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What's he building in there?

2
00:00:41,667 --> 00:00:44,636
What the hell is
he building in there?

3
00:00:46,939 --> 00:00:49,568
It had taken Enron
16 years to go

4
00:00:49,809 --> 00:00:51,538
from about 10 billion
of assets to

5
00:00:51,744 --> 00:00:54,144
65 billion of assets.

6
00:00:54,414 --> 00:00:56,644
It took them 24 days
to go bankrupt.

7
00:00:56,849 --> 00:00:59,716
What the hell is
he building in there?

8
00:00:59,919 --> 00:01:03,047
This company collapsed
so quickly and so entirely.

9
00:01:03,189 --> 00:01:06,215
I mean it was into bankruptcy
within a matter of weeks.

10
00:01:06,426 --> 00:01:08,155
It just immediately had

11
00:01:08,361 --> 00:01:11,297
all the makings of
a gigantic scandal.

12
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He's hiding something
from the rest of us.

13
00:01:14,435 --> 00:01:16,528
The fatal flaw at Enron

14
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if there is one,
you say it was pride

15
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but then it was arrogance,

16
00:01:22,209 --> 00:01:24,234
intolerance, greed,

17
00:01:25,112 --> 00:01:27,342
So many of them were
blinded by the money

18
00:01:27,614 --> 00:01:28,546
that they didn't see that

19
00:01:28,816 --> 00:01:30,181
they were sinking
their own life boat

20
00:01:30,384 --> 00:01:32,249
We have a right to know.

21
00:01:32,953 --> 00:01:35,047
It just got hungrier
and hungrier.

22
00:01:35,357 --> 00:01:37,188
Sooner or later
they were doomed to go off

23
00:01:37,392 --> 00:01:39,087
that cliff at 90 miles an hour.

24
00:01:40,295 --> 00:01:43,355
It's astounding that they
got away with it for so long.

25
00:01:43,965 --> 00:01:46,525
In reality,
Enron was a house of cards.

26
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What we didn't know was
that the house of cards

27
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had been built over
a pool of gasoline

28
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It all sort of became
smoke and mirrors.

29
00:01:57,913 --> 00:01:59,904
Committee will come to order.

30
00:02:00,116 --> 00:02:03,643
This is a case of America's
largest corporate bankruptcy.

31
00:02:03,919 --> 00:02:05,511
The question here is
what happened,

32
00:02:05,755 --> 00:02:07,620
who was responsible
for it happening,

33
00:02:07,823 --> 00:02:09,313
and what can we do to
prevent this sort of thing

34
00:02:09,558 --> 00:02:10,547
from happening again.

35
00:02:11,861 --> 00:02:14,022
I think the Enron story's
so fascinating

36
00:02:14,263 --> 00:02:16,561
because people perceive
it as a story

37
00:02:16,766 --> 00:02:17,825
that's about numbers.

38
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That it's somehow about all
these complicated transactions.

39
00:02:21,338 --> 00:02:23,169
But in reality
it's a story about people

40
00:02:23,340 --> 00:02:25,570
and it's really
a human tragedy.

41
00:03:41,988 --> 00:03:43,512
On this date, at 2:23 am,

42
00:03:43,790 --> 00:03:46,350
Sugar Land police
discovered John C Baxter

43
00:03:47,261 --> 00:03:48,421
located inside his vehicle

44
00:03:48,662 --> 00:03:50,755
with an apparent gunshot
wound to the head.

45
00:03:51,031 --> 00:03:53,625
Ah... at this time there has
been a suicide note located.

46
00:03:53,934 --> 00:03:55,799
Sir, can you give us
any indication whether

47
00:03:56,103 --> 00:03:58,230
this was related to
Enron's bankruptcy.

48
00:03:58,472 --> 00:04:00,201
We do know that he was
and Enron employee,

49
00:04:00,341 --> 00:04:02,639
but as far as any other
indications of why

50
00:04:02,877 --> 00:04:04,242
he committed suicide,
no we do not.

51
00:04:11,253 --> 00:04:11,878
Mr. Skilling,

52
00:04:12,187 --> 00:04:14,212
let me touch on something
that's sort of sad

53
00:04:14,456 --> 00:04:17,357
and that's of course
the suicide of Cliff Baxter.

54
00:04:17,592 --> 00:04:19,526
And you mentioned
he was your best friend

55
00:04:19,728 --> 00:04:21,161
in your opening statement.

56
00:04:21,496 --> 00:04:24,021
Before he died,

57
00:04:24,232 --> 00:04:26,166
did you have many
conversations with him?

