaction everything I'd mentioned
[01:30:11] the transaction everything I'd mentioned Cliff Baxter in these memos and I
[01:30:14] Cliff Baxter in these memos and I remember I made the comment to him
[01:30:16] remember I made the comment to him well you're one of the good guys you
[01:30:18] well you're one of the good guys you know you were one of the people fighting
[01:30:19] know you were one of the people fighting against this and it'll be all right and
[01:30:23] against this and it'll be all right and he said oh I don't think it's going to
[01:30:25] he said oh I don't think it's going to be all right for any of us involved in
[01:30:27] be all right for any of us involved in this
[01:30:30] when I started working on the book with
[01:30:32] when I started working on the book with Sharon I was interested in writing about
[01:30:34] Sharon I was interested in writing about a whistleblower people don't really
[01:30:36] a whistleblower people don't really appreciate
[01:30:38] appreciate what she did and The Bravery that it
[01:30:40] what she did and The Bravery that it took in that company Andy fastel would
[01:30:43] took in that company Andy fastel would not have put his hands in the Enron
[01:30:45] not have put his hands in the Enron candy jar without an explicit or
[01:30:47] candy jar without an explicit or implicit approval to do so by Mr
[01:30:49] implicit approval to do so by Mr Skillman I can't for the life of me see
[01:30:52] Skillman I can't for the life of me see what basis she would have for suggesting
[01:30:54] what basis she would have for suggesting that I would know some of that I mean
[01:30:56] that I would know some of that I mean how would she know that and and I don't
[01:30:58] how would she know that and and I don't see that it's at all inconsistent that
[01:31:00] see that it's at all inconsistent that there would be some things I don't know
[01:31:01] there would be some things I don't know if some people purposely kept me from
[01:31:04] if some people purposely kept me from knowing some things I felt like I was
[01:31:06] knowing some things I felt like I was one lone Voice Within Enron saying look
[01:31:09] one lone Voice Within Enron saying look we've committed horrible fraud and of
[01:31:11] we've committed horrible fraud and of course all hell broke loose within six
[01:31:13] course all hell broke loose within six short weeks Enron was spinning out of
[01:31:15] short weeks Enron was spinning out of control
[01:31:20] probably in more normal circumstances I
[01:31:23] probably in more normal circumstances I would add a few more words to say about
[01:31:24] would add a few more words to say about September the 11th just like America's
[01:31:27] September the 11th just like America's under attack by terrorism
[01:31:29] under attack by terrorism I think we're under attack and of course
[01:31:33] I think we're under attack and of course now we've got the SEC
[01:31:36] now we've got the SEC inquiry informal inquiry
[01:31:40] inquiry informal inquiry the SEC launched an investigation when
[01:31:42] the SEC launched an investigation when the Wall Street Journal published
[01:31:44] the Wall Street Journal published articles revealing fastao's murky deals
[01:31:47] articles revealing fastao's murky deals Enron announced massive Financial
[01:31:49] Enron announced massive Financial restatements investors began to worry
[01:31:52] restatements investors began to worry that billions in Mark to Market profits
[01:31:54] that billions in Mark to Market profits were really losses
[01:31:58] as you can foresee the underlying
[01:32:01] as you can foresee the underlying fundamentals of our businesses
[01:32:04] fundamentals of our businesses are very strong
[01:32:05] are very strong indeed the strongest they've ever been
[01:32:08] indeed the strongest they've ever been but regrettably
[01:32:11] but regrettably that's not what Wall Street is focusing
[01:32:13] that's not what Wall Street is focusing on
[01:32:14] on and I doubt that's what you're focusing
[01:32:16] and I doubt that's what you're focusing on this inquiry will take a lot of time
[01:32:19] on this inquiry will take a lot of time on the part of our accountants and
[01:32:21] on the part of our accountants and lawyers and others
[01:32:23] lawyers and others but it will finally put these issues to
[01:32:27] but it will finally put these issues to rest
[01:32:28] rest at the very moment Ken Lay was talking
