10 Reasons Houston Doesn’t Care About Enron Anymore

Forbes has published an article titled Why Houston Doesn’t Care About Enron Anymore.

On the face of it, it is good news. It’s over: hooray! But there are also some really cruel remarks about Ken Lay, which are just inappropriate.

Houston healed up, as did the rest of the country, so I guess we can all put away our Ask Why stickers and go home. Oh, except for the Jeff Skilling and the other innocent people who went to prison for nothing more than the aggrandizement of the DOJ.

Time does heal the collective. We don’t sit around and bawl our eyes out over 9/11 every day, or malinger over a loved one who passed away when we were 6 years old. But the individuals of the injustice – Jeff Skilling, Rex Shelby, Scott Yeager, Andy Fastow and many others – can hardly be expected to simply shake it off. It is their life we’re moving on from, and whatever scars they have won’t go away so easily.

The world really is moving on. I was a decade younger when I began writing about Enron, and I am not the same person I was. Yet the agony and injustice of it still eats at me. That angst is precious to me; it is what I have instead of justice. It reminds me of how brilliant some human beings are, and what can be accomplished with skill and competence instead of glamour and glitz. It motivates me to do better. To reach farther. And it reminds me to quietly whisper to myself, every once in a while, “fuck the police.”

Jeff Skilling Accepts Plea Deal

Jeff Skilling has accepted a plea deal that will see him released from prison in 2017; he will forfeit $40 million and will give up the right to appeal his conviction.

It’s a bitter pill to swallow that the former Enron CEO will end up serving eleven years in prison for something that is clearly not his responsibility. However, I understand Skilling’s fatigue. I know it from other Enron execs who have said they’re exhausted from fighting and simply give in. It took Jeff Skilling much longer to break.

I am relieved that there is an end in sight. Not a perfect end. Not a just end. But an end.

More to come.

Most Innovative Company in America

This fascinating article caught my attention. It is about how researchers created a better tablet/smartphone typing interface during their research work with Enron emails. How appropriate that Enron is associated with yet another innovation!

Fortune Magazine named Enron “Most Innovative Company in America” for six years in a row, 1996 – 2001. Even rabid Enron detractors admit that the designation was deserved — Enron was a transformative company during a period of rapid business model adjustments in America. In every market it entered, Enron brought not just new product and service ideas, but new business model approaches. Enron was consistently ranked near the top of everyone’s lists in quality of management, employee talent, and quality of products and services. Enron was a bold company in the best tradition of American free enterprise. Enron embraced and tried to manage the risk inherent in trying out new ideas.

One of the comments I have seen frequently in the transcripts of attorney interviews with potential witnesses is the belief that Enron tried too many new ideas at once and that, in doing so, its management team “reached too far beyond its grasp”. Because the federal government, after many years of investigations and prosecutions, found little compelling evidence of criminal wrongdoing at Enron, this “too many balls in the air” explanation makes a certain amount of sense to me — it is consistent with the Enron culture of encouraging experimentation that is clear from a reading of Enron documents.

A possible downside of having the kind of success that Enron had in hiring the brightest people from America’s top universities is that the company’s average employee age was remarkably young, and these young, ambitious Enronites were eager to spread their wings and make an impact. As I pour through hundreds of thousands of pages of Enron documents, it is incredible to see the number of ideas being actively pursued by Enron employees, with the support of Enron management. Enron Broadband Services (EBS) was a huge innovation in itself, a pioneer in cloud-based services, “we have an app for that”, usage-based billing, etc. — a business model and technologies that now are dominant among America’s most successful technology companies.

So effusive was the outpouring of entrepreneurial ideas at Enron that, in 2000, the company launched a separate business unit, called Enron Xcelerator, to help evaluate and foster business and product ideas from Enron employees. This does not match the contrived portrait of the Enron culture that you have been getting from the government and media, does it? Instead of a culture based on greed and bloodthirsty competition, Enron actually developed a culture that encouraged and nurtured innovation.

In fact, I would say that it was an excess of innovation, not greed, that led to Enron’s downfall. And, if you must fall, that is definitely the way to go!