58
00:04:27,235 --> 00:04:28,224
Yes.

59
00:04:28,470 --> 00:04:31,668
And were any of them
relative to Enron?

60
00:04:34,343 --> 00:04:35,708
Yes.

61
00:04:38,080 --> 00:04:39,809
There's no one that knew Cliff,

62
00:04:40,049 --> 00:04:41,380
toward the end,
that didn't realize that

63
00:04:41,651 --> 00:04:44,552
he was heartbroken
by what had happened.

64
00:04:45,788 --> 00:04:47,881
And Cliff came over to my house

65
00:04:48,491 --> 00:04:51,289
and he said 'They're calling
us child molesters.'

66
00:04:51,494 --> 00:04:54,259
He says,
'That will never wash off.'

67
00:04:55,499 --> 00:04:57,296
But Mr. Skilling
you don't believe that.

68
00:04:57,501 --> 00:04:58,525
I don't believe what?

69
00:04:58,769 --> 00:05:02,796
You don't believe that
the press and everybody

70
00:05:03,307 --> 00:05:06,572
calling Cliff Baxter
or yourself or anybody

71
00:05:06,810 --> 00:05:08,505
on the Board of Directors,

72
00:05:08,745 --> 00:05:10,337
denigrating or tainting you,

73
00:05:10,614 --> 00:05:11,808
you don't think it's accurate

74
00:05:12,049 --> 00:05:13,744
is what you're saying
to us here today.

75
00:05:13,951 --> 00:05:16,011
I do not believe...

76
00:05:16,387 --> 00:05:20,016
I did not do anything wrong
that was not in the interest

77
00:05:20,258 --> 00:05:22,453
In all the time that
I worked for Enron Corporation,

78
00:05:22,660 --> 00:05:24,719
it was in the interest of the
shareholders of the company.

79
00:05:25,863 --> 00:05:30,061
Ultimately, who was responsible
for the downfall of Enron?

80
00:05:34,372 --> 00:05:35,634
Only a few years ago,

81
00:05:35,840 --> 00:05:38,867
Enron was the nation's
seventh-largest corporation,

82
00:05:39,078 --> 00:05:41,512
valued at almost
70 billion dollars.

83
00:05:42,214 --> 00:05:45,445
Pundits praised the company
as a new business model.

84
00:05:46,619 --> 00:05:50,487
This trading floor was manned
by America's best and brightest,

85
00:05:50,689 --> 00:05:53,385
charting the futures of
energy and power.

86
00:05:54,493 --> 00:05:57,394
And high above each
with a private staircase,

87
00:05:57,630 --> 00:05:59,427
Ken Lay and Jeff Skilling

88
00:05:59,698 --> 00:06:02,224
had built their own
plush staterooms.

89
00:06:02,469 --> 00:06:04,699
They were known as
the smartest guys in the room.

90
00:06:04,938 --> 00:06:08,874
Captains of a ship
too powerful to ever go down.

91
00:06:09,309 --> 00:06:11,641
In the Titanic, the captain
went down with the ship.

92
00:06:11,945 --> 00:06:15,711
In Enron, it looks to me like
the captain first gave himself

93
00:06:15,915 --> 00:06:17,143
and some friends a bonus,

94
00:06:17,350 --> 00:06:19,614
then lowered himself and the
top folks down in the lifeboat

95
00:06:19,853 --> 00:06:20,945
and then hollered up and said,

96
00:06:21,187 --> 00:06:23,156
by the way, everything is
going to be just fine.

97
00:06:23,758 --> 00:06:24,690
Like Skilling,

98
00:06:24,959 --> 00:06:27,655
Ken Lay said he hadn't
done anything wrong.

99
00:06:28,195 --> 00:06:29,423
Could we have a word
with you real quickly?

100
00:06:29,664 --> 00:06:30,631
We're with CNN.

101
00:06:30,898 --> 00:06:32,160
Really not this morning,
thank you.

102
00:06:32,366 --> 00:06:33,697
Beyond the financial issues,

103
00:06:33,968 --> 00:06:36,630
some suspected
a political conspiracy.

104
00:06:36,904 --> 00:06:39,372
Enron had been the largest
corporate contributor

105
00:06:39,573 --> 00:06:43,202
to the first presidential
campaign of George W. Bush.

106
00:06:43,577 --> 00:06:46,240
This is not a political issue,
it is a business issue.

107
00:06:46,648 --> 00:06:48,707
You know Enron had
made contributions to

108
00:06:48,917 --> 00:06:51,351
a lot of people
around Washington D.C.