[01:32:31] at the very moment Ken Lay was talking to employees only a few blocks away
[01:32:33] to employees only a few blocks away enron's accounting firm Arthur Anderson
[01:32:36] enron's accounting firm Arthur Anderson had begun destroying its Enron files
[01:32:40] had begun destroying its Enron files on October 23rd Anderson shredded more
[01:32:43] on October 23rd Anderson shredded more than one ton of paper
[01:32:49] the speculation the company is doing
[01:32:51] the speculation the company is doing well both financially and operationally
[01:32:53] well both financially and operationally he was making all kinds of statements
[01:32:55] he was making all kinds of statements reassuring employees and not just
[01:32:57] reassuring employees and not just employees reinsuring investors we have
[01:33:00] employees reinsuring investors we have no accounting irregularities
[01:33:02] no accounting irregularities the company's in the best shape it's
[01:33:05] the company's in the best shape it's ever been in the standpoint of Enron
[01:33:07] ever been in the standpoint of Enron stock we're going to bring it back
[01:33:09] stock we're going to bring it back we're going to bring it back all right
[01:33:11] we're going to bring it back all right we're down to questions and I've got a
[01:33:14] we're down to questions and I've got a few up here I would like to know if you
[01:33:16] few up here I would like to know if you are on crack
[01:33:18] are on crack [Applause]
[01:33:20] [Applause] if so that would explain a lot if not
[01:33:23] if so that would explain a lot if not you may want to start because it's going
[01:33:24] you may want to start because it's going to be a long time before we trust you
[01:33:26] to be a long time before we trust you again
[01:33:28] again it certainly wasn't clear to anyone at
[01:33:29] it certainly wasn't clear to anyone at Enron much like anyone outside of it
[01:33:31] Enron much like anyone outside of it wasn't really clear what was going on or
[01:33:34] wasn't really clear what was going on or or what was going to happen I know this
[01:33:37] or what was going to happen I know this is a lot of there's a lot of speculation
[01:33:40] is a lot of there's a lot of speculation about Andy's involvement I and the board
[01:33:42] about Andy's involvement I and the board are also sure that Andy has operated in
[01:33:46] are also sure that Andy has operated in the most ethical and appropriate manner
[01:33:48] the most ethical and appropriate manner possible
[01:33:50] possible the next day Andy Fastow was fired when
[01:33:53] the next day Andy Fastow was fired when the Enron board discovered that he had
[01:33:55] the Enron board discovered that he had made more than 45 million dollars from
[01:33:58] made more than 45 million dollars from his ljn Partnerships
[01:34:00] his ljn Partnerships question Mr Fausto is how could you
[01:34:02] question Mr Fausto is how could you believe that your actions were in any
[01:34:05] believe that your actions were in any way consistent with your fiduciary
[01:34:07] way consistent with your fiduciary duties to Enron and its shareholders or
[01:34:10] duties to Enron and its shareholders or with common sense Notions of corporate
[01:34:13] with common sense Notions of corporate ethics and propriety
[01:34:15] ethics and propriety how do you answer Sir Mr chairman on the
[01:34:18] how do you answer Sir Mr chairman on the advice of my counsel I respectfully
[01:34:20] advice of my counsel I respectfully declined to answer the questions based
[01:34:22] declined to answer the questions based on the protection afforded me under the
[01:34:24] on the protection afforded me under the United States Constitution
[01:34:26] United States Constitution [Music]
[01:34:29] Andy in many ways I think he was set up
[01:34:33] Andy in many ways I think he was set up as the Fall Guy all of the Enron
[01:34:35] as the Fall Guy all of the Enron Executives were saying there's your man
[01:34:38] Executives were saying there's your man Andy vastal he's the crook you know he's
[01:34:41] Andy vastal he's the crook you know he's the one that stole from Enron stole from
[01:34:43] the one that stole from Enron stole from ljm he's the one that cooked the books
[01:34:45] ljm he's the one that cooked the books go after him
[01:34:49] I've thought about this and thought
[01:34:51] I've thought about this and thought about this and it couldn't have just