Why Enron Is (Still) Important

I have been researching and writing about Enron for more than a decade now. People often ask me why I continue to write about the topic. I have answered that question a number of times on this blog. The critical importance of the subject matter is obvious — Enron Corporation was a ground-breaking American enterprise, and the Enron legal events were among the most important criminal prosecutions in American history. I also believe that the Enron prosecutions were, collectively, one of the major witch hunts in American history, and it is important that we draw lessons from the prosecutorial abuse which permeated the Enron legal proceedings.

However, in addition to those subject matter reasons for my interest in Enron, I have also experienced an evolution in my perspective on the subject which has kept my interest alive over the years and which has refreshed the topic for me on a regular basis. When I first learned of the federal government claims of criminal activity at Enron, I simply assumed, like most people, that the government had done a thorough investigation and had sound reasons for their accusations. I am pretty much a “law and order” person, so I fell easily into the “bring the evil criminals to justice” knee-jerk mindset.

However, as I began to research Enron, I was frustrated by the shallowness of the reporting on the Enron proceedings in the mainstream media, and I was surprised at the irrational character of the anti-Enron hysteria in the press and public. I had worked in a company that did business with Enron, and I had interacted many times with Enron employees — the characterizations of Enron and Enron executives being hawked by the media simply did not match my own experiences. I begin to be dismayed by the lack of rigorous analysis by journalists and the general absence of press and public skepticism about the specter of the federal government hounding private citizens.

That initial frustration and dismay begin to turn into anger as I dived more deeply into my research. It took relatively little digging to see that there were huge holes in the Department of Justice (DOJ) tale of Enron. I was perplexed at why the press was not jumping all over the inconsistencies. As indictments were delivered against former Enron employees, the text of which was often laughably internally inconsistent, it became clear to me that most of the press was so gleeful at the prospect of having “greedy lying bastards” to write about that they were largely uninterested in pursuing the actual facts. And the public seemed to be wallowing in the mindless comfort of the simplistic morality tale of evil business executives which quickly congealed into the Enron Myth. That the Enron Myth persisted in the face of revelations about “questionable tactics” by the federal prosecutors (the quote is from prosecutor John Kroger), turned my anger into a kind of smoldering indignation which fueled a large number of my posts about the Enron legal proceedings.

Gradually, the outrage has evolved to where I find myself now — with a determination to use the Enron legal fiasco to help people understand the flaws in our criminal justice system and to motivate the need for reform. The Enron proceedings offer textbook examples of many of the major problems with the American criminal justice system — abusive plea bargains, over-charging, witness intimidation, suppression of exculpatory evidence, statute creep, broken grand jury system, etc. — the list is long and shameful. You may have already noticed the increasing focus of my blog posts on drawing out the lessons we should learn from the Enron witch hunt. I will be expanding on this reform focus as I go forward.

But don’t worry. For the many readers who also have told me they like my lighter, more irreverent and satirical posts, there will be plenty of those also. And thanks to all my readers, new and old — you are another reason why it has been so rewarding writing about Enron!

Andy Fastow To Keynote ACFE Conference

Andy Fastow, former CFO of Enron Corporation, is set to speak at this year’s ACFE Fraud Conference. On the speaker’s page, Mr Fastow is titled “Convicted Fraudster”, which sounds a little unkind, especially for someone who is, you know, volunteering to speak at your conference (Mr Fastow is not being paid for his appearance.) They could have simply titled him “Former Enron CFO” or some such. But nope, they gotta make their bones I guess.

Status of Jeff Skilling

I’ve got a few queries about the status of Jeff Skilling. This is all I know:

The Court has stayed his re-sentencing pending a new motion for appeal that Skilling’s attorneys have indicated that they will file. The attorneys have said that the appeal will focus on the government withholding exculpatory evidence related to interviews the government conducted with witnesses (perhaps Fastow). Skilling’s attorneys have repeatedly (at least 4+ times and for at least 6 months) asked for the Judge to delay the date by which this motion must be filed. The current due date for the new appeal motion is Feb. 8th.