109
00:06:52,220 --> 00:06:54,313
And if they came to this
administration looking for help

110
00:06:54,556 --> 00:06:55,682
they didn't find any.

111
00:06:55,924 --> 00:06:58,825
To say no help had is like,

112
00:06:59,261 --> 00:07:01,729
'I did not have
political relations

113
00:07:02,064 --> 00:07:04,294
with that man, Mr. Lay.'

114
00:07:04,533 --> 00:07:06,160
What about the fact
that George W. Bush

115
00:07:06,368 --> 00:07:08,132
calls Ken Lay, Kenny Boy?

116
00:07:08,371 --> 00:07:09,963
That's my nickname
for my husband,

117
00:07:10,173 --> 00:07:11,333
which he overheard.

118
00:07:11,574 --> 00:07:13,132
So it wasn't original,
with the President?

119
00:07:13,376 --> 00:07:14,570
It certainly wasn't.

120
00:07:15,078 --> 00:07:16,306
According to published reports,

121
00:07:16,546 --> 00:07:20,346
your husband earned
about 300 million dollars in,

122
00:07:20,583 --> 00:07:22,414
in compensation, in stocks

123
00:07:22,618 --> 00:07:24,518
from Enron
over the last four years.

124
00:07:24,821 --> 00:07:26,550
What happened to
all that money?

125
00:07:26,789 --> 00:07:28,815
It's gone. It's gone.

126
00:07:29,093 --> 00:07:30,253
There's nothing left.

127
00:07:34,298 --> 00:07:37,495
This is the shredded evidence
we got that came out of Enron.

128
00:07:38,001 --> 00:07:41,266
We very quickly determined that
the insiders had sold off

129
00:07:41,505 --> 00:07:45,168
a billion dollars of their stock
in the preceding several months.

130
00:07:45,342 --> 00:07:48,869
Did you convert stock
worth 66 million dollars?

131
00:07:50,080 --> 00:07:51,571
I don't know, but...

132
00:07:51,850 --> 00:07:52,407
I don't have
the records with me...

133
00:07:52,684 --> 00:07:54,208
Would that be surprising to
you to learn that you did that?

134
00:07:54,452 --> 00:07:56,181
No, that would
not be surprising.

135
00:07:56,688 --> 00:07:58,178
Mr. Fastow

136
00:07:58,423 --> 00:08:01,620
got only 30 million
in stock proceeds from Enron,

137
00:08:01,993 --> 00:08:04,518
but he took another
30 million out,

138
00:08:05,230 --> 00:08:06,891
with his side deals.

139
00:08:07,165 --> 00:08:11,226
I think there was just
an immediate sense of outrage

140
00:08:11,536 --> 00:08:15,303
at Lay and Skilling and Fastow

141
00:08:15,541 --> 00:08:18,510
when people realized
how much they had profited,

142
00:08:18,744 --> 00:08:20,769
and how completely artificial

143
00:08:21,013 --> 00:08:22,878
the appearance of
this company had been.

144
00:08:24,817 --> 00:08:27,547
News of shredding at Enron
raised more questions.

145
00:08:28,354 --> 00:08:31,255
What answers were lost
in the torn documents?

146
00:08:31,824 --> 00:08:35,021
20,000 employees
had lost their jobs.

147
00:08:35,429 --> 00:08:39,593
$2 billion in pensions and
retirement funds had disappeared.

148
00:08:40,267 --> 00:08:43,031
Was Enron the work of
a few bad men

149
00:08:43,270 --> 00:08:46,171
or the dark shadow of
the American dream?

150
00:08:51,578 --> 00:08:56,845
Lay comes to the story of
Enron from very humble roots.

151
00:08:59,921 --> 00:09:02,481
My father was
a Baptist minister and,

152
00:09:02,790 --> 00:09:04,257
and he was ordained
a Baptist minister

153
00:09:04,492 --> 00:09:08,485
while I was very young
probably two, three years old.

154
00:09:08,696 --> 00:09:11,130
Ken Lay was a Baptist
Preacher's son in a family

155
00:09:11,265 --> 00:09:12,732
that had been poor
all it's life

156
00:09:12,967 --> 00:09:16,368
and he, throughout his life,
worked several jobs as a kid

157
00:09:16,838 --> 00:09:20,002
and clearly had in mind that
things could be better...

158
00:09:20,242 --> 00:09:21,038
and wanted things to be better.

159
00:09:21,310 --> 00:09:24,370
He had a huge ambition to
make wealth for himself.

