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

Enron also relied heavily on mark-to-market accounting to help it reach its earnings goals. Originally, mark-to-market had been used only in the accounting of natural gas futures contracts—that, after all, is what the Securities and Exchange Commission had agreed to back in 1991. Over the years, Enron had quietly extended the practice. It marked-to

no company can prosper over the long term if every employee is a free agent, motivated solely by greed, no matter how smart he is. No company can function if it only hires brilliant MBAs—and sets them against each other. There is a reason companies value team players, just as there’s a reason that people who get along with others tend to do well in

For the analysts, there was a final reason they needed to keep their buy ratings on Enron: the ugliest and most powerful reason of all. There was simply too much investment-banking business at stake not to have a screaming buy on the stock. In an earlier age, Wall Street research and investment banking had been separated by a so-called Chinese Wall

Once, the company sent an analyst to pose as a porta-potty salesman. His task was to figure out how long a plant was supposed to be under construction so the traders could learn when it might start producing power. Enron sent analysts to meetings of the Washington State’s electric commission, where policy makers talked about the level of water in v

“I knew that what I was doing was misleading,” Fastow told the Las Vegas crowd. “But I didn’t think it was illegal. I thought: That’s how the game is played. You have a complex set of rules, and the objective is to use the rules to your advantage.”

If broadband’s promises and valuation were miles ahead of reality, well, they would ultimately catch up. As Enron people saw it, this was how they always did things. “Our company was running downhill, with our arms pinwheeling, as fast as we can,” says one former executive. “You get to a point where your legs can’t keep up with your body. But we al

Concluding that the energy crisis was bound to mean big changes for the staid old pipeline industry, Lay decided the time was ripe to exit the government and head into the world of business. In September 1973, less than a year after he arrived at the Interior Department, Lay put out a feeler to W. J. (Jack) Bowen, CEO of a midsize pipeline company

At Enron, it was bookable accounting profits, not dollars coming in the door, that mattered. “People did not know the difference between mark-to-market earnings and cash,” says a former trader. “No one ever talked to me about cash,” says another. “It wasn’t on our annual review or included in our targets. It had nothing to do with how we were measu

Other McKinsey partners began saying of Skilling, “Sometimes wrong, but never in doubt.”