[01:34:52] about this and it couldn't have just been a few Executives at Enron that made
[01:34:56] been a few Executives at Enron that made this happen if you think of the banks
[01:34:59] this happen if you think of the banks involved Chase
[01:35:02] involved Chase Morgan
[01:35:04] Morgan Citibank
[01:35:06] Citibank um the billions in loans Arthur Anderson
[01:35:10] um the billions in loans Arthur Anderson what about Vincent and Elkins the the
[01:35:13] what about Vincent and Elkins the the lawyers that represented us there had to
[01:35:16] lawyers that represented us there had to have been complicity across the board
[01:35:19] have been complicity across the board because it was all too easy
[01:35:22] because it was all too easy all too easy
[01:35:28] the Enron collapse was an enormous
[01:35:30] the Enron collapse was an enormous tragedy
[01:35:32] tragedy this is a company that had over 30 000
[01:35:34] this is a company that had over 30 000 employees and clearly in the company
[01:35:37] employees and clearly in the company that size you have a lot of senior
[01:35:39] that size you have a lot of senior officers that have a lot of authority in
[01:35:41] officers that have a lot of authority in which you place enormous trust cleared
[01:35:43] which you place enormous trust cleared in this case there was at least one Andy
[01:35:46] in this case there was at least one Andy fast out that betrayed that trust
[01:35:49] fast out that betrayed that trust to the extent that I did not know what
[01:35:52] to the extent that I did not know what he was doing that he obviously didn't
[01:35:53] he was doing that he obviously didn't share with me what he was doing
[01:35:55] share with me what he was doing but then indeed I cannot take
[01:35:57] but then indeed I cannot take responsibility for what he did I never
[01:35:59] responsibility for what he did I never heard him say I take responsibility for
[01:36:01] heard him say I take responsibility for a thing sounded to me like the wonderful
[01:36:04] a thing sounded to me like the wonderful movie Chicago
[01:36:06] movie Chicago I was reminded of the puppet strings and
[01:36:08] I was reminded of the puppet strings and the dancers and the tap dancing and
[01:36:11] the dancers and the tap dancing and pointing at the gun the gun the gun I
[01:36:13] pointing at the gun the gun the gun I mean everybody's everybody's in Step but
[01:36:16] mean everybody's everybody's in Step but Johnny I continue to grieve
[01:36:19] Johnny I continue to grieve as does my family
[01:36:21] as does my family over the loss of the company
[01:36:23] over the loss of the company Linda and I and son
[01:36:25] Linda and I and son that reduced from several hundred
[01:36:26] that reduced from several hundred million dollars down to something less
[01:36:29] million dollars down to something less than 20 million dollars on a net worth
[01:36:30] than 20 million dollars on a net worth basis and of course as you said about a
[01:36:32] basis and of course as you said about a million dollars or less in liquidity
[01:36:35] million dollars or less in liquidity I'm
[01:36:37] I'm I don't know whether I'd be rather be
[01:36:39] I don't know whether I'd be rather be shot as a crook or as a as an idiot I
[01:36:43] shot as a crook or as a as an idiot I believe the only venue for me is the
[01:36:46] believe the only venue for me is the riot of Broken Dreams Oh you mean the
[01:36:49] riot of Broken Dreams Oh you mean the Enron right
[01:36:50] Enron right go Enron hit the national psyche it hit
[01:36:52] go Enron hit the national psyche it hit it as sort of the time tested lesson and
[01:36:55] it as sort of the time tested lesson and that is if it looks too good to be true
[01:36:57] that is if it looks too good to be true sometimes it is
[01:37:04] all right broke even
[01:37:15] it is my belief that enron's failure was
[01:37:18] it is my belief that enron's failure was due to a classic run on the bank
[01:37:26] you've seen one but that's got all the
[01:37:27] you've seen one but that's got all the air marks of being a run
[01:37:37] on December 2nd 2001 less than four
[01:37:40] on December 2nd 2001 less than four months after skilling's resignation
[01:37:42] months after skilling's resignation Enron declared bankruptcy
[01:37:46] Enron declared bankruptcy remember
[01:37:49] remember it was just a strange kind of a surreal