160
00:09:24,613 --> 00:09:27,138
He told a story later
about sitting on a tractor,

161
00:09:27,316 --> 00:09:28,840
dreaming about
the world of business

162
00:09:29,051 --> 00:09:30,245
and how different
it could be from the way

163
00:09:30,486 --> 00:09:31,919
things were for him
and his family.

164
00:09:34,356 --> 00:09:36,824
Lay was a PhD in economics
and he became,

165
00:09:37,025 --> 00:09:39,425
very early on,
a real apostle for deregulation.

166
00:09:39,695 --> 00:09:41,595
He was way ahead of
the curve on this.

167
00:09:41,830 --> 00:09:43,355
He was thinking
about energy markets

168
00:09:43,600 --> 00:09:45,966
that would be deregulated.
And in particular,

169
00:09:46,202 --> 00:09:49,296
the natural gas industry
that was shackled by regulation.

170
00:09:49,506 --> 00:09:53,340
And he pushed aggressively in
Washington to change all of that.

171
00:09:58,481 --> 00:09:59,072
In Washington,

172
00:09:59,349 --> 00:10:01,249
Lay became part of
a new crusade

173
00:10:01,551 --> 00:10:03,644
to liberate businessmen
from the rules

174
00:10:03,887 --> 00:10:05,913
and regulations of government.

175
00:10:06,190 --> 00:10:09,421
Government is not
the solution to our problem.

176
00:10:09,827 --> 00:10:11,761
Government is the problem.

177
00:10:11,996 --> 00:10:14,396
The societies which have
achieved the most spectacular,

178
00:10:14,598 --> 00:10:17,829
broad-based economic progress
in the shortest period of time

179
00:10:18,335 --> 00:10:20,166
are not the most
tightly controlled,

180
00:10:20,371 --> 00:10:22,566
not necessarily
the biggest in size,

181
00:10:22,840 --> 00:10:25,468
or the wealthiest
in natural resources.

182
00:10:25,943 --> 00:10:28,811
No, what unites them all
is their willingness to believe

183
00:10:29,014 --> 00:10:31,574
in the magic
of the marketplace.

184
00:10:39,291 --> 00:10:41,418
The magic power of deregulation

185
00:10:41,660 --> 00:10:44,925
pushed Ken Lay to
found Enron in 1985.

186
00:10:45,530 --> 00:10:48,967
Through a merger of vast networks
of natural gas pipelines,

187
00:10:49,302 --> 00:10:51,600
Lay thought Enron
would be poised to take

188
00:10:51,804 --> 00:10:53,829
advantage of
the government's decision

189
00:10:54,073 --> 00:10:57,440
to let gas prices float
with the currents of the market.

190
00:10:59,612 --> 00:11:02,809
Ken Lay had
a view of deregulation

191
00:11:03,015 --> 00:11:04,346
from the standpoint
of all the money

192
00:11:04,584 --> 00:11:06,017
that he thought could be made.

193
00:11:06,252 --> 00:11:07,514
Ken Lay wasn't alone.

194
00:11:07,787 --> 00:11:10,255
A couple of Texas oilmen
shared his views

195
00:11:10,489 --> 00:11:13,254
on how to get government out
of the energy business.

196
00:11:13,460 --> 00:11:15,621
I think they could sort of
understand each other.

197
00:11:15,862 --> 00:11:17,295
It was a professional courtesy

198
00:11:17,564 --> 00:11:20,055
between a sidewinder
and a timber rattlesnake.

199
00:11:20,300 --> 00:11:21,961
Lay was closer to the father.

200
00:11:22,235 --> 00:11:24,203
But while
he was governor of Texas

201
00:11:24,371 --> 00:11:26,362
George W. Bush was
only too happy to

202
00:11:26,573 --> 00:11:28,734
make phone calls for Ken Lay.

203
00:11:29,643 --> 00:11:31,804
This absolutely has
no precedent.

204
00:11:32,045 --> 00:11:34,981
This is by far and away
the most important,

205
00:11:35,350 --> 00:11:38,410
major relationship of
a Presidential family

206
00:11:38,653 --> 00:11:40,917
with a single corporation
in American history.

207
00:11:41,255 --> 00:11:42,119
When Rich Kinder,

208
00:11:42,390 --> 00:11:44,722
one of Enron's Executives,
left the company,

209
00:11:44,959 --> 00:11:47,519
Lay arranged
for a video valentine.

210
00:11:47,829 --> 00:11:51,321
Rich, I've... been asked
to think of one thing

211
00:11:51,633 --> 00:11:53,225
I could say to you
on your departure from Enron.

212
00:11:53,468 --> 00:11:55,994
It'd be this,
'Don't leave Texas.'