Enron’s Lies vs Everybody Else’s Lies

Enron was accused of lying many times, but perhaps most vividly about its capabilities at Enron Broadband Services. Joe Hirko was accused of lying in a press release about Enron’s acquisition of WarpSpeed. A press release which was demonstrably factual and accurate and which was incidentally seen by perhaps five journalists in the entire world. Rex Shelby, Ken Rice, Kevin Hannon, Scott Yeager, and others were accused of lying at the 2000 Analyst Conference about the capabilities of the Broadband Operating System and EIN. None of their so-called lies were actually proved to be lies — and certainly not by the standard of the super-hyped tech sector of the late 1990s and early 2000s.

So when I came across this Apple report from 2004, I was goggle-eyed. Steve Jobs said at an analyst conference that there was no video iPod in the works.

Mr. Jobs addressed the issue of video on iPods when asked by Mike Wendland of the Detroit Free Press whether or not Apple was looking to add features to the iPod. “We want it to make toast,” replied Mr. Jobs. “We’re toying with refrigeration, too.” While intended to get a laugh, which it did, Mr. Jobs also offered a more substantive answer as to why Apple had heretofore not added too many features to the iPod. “One of the things we say around Apple, and I paraphrase Bill Clinton from the 1992 presidential race, is ‘It’s about the music, stupid.’” Mr. Jobs says that there is a big difference between the way people listen to music and other activities like watching videos. Specifically, he said, you can listen to music in the background, while movies require that you actually watch them. “You can’t watch a video and drive a car,” he said. “We’re focused on music.”

A year later, the video iPod debuted, complete with videos and movies available to buy on iTunes.

I don’t understand why Apple – indeed why many companies – are held to such a radically different standard than Enron.

Enron Executives Were Underpaid

The (Canadian) Globe and Mail launches a screed about executive pay thusly:

Bosses – are they worth it? A series of corporate-world disasters over the past decade – the internet bubble, Enron, banks – suggests that a lot of executives are overrated.

Enron is never mentioned again in the article so we don’t know what proof she has to support her position that Enron’s compensation was proof that executives are overpaid. However, I’ll take a stab at talking about Enron executives’ pay.

First, if you have a problem with executives’ compensation, take it up with Towers Pirren, a consulting firm with whom Enron devised its pay packages. Like everything Enron did, auditors and lawyers were circling like hawks. Enron, in its zeal to be transparent, loved to spend money on outsiders and advisers. McKinsey, Arthur Andersen, and Vinson and Elkins all advised Enron. Of course the company would outsource the pay packages.

In a 1999 proxy statement, Enron’s board said its goal was to set executive pay in the 75th percentile of its peer group. It’s not completely clear whom the board included among its peers. It did not expressly list its peers, but did compare itself to Duke Energy, Dynegy and PG&E to assess overall corporate performance.

Thus it is difficult to know if Enron executives were objectively overpaid. Were I to design a study on the situation, I would define Enron’s peers as those alike in market cap, number of employees, and income, then try and figure out what they were paying. The companies listed above were smaller than Enron; I would not be surprised to learn Enron paid more than them because Enron was not a peer.

In its proxy statements, Enron’s board said its “key performance criteria” for executive compensation included, “funds flow, return on equity, debt reduction, earnings per share improvements and other relevant factors.”

By these benchmarks, Enron’s executives did well. Between 1996 and 2000, revenue increased to $100.8 billion from $13.3 billion. Enron’s earnings per share grew to $1.22 from $1.12. Reported earnings climbed to $979 million from $584 million.

The compensation of the top-earning five Enron executives (Ken Lay, Jeff Skilling, Stanley Horton, Mark Frevert, Ken Rice) was inexorably tied to the health of the company. See for yourself:

Year	1996	1997	1998	1999	2000
Top Five Executive Salaries	$3.04	$3.13	$3.62	$3.80	$3.61
Top Five Bonus Payments	4.70	1.85	9.46	11.30	17.55
Top Five Stock Grants	29.71	62.51	54.74	81.40	85.61
Top Five Total Compensation	37.46	67.48	67.82	96.50	107.67

Eighty percent of their compensation was stock. Their livelihoods depended on that stock. The best interest of the company was their own best interest – which is how it should work. Compensating executives with stock is supposed to cement allegiance to the company, keeping them there for a long time (thus the vesting scheme) and doing their best to keep the stock price high.

