The Enron Show: Crime TV and Enron

I’ve been submerged in hardcore crime tv for, oh, about a month now. Everything I watch has the words “forensic”, “investigation”, or “cold” (as in “cold case”) in the title. I’ve always been squeamish about blood and guts but once I got hooked, the viscera seemed to just become background. Even when they showed real murder victims, the reality of it was subjugated to the story: how they got the bad guy. There is intrinsically drama in that narrative: a horrible crime, a good guy and a bad guy. Just add Hollywood.

Though I was watching them compulsively, the shows scared me. I started to hear noises. The sounds of my condo settling around me were suddenly as loud as some stranger breaking in through a window. I would mute the television, then dial 911 and creep to the back rooms, to see if I was really alone. Like so:

Surely I’d have enough time to hit CALL if a madman with a hatchet was crawling through the window, right? I even slept with my phone on my pillow, exactly like that, just waiting for me to hit CALL. You know, just in case a man came in while I was sleeping, and didn’t immediately take the one weapon I had – my phone – before doing something terrible to me.

One afternoon when Forensic Files wasn’t on, I found MSNBC’s To Catch A Predator. The show basically has a private group, Perverted Justice, pose as children attempting to lure adult men into sexual meet-ups. Again, the gratifying part is seeing the man squirm under Chris Hanson’s hard, penetrating stare, and then seeing the police force him to the ground before they haul him away. The interviews are always intriguing, but it is that first shock of knowing that they’re caught that gives you that little jolt of suck on that, jerkwad.

I remembered hearing about a suicide that was caused by To Catch A Predator so I googled. It happened in Texas; a PROSECUTOR was caught attempting to meet a 13 year old boy. He didn’t actually go to the trap house, but he planned to (according to police). When the police knocked on his door, he shot himself in the head.

It was at this point I grew sick with not just To Catch A Predator, but to all of the splash-shows. I realized that the prosecutor’s story was tragic and no matter what he had done, he didn’t deserve to be humiliated to the point of suicide on national television. And all those other stories about the missing girls and the chopped up wives and the poisoned husbands… I realized that at some point this had all become entertaining to me. I wasn’t taking any of it seriously because it isn’t meant to be taken seriously. My silly 911-ready phone? Pure symbolism. There was no chance that if something horrible were happening to me that I would be able to call anyone for help. It was an attempt to feel in control, nothing more. And more to the point, the pursuit of bad guys is mostly symbolic. It is news, maybe, but it is mostly entertainment.

I started to consider Enron in the context of “news-entertainment” and some things became clear:

I do not watch the murder shows to learn how to be safer. Likewise, nobody watched the news about Enron to learn how to “spot fraud” or whatever high-minded motive the news channels decided you should be looking for when you saw Enron stories. It was entertainment. That was all.

Secondly, none of the murder shows has anything whatsoever to do with me (the only exception is a show about a girl named Jennifer who actually survived being raped and cut from ear to ear when she was eight years old; she’s a friend of a friend. FBI Investigations on the ID channel shows her story at least a couple times per year.) The fact that it really happened doesn’t mean it is any more relevant to me, so why am I watching it? I am sure the crime is relevant to the subject’s families and friends, but what is the pull for a total stranger to invest in this story?

Drama, I guess. A nice, neat narrative. You have a full incident (beginning, middle and end). Unlike life, it seems finite and definable. Likewise with Enron, I would guess that 99.98% of the people who discuss Enron and hate the Enron execs have absolutely no connection to Enron at all. They probably didn’t own a single share of Enron stock, or know a single Enron executive, or use a single Enron product. Yet they could invest in the drama that was playing out before their very eyes every night on the six o’clock news. They could easily identify a bad guy (Jeff Skilling) and a good guy (the Department of Justice) and they were happy when Skilling went to prison. Roll credits.

I think because 99.98% of the world experienced Enron only by what they saw on the news, they felt engaged only as long as they were being entertained by the nightly Enron Show. When Jeff Skilling was still in prison a year later, they didn’t care because the show had already ended. It was a post-script about something they no longer cared about. There was another show to watch: The Tyco Show, or the 9/11 Show or the Sarah Palin Show. So who the hell cared about the Jeff Skilling subplot of the Enron Show? That is so last season.