213
00:11:56,305 --> 00:11:59,240
Rich, you have been fantastic
to the Bush family.

214
00:11:59,608 --> 00:12:01,235
I don't think
anybody did more than

215
00:12:01,443 --> 00:12:02,967
you did to support George and,

216
00:12:03,212 --> 00:12:04,645
of course,
in this stage of my life,

217
00:12:04,880 --> 00:12:07,178
and Barbara's too,
that's what really matters.

218
00:12:07,416 --> 00:12:09,179
Your family and your friends.

219
00:12:09,885 --> 00:12:11,876
Early on, George Bush, Sr.

220
00:12:12,221 --> 00:12:14,712
Helped secure billions
in government subsidies

221
00:12:14,957 --> 00:12:16,447
for Enron International.

222
00:12:16,725 --> 00:12:18,751
And he helped promote Lay as

223
00:12:19,029 --> 00:12:21,497
deregulation's
Ambassador-at-Large.

224
00:12:22,232 --> 00:12:23,631
Enron is a company...

225
00:12:23,967 --> 00:12:27,198
that deals with everyone
with absolute integrity.

226
00:12:27,404 --> 00:12:29,531
We want people to leave
the transaction with Enron

227
00:12:29,773 --> 00:12:31,001
thinking that
they've been dealt with

228
00:12:31,374 --> 00:12:33,638
in the highest possible way

229
00:12:33,910 --> 00:12:36,071
as far as integrity
and truthfulness.

230
00:12:36,312 --> 00:12:39,213
He always wrapped himself
in the cloak of moral rectitude.

231
00:12:39,516 --> 00:12:41,451
But there was one episode,
early on,

232
00:12:41,719 --> 00:12:43,710
that raised questions
about whether he was actually

233
00:12:43,988 --> 00:12:47,355
walking the walk
This was the Enron oil scandal,

234
00:12:47,591 --> 00:12:49,218
also know as
the Valhalla Scandal.

235
00:12:50,161 --> 00:12:51,594
While you were
at Arthur Anderson,

236
00:12:51,829 --> 00:12:54,662
were you involved
in an investigation

237
00:12:54,932 --> 00:12:57,127
at a company called Enron Oil?"

238
00:12:57,702 --> 00:12:58,691
Yes, I was.

239
00:12:58,903 --> 00:13:01,235
The issue
with the company in 1997

240
00:13:01,405 --> 00:13:05,001
involved the misappropriation
of moneys by two traders.

241
00:13:05,711 --> 00:13:09,613
In 1987 two oil traders
made bets for Enron

242
00:13:09,881 --> 00:13:12,315
on whether the price of
oil would rise or fall.

243
00:13:13,418 --> 00:13:15,010
Oil trading is like gambling:

244
00:13:15,253 --> 00:13:17,778
Sometimes you win,
sometimes you lose.

245
00:13:18,223 --> 00:13:21,192
But Enron Oil
always seemed to win,

246
00:13:21,359 --> 00:13:23,259
much to Ken Lay's delight.

247
00:13:23,462 --> 00:13:25,192
I tried to explain to Ken Lay

248
00:13:25,364 --> 00:13:28,492
the tremendous risk that
you have in that market.

249
00:13:28,701 --> 00:13:29,895
You can lose...

250
00:13:30,236 --> 00:13:32,295
ten times your
original investment.

251
00:13:32,772 --> 00:13:34,706
A veteran trader,
Mike Muckleroy,

252
00:13:34,907 --> 00:13:38,206
was suspicious of Enron Oil's
steady high profits.

253
00:13:38,911 --> 00:13:40,742
Well this oil trading
business had profits

254
00:13:40,980 --> 00:13:42,572
that nobody could really
understand and in fact,

255
00:13:42,915 --> 00:13:44,849
that many of Ken Lay's
lieutenants questioned.

256
00:13:45,118 --> 00:13:46,346
They said this
business can't be making

257
00:13:46,552 --> 00:13:47,781
this much money legitimately.

258
00:13:48,021 --> 00:13:49,648
Something weird is going on.

259
00:13:50,057 --> 00:13:52,218
Something weird was going on.

260
00:13:52,693 --> 00:13:54,786
The first hint came
from an anonymous tip

261
00:13:55,028 --> 00:13:56,723
about the president
of the company,

262
00:13:56,964 --> 00:13:58,261
Louis Borget.

263
00:13:58,499 --> 00:14:01,468
Mr. Borget had taken
some three plus million dollars

264
00:14:01,735 --> 00:14:04,932
of corporate funds and put it
in a personal account of his.

