Looking Back at the Fall of Enron
ALEX CHADWICK, host:
In Houston, jury selection is underway today for the trial of former Enron executives Kenneth Lay and Jeffrey Skilling. Both are charged with fraud, conspiracy, and lying to investigators. The trial could last months, and may be as complicated as Enron's accounting techniques. Here now, NPR's Mike Pesca, with the help of some audiotape, recaps how Enron came to this.
MIKE PESCA reporting:
August 23, 2000, the temperatures at Hobby Airport in Houston was in the high 90's, and there was no sign of cooling off. Downtown, it felt hotter, especially over on Smith Street, where in the cool, windowed tower that was Enron headquarters, there was a celebration going on. Enron stock was almost keeping up with the weather. It closed that day at $90.56, a new high.
That phrase, a new high, could describe almost everything about the mood of the company, which once supplied energy, but now seemed to get rich over the idea of energy through ventures, which were hard to fathom. But judging by the Arthur Anderson edited books, hard to knock.
Maybe Enron's Chair, Ken Lay, and its CEO Jeffrey Skilling, just knew something the rest of us didn't. Fed Chairman Alan Greenspan certainly was flattered to be even associated with the company in the form of a prize handed out by Ken Lay.
Mr. KENNETH LAY (Former Enron Chairman): Alan, it is with our sincere thanks and admiration, we're pleased, and indeed honored, to award you the Enron Prize for Distinguished Public Service.
PESCA: Years before, in a videotaped going away present for a top Enron official, Skilling appeared in a skit, joking about using even more fanciful accounting methods than were already employed. The tape, like all of these clips, was included in a documentary Enron, the Smartest Guys in the Room.
Mr. JEFFREY SKILLING (Former CEO, Enron): We're going to move from mark to market accounting to something I call HFV, Hypothetical Future Value accounting.
Unidentified Woman: Whoa.
MR. SKILLING: If we do that, we could add a kazillion dollars to the bottom line.
Unidentified Woman: Whoa. Yeah. All right, that sounds fantastic.
PESCA: It all came true; Enron did make so much money that it rose to Number Seven on the Fortune 500. But by 2001, the tiniest of questions were being raised, first in a Fortune magazine article. Here's how Skilling handled that report.
MR. SKILLING: The entire reason that this analysis was done by Fortune magazine is because Business Week had a favorable article about Enron the week before. And there's this competition that the news magazines have, where if one says something good, the other one has to come and find something bad.
PESCA: And here's how Skilling dispatched with talk that Enron not only profited from the 2001 California energy crisis, but by pushing for deregulation may have helped prompt it.
MR. SKILLING: Oh, I can't help myself. You know what the difference is between the state of California and the Titanic?
(Soundbite of people laughing)
MR. SKILLING: And this being webcast. I know I'm going to regret this. At least when the Titanic went down, the lights were on.
PESCA: Skilling's heart was not in it for much longer, though. By August of 2001, he had abruptly resigned, leaving the grumbles of employees and shareholders all to Ken Lay.
Unidentified Man (Former Enron employee): All Right. We're down to questions. And we've got a few up here. I would like to know if you are on crack?
(Soundbite of people laughing)
Unidentified Man: If so, that would explain a lot. If not, you may want to start, because it's going to be a long time before we trust you again.
PESCA: Today, in a Houston courtroom, they'll choose 12 people who swear to be open minded enough to judge Lay and Skilling fairly. Maybe there's someone in Houston who doesn't know an Enron employee with a ruined pension, or doesn't care that the Astros now play in Minute Maid and not Enron Park, or didn't catch the change of the sign outside the 50-story building on Smith Street.
Highs of 71 are expected in Houston today. Inside the courtroom, it will seem a lot hotter.
Mike Pesca, NPR News, New York.
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