I’m starting to understand now just how deeply entrenched the Enron narrative is in our society. It is not a crime story or even a human interest story. It is a media story. It is the story of how a story became a story.

We’re like people standing around the water cooler talking about the show we saw last night. When one person says, “Hm, I wonder if maybe this meant something else…” the result is astonishment. “Dude, were you even watching the same show we were? It was so obvious that Skilling was the bad guy.”

Maybe not. We’ve seen all kinds of stories about journalistic malpractice, but even skeptics are slow to realize that maybe the Enron Show wasn’t really based on a true story. It was a fictionalized account, even though that news lady looked so earnest when she talked, and the crawler on the bottom of the screen was current.

While I can turn off the programs about murder and mayhem, I can’t turn off the Enron Show. There is still so much to correct. So much still to say.

Rex Shelby Sentencing – 4.2

This blog post by Mary Flood angered me. She writes:

This just in from the AP about the sentencing of one of the nicest guys I’ve ever covered in a case like this, Rex Shelby:

The “Rex Shelby” link goes to a cute document Rex wrote many a year ago and then the rest of her post is quoting the AP about Rex’s sentencing. This angers me because Mary Flood seems to love Rex now (and many other execs) but she was just as deaf to their side of the story when the trials were happening as Loren Steffy or anyone else. One Enron exec told me, “Mary seems much nicer now.” When I asked why, this person said that the prosecution was so ridiculous and nasty after the trial that they were a little more jaded. But it took until the end of the trial for them to start writing anything even remotely objective about the Broadband Seven (later the Broadband Three).

I guess it irks me that those who slammed these fine men are now ready to be all buddy-buddy with them. I say the good men of Enron don’t need fair-weather friends like this. You made your pro-prosecution bed, Mary, you lie in it.

Loren Steffy Still Slamming Enron

Loren Steffy is at it again.

The Doofus Defense is under attack. As longtime readers know, I coined that term leading up to the trial of Enron executives Ken Lay and Jeff Skilling, who, facing criminal charges, suddenly claimed to be woefully ignorant of their company’s actions.

Hey, that’s awesome Loren! You coined a term – that’s so cool. Do you have any other tricks? How about a modicum of journalistic integrity?

Besides that, Jeff Skilling and Ken Lay never claimed to be woefully ignorant of their company’s actions – a fact that Loren Steffy knows quite well. But when there are lies to perpetuate, and a chance to use your own term – Doofus Defense… wow, how would anyone have ever gotten along without that? – then what does the actual, reality-based truth matter?

Lay and Skilling didn’t invent the Doofus Defense, of course, and in the decade since Enron’s collapse, it has become a popular ploy among executives who were happy to accept accolades for rising stock prices during the boom but loath to accept responsibility for their companies’ fall.

More blather. The rest of the article – or rather, opinion piece – goes on and on about how unfair it is that executives are compensated handsomely while, when the companies go bust, they claim to know nothin’ about birthin’ no companies.

In the first place, I’ve never heard an executive claim that he knew nothing about his company. The truth is more more comprehensible than that. Executives normally don’t know what is going on in every cube of a multi-billion dollar international corporation. If that is Steffy’s real accusation I happily concede – it is true that Jeff Skilling didn’t know everything going on in every office, every cube, and every casual gossipy conversation that took place in the dressing room of Enron’s sweet, sweet tricked-out gym in the basement.

But I would challenge Steffy to tell me what is happening just one floor above his at the Chron. Come on, Steff, you know how its done, show us some leadership. Tell us everything happening in the building. Tick tock tick tock.

WSJ Mentions Gimien Article, Doesn’t Mention “Enron Revisionists”

WSJ mentions the Gimien article about “Enron Revisionists” but doesn’t mention ANY of the arguments that we, the so-called “revisionists” are making. Indeed it only gives Gimien a platform to continue to naysay the entire enterprise:

Granted, it’s not a twelve-page dissection of the piece, but for goodness sakes, at least mention what Gimien is arguing against.