265
00:14:05,205 --> 00:14:07,799
There were offshore
accounts phony books

266
00:14:08,008 --> 00:14:10,204
and a trail that led
from the company's treasurer,

267
00:14:10,478 --> 00:14:11,376
Tom Mastroeni,

268
00:14:11,613 --> 00:14:15,014
to a mysterious Lebanese
speculator no one could find:

269
00:14:15,250 --> 00:14:16,615
M. Yass.

270
00:14:17,118 --> 00:14:18,608
What name did you
suspect that was?

271
00:14:18,853 --> 00:14:20,218
My ass, you know.

272
00:14:20,622 --> 00:14:23,090
And M Smart,
well so that's Maxwell Smart.

273
00:14:23,324 --> 00:14:25,053
I mean, these guys
are playing games

274
00:14:25,827 --> 00:14:28,295
Borget and Mastroeni were
summoned to Houston.

275
00:14:28,830 --> 00:14:31,994
First, they presented
falsified bank records to Enron.

276
00:14:32,401 --> 00:14:34,392
Then they admitted
they had diverted company

277
00:14:34,637 --> 00:14:36,628
profits to personal accounts.

278
00:14:37,740 --> 00:14:39,298
It was brought to the attention
of the Enron Board.

279
00:14:39,508 --> 00:14:41,271
Auditors were brought
in as well,

280
00:14:41,510 --> 00:14:42,602
to look at the whole thing.

281
00:14:42,845 --> 00:14:43,812
At the board meeting,

282
00:14:44,013 --> 00:14:46,504
the auditors told Lay
that Borget and his traders

283
00:14:46,749 --> 00:14:49,775
were manipulating earnings
destroying daily trading records,

284
00:14:50,019 --> 00:14:53,319
and probably gambling
way beyond their limits.

285
00:14:53,557 --> 00:14:54,922
The next day we found out that

286
00:14:55,158 --> 00:14:57,854
Lay's decision was to
basically change nothing

287
00:14:58,094 --> 00:15:00,062
as far as
the operation's concerned.

288
00:15:00,363 --> 00:15:03,059
And the reason
he gave was that this was

289
00:15:03,266 --> 00:15:05,166
the only part of
the combined company

290
00:15:05,402 --> 00:15:07,768
that was making any money
and that he could not,

291
00:15:08,104 --> 00:15:10,334
you know,
kill the golden goose.

292
00:15:10,941 --> 00:15:13,705
The traders weren't fired,
or even disciplined.

293
00:15:14,077 --> 00:15:16,945
Instead,
Enron sent a telex to Borget:

294
00:15:17,315 --> 00:15:20,011
Please keep making us millions.

295
00:15:20,785 --> 00:15:22,878
Instead of reducing
Enron's risk,

296
00:15:23,221 --> 00:15:25,712
Lay encouraged his traders
to gamble more.

297
00:15:26,424 --> 00:15:28,551
But then their luck changed.

298
00:15:30,027 --> 00:15:30,994
Two months later,

299
00:15:31,229 --> 00:15:33,197
here I got this panic
call that they had

300
00:15:33,331 --> 00:15:36,698
drawn down 90 million dollars
in the previous five days.

301
00:15:36,901 --> 00:15:38,597
What we could do is
just try and find out

302
00:15:38,837 --> 00:15:41,635
what kind of guerilla
we had loose up there.

303
00:15:42,407 --> 00:15:44,967
Muckleroy hopped on the
next plane to New York.

304
00:15:45,244 --> 00:15:47,838
He knew Mastroeni had
another set of books,

305
00:15:48,080 --> 00:15:51,049
and he would do whatever
it took to get them.

306
00:15:52,050 --> 00:15:54,109
I basically stood over Tom

307
00:15:54,386 --> 00:15:56,854
and I told him that one of
two things was going to happen.

308
00:15:57,055 --> 00:15:58,920
Either one of
the trading partners

309
00:15:59,258 --> 00:16:00,726
that was crooked with Borget

310
00:16:00,994 --> 00:16:03,622
who was a German arms dealer
was going to kill him,

311
00:16:04,030 --> 00:16:06,430
or I was.
I said 'I'll track you down

312
00:16:06,766 --> 00:16:08,825
and find you
no matter where you go.

313
00:16:09,202 --> 00:16:10,931
And sooner or later,
I'll get you.'

314
00:16:12,105 --> 00:16:15,040
The next day, Mastroeni came
in with the real books.

315
00:16:15,308 --> 00:16:18,607
The traders had gambled away
all of Enron's reserves.

316
00:16:19,879 --> 00:16:22,747
By acting fast,
Muckleroy bluffed the market,

317
00:16:23,017 --> 00:16:25,042
and managed to
save the company.