[01:37:51] it was just a strange kind of a surreal day we learned around 9 30 about the
[01:37:54] day we learned around 9 30 about the bankruptcy and that we were all being
[01:37:56] bankruptcy and that we were all being let go
[01:37:58] let go we all felt like we were on the Titanic
[01:38:01] we all felt like we were on the Titanic and the last lifeboats had long gone and
[01:38:06] and the last lifeboats had long gone and we were just now on the sinking ship
[01:38:09] we were just now on the sinking ship we had 30 minutes to leave the building
[01:38:12] we had 30 minutes to leave the building and at that point it was no longer like
[01:38:15] and at that point it was no longer like being on the Titanic it was kind of like
[01:38:18] being on the Titanic it was kind of like being under Lusitania the torpedo had
[01:38:20] being under Lusitania the torpedo had hit and there's 20 minutes to to get out
[01:38:26] there's a lot of disbelief very few of
[01:38:30] there's a lot of disbelief very few of the rank and file people ever dreamed
[01:38:33] the rank and file people ever dreamed that Enron would actually go bankrupt
[01:38:36] that Enron would actually go bankrupt [Music]
[01:38:40] and then all of a sudden it was like a
[01:38:41] and then all of a sudden it was like a ghost town
[01:38:44] I can remember going into the old
[01:38:46] I can remember going into the old building on certain floors late in the
[01:38:49] building on certain floors late in the afternoon or evening and it was scary
[01:38:52] afternoon or evening and it was scary there'd be like papers blowing around
[01:38:54] there'd be like papers blowing around and nobody there and and it was it was
[01:38:57] and nobody there and and it was it was just it was very eerie
[01:39:01] good
[01:39:04] Mr Skilling you're opening statement was
[01:39:07] Mr Skilling you're opening statement was extremely compassionate to the employees
[01:39:10] extremely compassionate to the employees and I want to show you a tape and I
[01:39:13] and I want to show you a tape and I believe we have it ready to go listen to
[01:39:16] believe we have it ready to go listen to this can we invest all of our 401k and
[01:39:19] this can we invest all of our 401k and Enron stock absolutely
[01:39:26] why is it that you had begun unloading
[01:39:28] why is it that you had begun unloading your stock
[01:39:29] your stock pretty heavily before that date and yet
[01:39:33] pretty heavily before that date and yet led the employees to think they should
[01:39:35] led the employees to think they should keep buying stock
[01:39:38] um Mr Senator I have been a major
[01:39:41] um Mr Senator I have been a major shareholder in Enron Corporation and you
[01:39:44] shareholder in Enron Corporation and you can take the videotape to me what you
[01:39:45] can take the videotape to me what you want it to mean I was a supporter of
[01:39:47] want it to mean I was a supporter of Enron Corporation you know what happened
[01:39:49] Enron Corporation you know what happened to those people they lost everything I
[01:39:52] to those people they lost everything I feel terrible about what happened to the
[01:39:54] feel terrible about what happened to the employees
[01:39:57] well at one time things were really Rosy
[01:39:59] well at one time things were really Rosy for us and we all had some really nice
[01:40:02] for us and we all had some really nice looking 401ks and pensions and
[01:40:05] looking 401ks and pensions and it peaked and then it just started going
[01:40:07] it peaked and then it just started going down and went lower and lower and lower
[01:40:09] down and went lower and lower and lower the peak I had about 348 thousand and I
[01:40:13] the peak I had about 348 thousand and I sold it all for twelve hundred dollars
[01:40:15] sold it all for twelve hundred dollars that was what I got for it when it was
[01:40:17] that was what I got for it when it was done
[01:40:21] while enron's stock was plummeting the
[01:40:24] while enron's stock was plummeting the retirement accounts of enron's rank and
[01:40:26] retirement accounts of enron's rank and file workers were frozen we were frozen
[01:40:29] file workers were frozen we were frozen out of our accounts it was right about
[01:40:31] out of our accounts it was right about 32 dollars I believe
[01:40:33] 32 dollars I believe and over that time from when it was
[01:40:35] and over that time from when it was frozen to when it opened up I think it