Bethany McLean and Me

A difficult admission: Bethany McLean reminds me of me. Or rather, how I used to be. I identify with her ambition, and the fact that she tried to join a man’s world. For her, it was the Goldman Sachs trading program. For me, it was engineering. I hated engineering, but I felt it was important to complete the program because I wanted to prove that I was smart, and that was the single best way I could think to do so. Bethany’s presence in the Goldman Sachs program was probably a lot like mine in engineering school: since she was one of the few women in the program, and because she was very pretty, the boys inflated her ego with their attentions, and probably covered up her lack of accomplishment for a while. This is how it was for me in engineering. When I could not complete a problem set, there were constellations of boys who would offer to help, and then when I still wasn’t understanding it, to just do the work for me so I could turn it is as mine with the promise to spend a weekend studying so I really grasped the material.

Unlike Bethany, I didn’t wash out. I gutted it out, slaving for C’s, ecstatic when my models worked, in tears when I couldn’t get through the calculus of a particularly petrifying problem. At some point, Bethany threw up her hands and left the program. Then she did something she probably knew, instinctively, that she should have been doing the whole time: writing about the men who actually could do the things she had dreamed of doing.

The fundamental act of writing is observing. And I can imagine she was observing the traders with their high-frequency intelligence with both awe and envy.

I know because that’s how I observed real engineers. They seemed to have more substance than me. They were doing work that was somehow more genuine than my own. They were the really smart ones; I was just a girl.

For Bethany, it was easier to write than to do. And she probably enjoyed being in the confidence of the men she admired. So when business leaders and hedge fund managers began to confide in her, it was probably a satisfying substitute to genuine achievement. It felt very close to accomplishment.

That is why I understand why she began to do the dirty work of James Chanos. He was important! He was rich and famous and he was a player, all the things that made her feel seen. So when he asked her to “look into” Enron, of course she would! Someone at the top was finally giving her some attention. Her journalism skills could be put to work for something meaningful.

Her passion for the prosecution of Enron is matched only by my passion for the defense of Enron. I understand how the subject can fascinate, and drag you into its vortex. It creates its own orbit. And with so many people – not least of which her husband, the prosecutor Sean Berkowitz – feeding her information, urging her on, of course she would abandon her journalist ethics and become just a pundit.

Basically Bethany and I took the same path and ended up in two different places.

Someone who used to work with her said to me that it wasn’t personal with her. I believe she doesn’t think its personal but when she began to date Sean Berkowitz, of course it was personal. She wanted her boyfriend to win. That is completely understandable. Like all of us, she has an agenda.

I don’t hate Bethany. I know it sounds like I do, but I don’t. She is unlike the other Enron-bashers. Sherron Watkins isn’t a fair fight for me because she’s so obviously an opportunistic nothing: she is far too easy to dissect and expose. Others suffer the same lack of challenge. But Bethany is my equal. Bethany and I both consider ourselves writers, we have followed similar career paths. Bethany is prone to over-admiration of her subjects as I am. So we have a lot in common.

Our likenesses diverge there, however.

The difference between us is I finally learned the brain-meltingly dull skills of engineering. I finally got my hands dirty with it, and achieved a reasonable level of competence. Bethany never did learn how to be a magnificent trader. She’s still writing about Wall Street. She somehow never moved on.

Loren Steffy Cites Unindicted Co-Conspirator In Latest Column

Writing in the Herald Tribune, a Sarasota paper, Loren Steffy said something odd. Granted, most of his stuff is just corporate conspiracy junk, but this was about Enron and thus, it is my business.

Not long ago, an unindicted co-conspirator in the Enron case asked me why the cleanup of the financial crisis lacked the zeal for justice that drove the Enron prosecutions.

It’s a fair point. Enron and the other corporate scandals shook our faith in big companies, but they didn’t undermine the entire financial system.