318
00:16:26,820 --> 00:16:29,288
After Valhalla Ken Lay
maintained that

319
00:16:29,490 --> 00:16:30,718
he had been shocked
that the traders

320
00:16:30,991 --> 00:16:32,185
had gambled so recklessly.

321
00:16:32,359 --> 00:16:33,917
But Ken Lay had known
all along

322
00:16:34,228 --> 00:16:35,786
about the risks
that were taken.

323
00:16:35,996 --> 00:16:37,861
He had seen
the reports warning him

324
00:16:38,065 --> 00:16:39,692
about the traders' behavior.

325
00:16:40,601 --> 00:16:42,899
Since the fall of Enron,
Ken Lay has said that

326
00:16:43,103 --> 00:16:44,365
he can't be responsible
for things

327
00:16:44,572 --> 00:16:45,800
he didn't know about.

328
00:16:46,041 --> 00:16:47,872
Sounds like what he said
about Valhalla.

329
00:16:48,410 --> 00:16:50,207
Do you believe that
he didn't know?"

330
00:16:50,445 --> 00:16:53,846
I can answer only for one.
I can answer for Valhalla

331
00:16:54,049 --> 00:16:56,210
because Ken Lay did in fact
know about this thing.

332
00:16:56,384 --> 00:16:57,612
Because I had told him myself.

333
00:16:57,886 --> 00:17:01,117
The auditors adamantly
told Mr. Ken Lay

334
00:17:01,589 --> 00:17:04,820
that the two rogue traders
should be fired.

335
00:17:05,193 --> 00:17:07,253
Lay read the report
and he read his budget

336
00:17:07,463 --> 00:17:10,899
and estimated how much they,
the two rogue executives made

337
00:17:11,200 --> 00:17:13,293
and if they were fired
what he could lose.

338
00:17:13,602 --> 00:17:16,469
My conclusion was that this guy
is a guy who puts earnings

339
00:17:16,706 --> 00:17:18,173
before scruples
rather than reacting

340
00:17:18,374 --> 00:17:20,308
to the dishonesty right
in front of him.

341
00:17:20,776 --> 00:17:23,176
Mastroeni received
a suspended sentence.

342
00:17:23,379 --> 00:17:26,837
Borget was convicted of fraud,
and spent one year in jail.

343
00:17:27,717 --> 00:17:30,209
With his biggest moneymaker
now behind bars,

344
00:17:30,487 --> 00:17:31,954
Ken Lay had a problem:

345
00:17:32,222 --> 00:17:34,884
Who could he find
to make money for Enron?

346
00:17:36,293 --> 00:17:37,851
Every year, every day,

347
00:17:38,095 --> 00:17:40,290
every week you have to come up
with new ideas.

348
00:17:50,073 --> 00:17:52,406
Ken Lay saw in Jeff Skilling
the guy who had the answer to

349
00:17:52,610 --> 00:17:55,602
what the future of the natural
gas business was supposed to be.

350
00:17:55,880 --> 00:17:58,405
Ken Lay is also a guy who
considers himself a visionary

351
00:17:58,683 --> 00:18:01,208
and he liked other people
he thought of as visionaries.

352
00:18:01,386 --> 00:18:02,546
He liked people with big ideas.

353
00:18:02,920 --> 00:18:05,889
And Jeff Skilling was a person
with the biggest ideas of all.

354
00:18:06,858 --> 00:18:09,520
Jeff Skilling's biggest
single idea was find

355
00:18:09,761 --> 00:18:11,729
a new way to deliver energy.

356
00:18:11,963 --> 00:18:15,058
Rather than be bound by the
physical flow of the pipeline,

357
00:18:15,367 --> 00:18:18,996
Enron would become a kind of
stock market for natural gas.

358
00:18:19,271 --> 00:18:21,262
It was a magical new idea:

359
00:18:21,540 --> 00:18:24,304
Transform energy into
financial instruments

360
00:18:24,543 --> 00:18:27,034
that could be traded
like stocks and bonds.

361
00:18:27,513 --> 00:18:29,276
So that was the one good idea.

362
00:18:29,548 --> 00:18:31,709
In 1992 using that good idea,

363
00:18:31,917 --> 00:18:34,215
we became the largest buyer
and seller of natural gas

364
00:18:34,420 --> 00:18:35,444
in North America.

365
00:18:35,688 --> 00:18:37,053
Jeff was like the prophet.

366
00:18:37,323 --> 00:18:39,985
He came in and said There's
a whole new world out there.