Between 1996 and 2000, the average chief executive salary and bonus increased by 24% to $1.72 million, according to a Forbes study. Total CEO compensation, including stock options and restricted stock grants, grew 166% to an average of $7.43 million. But look what the top five Enron execs were making.

Their salaries grew only 2.6% from 1996 to 2000. Their bonus payments grew 16.55% from 1996 to 2000. These two figures are well below their peers’ compensation. Their stock grants grew by 85.51% in the same time period – again, below their peers’ 166% figure. At the same time, Enron’s reported earrings grew 97% and revenue increased 99.8%.

That is what you call an argument that Enron’s execs were underpaid.

Enron and Apple

I’ve not been shy about my love of Apple products. I love the minimalist design of my computer, iPod, iPhone. I love how they just work. I love how they seem to be created with the express purpose of allowing others to be creative. When the iPod came out, I lost my mind; I was just blown away. How did they get such great sound in that tiny itty bitty gleaming white case? It was a piece of art I carried in my purse, a beautiful totem. I was seduced anew when in 2010 my crummy old Dell exploded and I needed a new computer. Big bought me a MacBook Pro. I was shrieking with joy at the purchase of this computer. It was amazing. I love everything about it – the fact that it integrates seamlessly with my iPod and my iPhone, the fact that it is beautiful, fun to use, and it feels like a device that supports creative passions, such as writing books.

What’s more, since I like CEOs in principle, I found Steve Jobs fascinating. When he passed away, I felt bereft. I worried that the creative spark that was born in every Apple product would fizzle, but I’ve come to believe the DNA is woven into the culture at Apple and will be there for generations. One can hope. Anyway, I began reading the Steve Jobs biography a few days ago, and I came across two passages that set off my Enron alarms.

Passage one:

Partly because of the poor sales of the Cube, Apple produced disappointing revenue numbers in September 2000. That was just when the tech bubble was deflating and Apple’s education market was declining. The company’s stock price, which had been above $60, fell 50% in one day, and by early December it was below $15.

This dramatic decline in Apple’s stock brought me up short. Though I remember the tech bubble bursting, I wasn’t aware that all companies were having these massive spikes and dips in their stock price. 50% in one day is alarming. Shocking, even. It was this fact that made me do a little research and realize that indeed, I had foolishly imagined that the market burst in a calm, orderly way with stocks s-l-o-w-l-y declining. Why I had overlooked that intraday turbulence as normal at the time, I don’t know – just a weird little blindspot. But it did serve to strengthen my belief that Enron was outperforming many companies in September 2000, notably Apple.

Enron’s stock closed at $85.33 on September 1, and was at $87.46 on the last trading day of that month. On December 1 it was $65.50 but by the last day of trading for the month (and the year) it was back to $83.13. Go Enron.

The second passage, which was actually the very next paragraph, was this:

Making matters worse was a June 2001 cover story in Fortune about overcompensated CEOs, “The Great CEO Pay Heist”. A mug of Jobs, smiling smugly, filled the cover. Even though his options were underwater at the time, the technical method for valuing them when granted (known as a Black-Scholes valuation) set their worth at $872 million. Fortune proclaimed it “by far” the largest compensation package ever granted a CEO. It was the worst of all worlds: Jobs had almost no money that he could put in his pocket after four years of hard and successful turnaround work at Apple, yet he had become the poster child of greedy CEOs, making him look hypocritical and undermining his self-image. He wrote a scathing letter to the editor, declaring that his options actually “are worth zero” and offering to sell them to Fortune for half the supposed $872million the magazine had reported.