I wonder if Steffy understood what the UCC was trying to say. I don’t think I am misunderstanding the UCC because every person I’ve spoken to who has anything at all to do with Enron agrees on one central point: the government was overzealous in its prosecution of Enron. The executive here, in Steffy’s column, seems to be making that point – but it reads as if Steffy is saying that since it was justified at Enron, a dramatic over-prosecution of the financial crisis is also in order.

I think the reason we don’t have people testifying before congress about their role in the crisis is because it was caused by the government! Chris Dodd, Barney Frank, and their cocksucking toadies at Fannie and Freddie are responsible. Since the government is at fault, they aren’t going to prosecute themselves. They won’t accept any responsibility for their actions. Enron executives readily admit to mistakes. Every single one of them have admitted in court to making mistakes. But those mistakes did not equate to criminal liability.

On this point Steffy and I agree: Enron didn’t undermine the entire financial system. I am relieved and happy that he has finally changed his mind on that score.

Is Enron Overpriced?

Bethany McLean’s Fortune article Is Enron Overpriced?

Chron Still Can’t Get Facts Straight About Shelby

In Saturday’s Chron was the exciting and good news that Robert Furst has entered into a deferred prosecution agreement with the Justice Department under which if he commits no crimes in the next year, and complies with other rules, the government will dismiss the charges pending against him in a case that arose from transactions involving Nigerian barges.

But the report also mentions:

In another Enron case, the 5th U.S. Circuit Court of Appeals Friday refused to dismiss charges against Rex Shelby, a defendant in a case involving Enron’s broadband unit. Shelby hoped the Supreme Court victory of a co-defendant would lead to the dismissal of his case too, but the appellate court sent it back to Houston for retrial.

Mary Flood, as is so often the case when the Chronicle reports on Enron, has her facts wrong. Rex Shelby’s Motion to Dismiss was denied on April 23, 2010. Not “Friday”.

It is a small mistake, but it builds upon an entire body of knowledge that is wrong. Dates, times, amounts – they seem small but they’re important. Get them right.

Thus, when I read about Furst’s deal I was very pleased and happy for him – if disgusted that he had to spend seven years being a defendant in the first place. But I must wonder how much of the Chron’s report is actually based in fact and how much is sloppy reporting.

What would be a good benchmark? That the Chron is reliably accurate 30% of the time when reporting on Enron? 50% ? Certainly not 80%. So let’s split the difference and say that the Chron is reliably accurate approximately 75% of the time. That means there’s a full quarter of stuff out there about Enron that is conjecture, opinion (not news), and general journalistic malpractice.

Enron and the people victimized by the Department of Justice in their relentless pursuit of scalps deserve better. They deserve fair, accurate reporting from the Chron, but since they won’t get it, they can, at least, come here – to the Enron blog.

You’re welcome.

Minyanville Screws Up Enron Article

Minyanville has an article about something – I really wasn’t even paying attention because the grammar was just awful, I couldn’t wade through it. But I did force myself to read the Enron parts:

I was an investor in Enron and was on the earnings conference calls with Ken Lay, Jeff Shilling, and Andrew Fastow. I knew something was wrong with Enron’s meteoric rise, but I couldn’t put my finger on it and consequently I lost money. I subsequently learned during the collapse about the new world of offshore accounting and financial instruments such as SPEs (Special Purpose Entities). How companies could legally move debt off their asset ledger. A few years later, I again knew something was terribly wrong as I watched housing prices explode and witnessed kids buying McMansions and driving prestigious cars, with jobs that didn’t appear to be able to support this lifestyle. I subsequently learned during the financial crisis about the mysterious world of financial instruments such as CDS, CDO, CLO et al and the vehicles such as SIVs (Structured Investment Vehicles) that allowed banks and financial instruments to circumvent capital requirements and move debt off their balance sheet. The resulting Shadow Banking System flooded the global financial markets with cheap, highly available credit to anyone that had a pulse.

I left a comment on the site point out that the name is Jeff Skilling, and that the SPE’s didn’t “collapse”. I probably over-criticized the writer, and I do regret that. But we have had ten years – a whole decade – to try and figure out what happened at Enron. At the very, very least I would ask that anyone who writes about Enron actually get the names correct and secondly, please have a basic grasp of the facts.

