September was a strange month in the company. For a while, it seemed as if the tumult of Skilling’s departure in August, and the upset created by Sherron Watkins’ memo, had abated a little bit. For a few days, there were no shocking revelations, no crazy allegations. Just normal work.
But all was not well.
The Woodlands is a small community outside of Houston. In 2001, it was becoming a popular neighborhood for Houston commuters to live. It was here, at the Woodlands Conference Center, on September 7-10, 2001, that the Management Committee met.
Enron had polled its employees about their concerns, and the results were not good. Employees reported feeling a lot of anxiety. Watkins’ memo had inspired rumors about aggressive accounting. Additionally, since the first appearance of LJM in the Wall Street Journal, journalists wanted to know more about the partnership.
At the meeting, a PR manager, Mark Palmer, announced, “We are entering into crisis.” His idea to head off the questions and uncertainty was to acknowledge LJM in an open, non-defensive way, apologize for not being as open as it could have been, and then act to show the Street that Enron was striving to be more transparent about LJM. (It is worth noting that the secrecy of LJM is directly attributable to Andy Fastow. He flatly refused several requests by the Wall Street Journal to discuss the partnerships. When Palmer practically begged him to talk to the reporters, he got angry and said talking to them would be the worst thing he could do. He flat-out refused to entertain questions, which no doubt added to the illusion that Enron was hiding something.) Andy Fastow, of course, did have something to hide. He had been lying about his compensation from the partnerships from the beginning. If Jeff Skilling or Ken Lay had known that Fastow was earning in the double-digit millions for his reported “three hours a week” of time spent on the partnerships, they would have been furious because it was critical to keep the lion’s share of his income from Enron, supposedly assuring his loyalty to the company.
A few days after the Woodlands meeting, Fastow’s partner, Michael Kopper, drove to a dumpster and threw away his laptop. The laptop had kept a running tally of who was making what on the illegal schemes – and both of them felt the time had come to ditch the proof of their malfeasance.
In addition to the LJM disclosure issue, the Vinson and Elkins’ investigation into Watkins’ claims continued apace.
Meanwhile, investors were worrying about the company as the stock continued to shed value. The small, buzzing question about LJM might have contributed to the general feeling of uneasiness over the stock.
If there was any sense of peace or rejuvenation in the suburban enclave of the Woodlands, it was short lived. Because everything was about to get so much worse.