Oh really? Color me interested. One thing I hadn’t done, which I probably should, was to go back and take a look at the Fortune archives to see what else they were reporting back then. We already know that in March, Bethany McLean had published “Is Enron Overpriced?” Then two months later, this hit piece on Steve Jobs came out (it was not written by Bethany McLean.) Fortune was definitely taking a jaundiced eye at CEOs, and lurid, lying portrayals seemed to be the mode of lashing out.Fortune seemed to be trying to stir up trouble by exaggerating and misrepresenting what was happening both at Apple and Enron. I am curious to know if Fortune published any positive articles at all during 2001 or if the publication was only interested in stoking class warfare.

While reading the book, I couldn’t help but compare Steve Jobs to Jeff Skilling. Steve Jobs was a tyrant, an ego-maniac who sucked the life out of people around him. He had an absolutely nauseating personality, prickly and short-tempered. Jeff Skilling was a prince. He could be demanding, but he didn’t humiliate people just for fun the way Jobs did. He was brilliant, but didn’t have weird affectations, such as practicing a “hard stare” that was designed to intimidate people. He was a doofy, brilliant guy who believed passionately and who was not without a great sense of humor.

Neither Steve nor Jeff saw their children as much as they’d like. Steve could be cold and mercurial to his own kids though, and by all accounts Jeff is a wonderful father. When he left Enron, it was for the purpose of spending more time with his children.

Another point zooms to mind, and this one really bugs me. After Dr. Lay passed away, there was some discussion about whether his heart problems had been revealed in the financial documents. I remember this public conversation very well and it angered me even then. But as I read the Jobs bio, that anger bubbled up anew. Steve Jobs was a narcissistic jackwagon who refused to have cancer surgery when his tumor was discovered, then refused to follow medical advice (the pancreas provides enzymes that make allow the stomach to digest food and absorb nutrients; after he finally had part of his removed some nine months after diagnosis, he had difficulty getting enough protein. The doctors advised eating meat and fish proteins as well as full-fat milk products. Steve, a vegan, stubbornly refused.) Even while he was going through these procedures, he refused to discuss the fact that he had cancer. Certainly nobody demanded he disclose this in his financial filings.

I am of the belief that CEOs are entitled to as much privacy as anyone else. I hate the fact that their compensation is discussed so openly. To give those busybodies a taste of their own medicine, I’m always tempted to say, “So how much money do you make? I think that’s way too much. You should give more to charity.” Some things, like money and health are nobody’s business at all. But CEOs, I suppose, are our cultural whipping boys right now so nobody is willing to shut up about these things.

The final point is that Steve Jobs was ensnared in what looks now like a quaint backdating scandal in 2006. He just had a run of bad luck and every time he would change the date of his options, they’d become worthless. But the SEC declined to pursue this for no real reason other than Apple acted “swiftly” to correct it – and probably the fact that Al Gore was on the board.

This made me think of the NatWest Three. They suspected something might be amiss with a deal they did with Andy Fastow and went to the British version of the SEC, and were promptly strung up like common criminals.

It seems to me in many ways that in the late 1990s and early 2001, the two companies were mirror images of each other. But Apple got the good fate and Enron was doomed to collapse.

Touch It: Tangibility and Enron

My new company – right now – is a service company. I’m trying to make something that will actually be a product, but right now it would be called a service company. Services are damn hard to sell. It is difficult to quantify why you need me, especially if you’ve never heard of me before. Probably you’re doing just fine without me. But if you had me… wow. Your life would be better by orders of magnitude!

It is a difficult sell (as it should be).

But if you have a product, you can, of course, use it and judge for yourself whether or not your life will be better by orders of magnitude.

As I frown and scowl at the people who won’t take my word for it that I am wonderfulamazingawesome, it occurred to me that most of Enron was too a service company. It was an intermediary between producers and financial institutions (I am discounting, for the sake of this argument, the Broadband division, all the overseas assets and the other tangibles that one could see and touch and use.) Enron’s entire pipeline workflow depended on the conviction of the other people that Enron was doing something amazing for them that they couldn’t do themselves.

This is why Enron crashed so fatally. Once that trust was gone, it was gone for good.

All other things being equal, tangibility is a huge asset.