[01:40:37] frozen to when it opened up I think it went down to nine and we could not
[01:40:39] went down to nine and we could not access it and what came out later that
[01:40:41] access it and what came out later that was so bad was the fact that uh Ken Lane
[01:40:44] was so bad was the fact that uh Ken Lane and Skilling and all the top people were
[01:40:46] and Skilling and all the top people were moving their money then
[01:40:48] moving their money then but we couldn't
[01:40:51] the Insiders had sold off a billion
[01:40:54] the Insiders had sold off a billion dollars of their stock compare that to
[01:40:57] dollars of their stock compare that to the linemen who worked for a state old
[01:40:59] the linemen who worked for a state old utility company for most of his life put
[01:41:02] utility company for most of his life put away money each month and what's he have
[01:41:04] away money each month and what's he have to show at the end of the day for his
[01:41:07] to show at the end of the day for his years of hard and decent labor he gets a
[01:41:09] years of hard and decent labor he gets a big goose egg
[01:41:11] big goose egg pie is out in Hawaii somewhere with 350
[01:41:15] pie is out in Hawaii somewhere with 350 million dollars in the bank that's wrong
[01:41:25] they're still to this city a layer of
[01:41:28] they're still to this city a layer of anger and upset
[01:41:30] anger and upset I am still doing counseling three years
[01:41:32] I am still doing counseling three years later with some families
[01:41:36] with some of those who are most
[01:41:38] with some of those who are most reflective it's gone to a deeper layer
[01:41:40] reflective it's gone to a deeper layer and they are looking at the corporate
[01:41:42] and they are looking at the corporate culture itself in this country you know
[01:41:45] culture itself in this country you know you can gain the whole world
[01:41:48] you can gain the whole world and all the Trinkets and all the
[01:41:49] and all the Trinkets and all the trophies of the world the corner office
[01:41:51] trophies of the world the corner office and all the perks
[01:41:53] and all the perks and you really can lose your soul in the
[01:41:56] and you really can lose your soul in the midst of this
[01:41:57] midst of this on January 25th 2002 seven weeks after
[01:42:01] on January 25th 2002 seven weeks after the Enron bankruptcy Cliff Baxter
[01:42:04] the Enron bankruptcy Cliff Baxter committed suicide with the media
[01:42:07] committed suicide with the media hounding him because he was mentioned in
[01:42:09] hounding him because he was mentioned in my memos and the fact that he had been
[01:42:11] my memos and the fact that he had been sued civilly because he'd cashed in for
[01:42:14] sued civilly because he'd cashed in for about 30 million dollars worth of stock
[01:42:16] about 30 million dollars worth of stock I guess it all came crashing down on it
[01:42:19] I guess it all came crashing down on it I think Cliff's suicide note tells it
[01:42:21] I think Cliff's suicide note tells it all you know which where there was once
[01:42:24] all you know which where there was once great pride now there is none
[01:42:28] great pride now there is none [Music]
[01:42:30] [Music] it's very hard for me to talk about
[01:42:32] it's very hard for me to talk about Cliff we were very close for many years
[01:42:36] and he was a wonderful wonderful man
[01:42:40] and he was a wonderful wonderful man but a lot of who Cliff was was tied up
[01:42:43] but a lot of who Cliff was was tied up in how he had succeeded at Enron
[01:42:46] in how he had succeeded at Enron it is hard to look at your life's work
[01:42:49] it is hard to look at your life's work and say
[01:42:50] and say it's failed
[01:42:52] it's failed but you have to take long cold look at
[01:42:55] but you have to take long cold look at yourself and say
[01:42:57] yourself and say who was I
[01:42:59] who was I who did I become
[01:43:01] who did I become and realize
[01:43:03] and realize that you may have seen your shadow
[01:43:07] Andy Fastow pled guilty to conspiracy to
[01:43:10] Andy Fastow pled guilty to conspiracy to commit wire fraud he agreed to Forfeit
[01:43:13] commit wire fraud he agreed to Forfeit 23 million dollars in assets
[01:43:15] 23 million dollars in assets his sentence was reduced to 10 years in
[01:43:19] his sentence was reduced to 10 years in exchange for testifying against other