It is so easy to smear Enron. You will seldom be cross-checked because most people generally believe that Enron was corrupt and the list of crimes you heap upon the company is never ending. It’s false; Enron was not corrupt. I won’t even argue about that if journalists and commentators actually start getting the basic facts correct.

I ask for so little. I just ask that you know what you’re talking about when you’re talking about Enron. I don’t have to agree with your opinion, I just have to agree on the facts. So please, Minyanville (who I actually like – I read that website almost every day), get your facts straight.

An Unbiased Look At Honest Services By The Mainstream Media

Timothy Sandefur, writing for Forbes, has an interesting column about the nature of vague laws. He uses Jeff Skilling as an example of the victimization that happens when laws are too broadly defined:

On March 1 the Supreme Court heard arguments challenging the constitutionality of a law so broadly worded that nobody–not even the nation’s most respected legal experts–can understand or explain its provisions. This law, known as the “honest services fraud” statute, makes it a federal crime to “deprive another of the intangible right of honest services”–whatever that means.

The case–one of three now before the Court involving this statute–arose from the prosecution of Enron CEO Jeffrey Skilling, who was convicted in 2006 of several charges stemming from that company’s scandalous collapse. He and his company may indeed have defrauded people, but the question here isn’t whether Enron broke the law, it’s what actions will federal prosecutors target next? Or are there boundaries to protect innocent citizens from being branded criminals?

The statute’s elastic language makes this a real threat. Last year Justice Antonin Scalia pointed out that if taken literally the honest services law would make it a crime to call in sick to work and go to a ball game instead. Other federal courts have tried to improvise: In 2003 a team of seven judges wrote a long decision patching together a complicated test for determining whether a person is in violation. But six judges on that same court dissented. How can average Americans be expected to understand the law if even federal appellate judges are divided on its meaning?

[Sidebar: I love Antonin Scalia's comment about the ball game.]

I find this a refreshingly honest look about the Honest Services statute. I always like to point out that Kevin Howard – bless his heart – went through two trials fighting Honest Services. He won. The District Court vacated his conviction and the Fifth Circuit Court of Appeals upheld the District Court’s decision. Then the government removed the “Honest Services” language from the indictment, and eventually Kevin just got tired and agreed to plead guilty.

Unfortunately, Kevin Howard isn’t the only one in the Enron cases who had to deal with that kind of whiplash (Nigerian Barge defendants did too.)

But Jeff Skilling is the only Enron defendant to make it to the Supreme Court on the question of Honest Services. I sincerely hope that Antonin Scalia’s skepticism of Honest Services remains, and is shared by a majority of other justices. The law is ridiculous.

Though it no longer matters, Jeff Skilling is actually innocent.

That will be lost in the chaos when he’s freed. People will call this a “technicality” or whatever. But the fact is, he’s innocent and that’s why he’s appealing.

Enron Showdown at the New York Times

Maureen Dowd concludes a column ostensibly about Catholic sex-abuse scandals as follows:

Vatican lawyers will argue in negligence cases brought by abuse victims that the pope has immunity as a head of state and that bishops who allowed an abuse culture, endlessly recirculating like dirty fountain water, were not Vatican employees.

Maybe they worked for Enron.

James Taranto of the Wall Street Journal opines excitedly:

That last line is unmistakably a shot at Dowd’s Times colleague Paul Krugman. If you know the backstory behind this, please email us!

I like James Taranto and read his column every day. But with his constant note that Paul Krugman worked for Enron, he is guilty of the same snarkiness Dowd exhibits.

Former Enron employees, even the evil or stupid ones, like Krugman, should be proud to have worked in a place that was so good. I can’t help but believe that Krugman’s mortal soul was actually elevated the few times he interacted with Enron executives.

Enron was a good, ethical place to work. The fact that it is used as a punchline now speaks more to the creative bankruptcy of political pundits than it does of the company itself.