I am still not entirely 100% convinced that Norway exists. Oh sure, I’ve read the broody noir novels that come from some place called “Norway”, but I’ve never seen it or met anyone from there so … I have my doubts. It’s a silly thing – I mean there is no huge conspiracy to make me believe there is a place called Norway (wouldn’t that be an awesome practical joke though?) But since Norway means nothing to me, I don’t really care about it or its sleety, snowy nights of mystery and angst. Sometimes I wonder if the whole world is as silly as this, as if they are infants who don’t quite grasp object permanence. (You hide the ball behind your back and it is gone forever.) It seems to me that people were willing to believe that about Enron. They’d never seen Enron so it didn’t really exist. They couldn’t see SubSwap or Yosemite or Greyhawk so… well, it didn’t really exist. Couldn’t exist because the whole idea is as crazy as some desolate windswept country that cloaks itself in darkness for eleven months of the year.

How simplistic. How silly. How sad.

My Enron Education

The first thing I ever learned about Enron was this: I knew nothing. Oh sure, I could talk about prepays and Raptors and honest services, but I really had very little idea what I was talking about; I didn’t know how it all fit together. An Enron exec told me, upon hearing me expound on Enron, that I really should be humble. “You know nothing.”

I bristled at the time, but I came to realize he was right. More than right. Every time I start to think I have a handle on one aspect of Enron, or one personality, I remember his admonition to be humble, and in that space of learning and curiosity, I always find something I missed before.

I began with the Skilling/Lay trial transcripts. I read about retail and reserves until my eyes bled. When I didn’t know something, I would make a note of it in a giant notebook, and then I’d spend time going back to research it. Then, after learning about it, I would go back to the transcripts and re-read it. In this slow way I began to get what I believe is a pretty good overview of Enron Corporation.

One thing that still surprises me is to learn who is in who’s circle, and who hates who and why. (I use the term “hate” very loosely; nobody has ever used the word “hate” to describe anyone else. In fact, even among the squabbling factions, they remain surprisingly gracious about each other. However, I have one funny story. I asked one person, “Did you like so-and-so while at Enron?” He said, with perfect equanimity, “No.” It was funny to me — usually people will say, “Well I liked that he did this” or whatever. He was the only person I’ve met who was utterly fearless about his own opinions. I so respected that, and I’ve tried to become more like that person. One person did say he “couldn’t stand” another person. “He came after me for no reason!” this person said emphatically. “I didn’t even freaking know him and he accused me of [deleted]“. That was the most passionate response I’ve seen.)

Learning about the people is much more fascinating to me than learning about Enron’s balance sheet. The balance sheet is the product of the people applying rules, and I enjoy seeing how they did that. I would love, for instance, to sit down with Ken Rice and have him explain to me exactly how he and Jeff came up with the Gas Bank. Not just general, “A plus B equals C”, but step by step. How did you dream it up? How did you make it happen?

Likewise, I think it would be fascinating to go over Enron’s financial statements with Rick Causey. Because the statements themselves – and the gas bank – don’t mean anything without the personality behind it.

Still, in order to get a comprehensive idea of what was going on at Enron, it is a good idea to be able to talk about the projects and the events without the personalities. In order to attack an accusation that mark to market was being abused at Enron, it is a good idea to know how it usually works, how it works in other places, and then carry that to the logical end – what difference did it make how it was used at Enron?

A few weeks ago I was talking to someone who was surprised I had been blogging about Enron for nearly ten years. I said I just couldn’t stop. There is always some other facet to discover, or some project or some document that can be analyzed more deeply. It just never stops. Then this weekend, someone suggested I stop blogging about Enron for a while to focus on other projects.

I literally couldn’t imagine such a thing. I mean, I’ve taken off a few days at a time, but I’ve never gone more than four days without being revved up about something to do with Enron. So that’s just not going to happen. There is always more to learn. It is an entity with roughly twenty years of fascinating, innovative projects, with thirty six people who were prosecuted, with thousands who lost jobs, and a million different directions. I will never get tired of learning about Enron. It is a lifelong love affair.

One Month

It is 12:01am as I write this. I realized just now that in a month – as of yesterday – it will be the ten year anniversary of the collapse of Enron, and the beginning of the long, arduous, painful journey for Enron executives who found themselves in the government’s crosshairs.