[01:43:21] exchange for testifying against other Enron executives
[01:43:24] why Enron why not world Worldcom or
[01:43:32] test the brains
[01:43:34] test the brains and wiliness could out-think the way
[01:43:37] and wiliness could out-think the way that the system eventually will work in
[01:43:40] that the system eventually will work in 2004 Jeff Skilling was indicted for
[01:43:42] 2004 Jeff Skilling was indicted for insider trading and conspiracy to
[01:43:45] insider trading and conspiracy to defraud investors pleading innocent he
[01:43:47] defraud investors pleading innocent he paid his attorneys a retainer of 23
[01:43:50] paid his attorneys a retainer of 23 million dollars to defend him
[01:43:55] as an aberration something that can't
[01:43:58] as an aberration something that can't happen anywhere else because it's all
[01:44:00] happen anywhere else because it's all about the rationalization that that
[01:44:03] about the rationalization that that you're not doing anything wrong we've
[01:44:05] you're not doing anything wrong we've involved Arthur Anderson we've involved
[01:44:07] involved Arthur Anderson we've involved the lawyers the bankers know what we're
[01:44:09] the lawyers the bankers know what we're doing there's a sense the diffusion of
[01:44:12] doing there's a sense the diffusion of responsibility everyone was on the
[01:44:14] responsibility everyone was on the bandwagon
[01:44:15] bandwagon and it can happen again
[01:44:19] enron's accounting firm Arthur Anderson
[01:44:21] enron's accounting firm Arthur Anderson was convicted of obstructing justice
[01:44:25] was convicted of obstructing justice with its reputation for honesty
[01:44:27] with its reputation for honesty destroyed America's oldest accounting
[01:44:29] destroyed America's oldest accounting firm fell along with Enron and 29 000
[01:44:33] firm fell along with Enron and 29 000 people lost their jobs Enron
[01:44:36] people lost their jobs Enron shareholders are suing Enron and its
[01:44:38] shareholders are suing Enron and its banks for 20 billion dollars
[01:44:42] banks for 20 billion dollars [Music]
[01:44:44] [Music] Ken Lay was also indicted for conspiracy
[01:44:47] Ken Lay was also indicted for conspiracy to commit fraud his attorney maintains
[01:44:49] to commit fraud his attorney maintains that no one has been hurt more by the
[01:44:52] that no one has been hurt more by the Enron bankruptcy than Ken Lay
[01:44:56] Enron bankruptcy than Ken Lay show up this morning with today's arrest
[01:44:58] show up this morning with today's arrest of Ken Lay
[01:45:01] of Ken Lay top Echelon at Enron has now been called
[01:45:04] top Echelon at Enron has now been called to account for their crimes
[01:45:10] looking at Enron is like looking at the
[01:45:12] looking at Enron is like looking at the flip side of so much possibility because
[01:45:15] flip side of so much possibility because like most things that end terribly it
[01:45:17] like most things that end terribly it didn't start out that way it started
[01:45:19] didn't start out that way it started with a lot of people who thought they
[01:45:21] with a lot of people who thought they were changing the world and over time
[01:45:23] were changing the world and over time they became victims of their own hubris
[01:45:25] they became victims of their own hubris victims of their own greed and so it's
[01:45:27] victims of their own greed and so it's like taking so much promise and
[01:45:29] like taking so much promise and possibility and looking at it in a
[01:45:31] possibility and looking at it in a mirror and seeing the flip side
[01:45:32] mirror and seeing the flip side reflected back at you
[01:45:35] I think the larger lesson was what Enron
[01:45:39] I think the larger lesson was what Enron asked of its employees which was ask why
[01:45:43] asked of its employees which was ask why and you know I I didn't ask myself why
[01:45:47] and you know I I didn't ask myself why enough I didn't ask managers why enough
[01:45:49] enough I didn't ask managers why enough I didn't ask my colleagues why enough
[01:45:56] [Music]
[01:46:04] why
[01:46:18] thank you
[01:46:42] baby
[01:46:52] another look
[01:47:00] is
[01:47:19] Subway Christmas
[01:47:33] [Music]
[01:47:56] loyal
[01:47:57] loyal lawyer
[01:48:03] Christmas
[01:48:09] [Music]
[01:48:31] movies
[01:48:34] [Music]
[01:48:43] who is this
[01:48:47] business