Today In Enron History

March 5, 2001, Fortune published Bethany McLean’s article, Is Enron Overpriced? The backstory of this article is as interesting as the actual article. She was prompted by Jim Chanos to look into “irregularities”. Conveniently, this is also when Chanos began to short massive amounts of Enron stock. McLean did as she was told and began to write the skeptical article about Enron. She phoned Jeff Skilling to get some comments and Jeff was about to walk into a meeting so he said he’d fly some people to New York to chat with her about Enron. Andy Fastow, Rick Causey and a few others were called on for the fun task.

I would be very curious to see the actual notes from that meeting. Andy Fastow has never talked about it. Rick Causey certainly never has either. So basically we have to take McLean’s word for the proceedings, something I am not inclined to do.

McLean claims that as the Enron executives were leaving, Fastow quipped, “Say whatever you want about the company. Just don’t make me look bad.”

I’m just not believing that Fastow had the foresight to say any such thing.

Skilling would point out that Business Week wrote a favorable article about Enron that same week, and the two magazines were rivals – thus if BW said something complimentary, Fortune had to counter it with something negative. But I think even Skilling couldn’t see all the pieces at that point. He had no idea that people were out to get him, destroy his company, and make lots and lots of money.

Skilling Coverage Already Wrong

Here is Mary Flood’s article this morning in the Houston Chronicle — it made the front page. Note the error in the sidebar about Yeager:

“Prosecutors eventually decided not to retry him.”

No, the SCOTUS and the 5th Circuit compelled the dismissal of his remaining charges! Sheesh, the difference is significant!

Skilling made Fox News this morning, complete with videos of him and Petrocelli. It is interesting that the news coverage seems a bit more balanced now. However, the comments on Flood’s article are the same “burn Skilling” stuff as always — this is good support for the change of venue argument.

Enron Among Top Ten Business Scandals

Big surprise, right? But Business Pundit goes a step farther than the usual talk of scam-scam-scam and accuses Enron of bribing foreign officials, an allegation I’ve never even heard before. That allegation is certainly not reflected in any of the charges against any Enron employee. Actually, now that I re-read the allegations, I realize the person who wrote that has no idea at all what Enron was accused of doing:

manipulating the Texas power market, bribing foreign governments to win contracts abroad and manipulating the California energy market.

They were accused of manipulating the California Energy Market (however absurd that allegation might be) but they were never accused of messing with Texas or bribing anyone.

Is it too much to ask that a modicum of research be done before casting allegations? Pretty please? With a cherry on top?

James Taranto: NYT Is Worse Than Enron

I like James Taranto of the WSJ, and read his column every day. His reference to Paul Krugman of “former Enron adviser Paul Krugman” is a little annoying because, though I have no respect for Krugman, of course I hold Enron in the highest esteem. So today when Taranto found something even worse than being an ‘Enron adviser’, I was amused:

Is there anything Rasmussen Reports won’t take a poll on? From the firm’s latest release:

In one sample, John Fund was viewed favorably by 12% of voters and unfavorably by 22%. . . . However, when Fund was identified with the Wall Street Journal, his numbers jumped to 34% favorable and 20% unfavorable.

But mentioning the New York Times seems to have the opposite effect:

Most voters (55%) don’t know enough about [former Enron adviser] Paul Krugman to venture even a soft opinion about him. Those with an opinion are fairly evenly divided—22% favorable and 22% unfavorable. A new Rasmussen Reports national telephone survey finds that just one-in-10 voters has a strong opinion about Krugman, with four percent (4%) voicing a Very Favorable opinion and six percent (6%) a Very Unfavorable view.

But if people are asked about New York Times columnist Paul Krugman, the numbers shift significantly. Once he is identified with that publication, his unfavorable ratings jump 15 points to 37%. The number with a Very Unfavorable view more than triples to 20%. However, Krugman’s favorable ratings show little improvement, inching up only three points to 25%.

Rasmussen says the results “highlight the importance of question wording, especially for lesser known people such as Krugman.” To our mind, though, the more significant finding is that the New York Times is even more unpopular than Enron.