I’ve been thinking about the anniversary a lot – I have a few things planned for it. But I’m trying to figure out if anything has been learned from the experience. My answer is yes. I no longer assume people who are perp walked before cameras are guilty. I no longer believe that the justice system is fair and just. I no longer believe anything the mainstream media tells me.

I do not blame any of the Enron execs for the downfall of the company. I do blame the aftermath – which was by far more destructive than the collapse – on a power-mad judiciary. I think if Enron had been allowed to collapse in peace, a lot of the wealth and technology would have been preserved.

But it didn’t happen that way.

Now we’re ten years out and we have nothing.

John Corzine and Enron

Today on the Rush Limbaugh program, he mentioned Enron. Frankly I’m a little surprised that Limbaugh buys into the Enron myth so readily; he grew up with Rich Kinder and the two are still super close. Yet he makes disparaging Enron remarks frequently. In any case, he made a point today regarding an article in the NYT which states that Corzine’s current scandal (something like $700 million of customer money is missing from his company) could be a case of “sloppy bookkeeping.” Rush said it is funny that Enron didn’t get the benefit of the NYT’s cover when it collapsed; the paper certainly did not wonder if perhaps the bankruptcy was the result of sloppy bookkeeping.

Rush then went on to say that Corzine helped Enron. That he helped “create assets from liabilities on the balance sheet.” He is no doubt talking about Goldman Sachs here, but it is still incorrect.

Banks were not complicit in any wrong doing at Enron Corporation. I wish I could force people to do a little critical thinking. In the first place: why would they risk their own welfare for a company that they believed was corrupt? Why would Goldman or Merrill Lynch or NatWest or anyone else do something that would harm them but would benefit Enron, one of their myriad clients? It makes no damn sense at all.

I have no idea what, if anything, Corzine did that was wrong. But you can’t cast aspersions on Enron’s deals by attempting, some ten years later, to tie him to the company.

Transforming Enron Corporation: The Value of Active Management

I made a marvelous discovery today! I found this article in the Journal of Applied Corporate Finance by VP of Research Vince Kaminski. There are some great quotes by Jeff Skilling, Ken Lay and others. But this one, by Andy Fastow, made me sigh with nostalgia:

“If you ask an outsider what industry Enron is in they will say energy. If you ask an insider, they will tell you we’re in the risk management business. We provide certainty of delivery and certainty of price.”

This is Andy Fastow speaking of the direct bloodline to Enron’s Gas Bank, possibly the company’s first large-scale project that sought to provide – as he says – certainty of delivery and price.

Oh, Andy. You’re making me emotional this morning.

Enron’s Audit Fees Entertain Professor

Everybody is ramping up their Enron coverage in time for the anniversary. This USA Today article states:

Enron’s collapse gave professor Jonathan Stanley of Auburn University the inspiration to pay more attention to auditing fees.

Just as everyone points to the Hindenburg when talking about zeppelin safety, Enron is the poster child for corporate implosion. But very few people realized that Enron was going belly up until it was too late.

But there was a warning: The year before the stock collapsed, Enron paid $25 million in auditing fees, more than all but one company in the Dow Jones industrial average. Intrigued, professor Stanley looked to see if there was any correlation between big auditor fees and stock performance.

And cut.

The article doesn’t mention who the other company is, and whether it too collapsed. My instinct – based on my general mistrust of the media – is that the company is still alive and thriving somewhere, but that would destroy his stupid little theory so nobody is going to mention that inconvenient fact.

I don’t believe Enron’s auditing fees were indicative of anything other than Enron’s usual money-is-nothing attitude about spending. Enron spent millions on McKinsey studies, millions on Aeron chairs, millions on fancy art. I would not be shocked to learn that Enron also spent millions on auditing fees. In fact, if you told me that Enron was quite frugal and paid lower than industry average, I would definitely be suspicious.

But this is Enron we’re talking. ENRON! The company didn’t worry its pretty little over head over auditing fees. And this professor shouldn’t worry his pretty little head either.