367
00:18:40,226 --> 00:18:41,853
Forget about
this pipeline stuff,

368
00:18:42,095 --> 00:18:43,687
you know the staid pipeline
in the ground and...

369
00:18:43,997 --> 00:18:45,464
gas in and gas out.

370
00:18:45,732 --> 00:18:49,463
We can recreate
this entire industry.

371
00:18:50,236 --> 00:18:51,965
An attorney from
Vinson & Elkins,

372
00:18:52,272 --> 00:18:55,002
Amanda Martin was one of
the first executives hired

373
00:18:55,275 --> 00:18:58,268
by Jeff Skilling and became
part of his inner circle.

374
00:18:59,313 --> 00:19:00,871
The excitement was palpable.

375
00:19:01,115 --> 00:19:04,312
You cannot imagine how proud
we all were to be there.

376
00:19:04,552 --> 00:19:07,646
And then, of course,
we had a leader who imbued us

377
00:19:07,888 --> 00:19:10,288
with a sense of confidence that
if we were smart,

378
00:19:10,524 --> 00:19:14,255
anything could be accomplished
And then the bottom line

379
00:19:14,495 --> 00:19:16,224
we began to make money.

380
00:19:16,997 --> 00:19:18,897
And that in and of itself,

381
00:19:19,100 --> 00:19:22,593
was a re-affirmation
that this could be big.

382
00:19:25,407 --> 00:19:27,932
Skilling saw the opportunity
to build an industry new

383
00:19:28,210 --> 00:19:29,734
and to start a business
from scratch.

384
00:19:29,978 --> 00:19:32,208
But he had
one specific condition

385
00:19:32,447 --> 00:19:34,244
that had to be met
before he'd join Enron,

386
00:19:34,483 --> 00:19:36,610
and it was that
he be allowed to use

387
00:19:36,818 --> 00:19:39,184
a certain kind of accounting
known as mark-to-market.

388
00:19:39,488 --> 00:19:42,082
Arthur Andersen signed off,
and the SEC approved it.

389
00:19:42,725 --> 00:19:44,693
I remember walking in
and going 'What's going on? '

390
00:19:44,961 --> 00:19:46,292
And Causey and everybody,

391
00:19:46,496 --> 00:19:48,396
I mean every one was so excited
and then came the champagne

392
00:19:48,631 --> 00:19:50,895
and We had got Mark-to-market
accounting treatment.

393
00:19:51,234 --> 00:19:54,692
And I often think about how clear
my memory was about that event.

394
00:19:54,971 --> 00:19:58,668
And that was
the beginning of a major cog

395
00:19:58,875 --> 00:20:00,604
of the downfall
ultimately of Enron.

396
00:20:03,513 --> 00:20:05,982
Mark-to-market
accounting allowed Enron

397
00:20:06,250 --> 00:20:08,514
to book potential
future profits

398
00:20:08,752 --> 00:20:10,617
on the very day
a deal was signed.

399
00:20:11,021 --> 00:20:14,013
No matter how little cash
actually came in the door,

400
00:20:14,324 --> 00:20:17,293
to the outside world,
Enron's profits could be...

401
00:20:17,561 --> 00:20:20,155
whatever Enron said they were.

402
00:20:20,998 --> 00:20:22,795
Very subjective.

403
00:20:24,501 --> 00:20:30,407
And very...
it left it open to manipulation.

404
00:20:30,608 --> 00:20:32,337
And they were saying
that we're going to sell

405
00:20:32,577 --> 00:20:35,740
power out of this
power plant in ten years

406
00:20:35,980 --> 00:20:38,676
for X dollars per kilowatt.

407
00:20:39,417 --> 00:20:42,215
And there was no way
anybody could prove that

408
00:20:42,487 --> 00:20:42,953
they could do it.

409
00:20:43,154 --> 00:20:44,018
Well...
Hey Reg.

410
00:20:44,222 --> 00:20:44,916
Good morning.
How are you?

411
00:20:45,156 --> 00:20:46,487
Finally. Great.
Good to see you.

412
00:20:46,691 --> 00:20:48,181
Jeff. Good to see you.
Todd, sit down.

413
00:20:48,493 --> 00:20:49,791
We've been working
hard on this

414
00:20:49,995 --> 00:20:51,121
and we've really pulled
out all the stops.

415
00:20:51,330 --> 00:20:53,127
Look what we got.
Origination...

416
00:20:53,365 --> 00:20:54,662
We did 20 million last year,

417
00:20:54,934 --> 00:20:57,164
I think we can do 120 million
dollars this year.

418
00:20:57,636 --> 00:20:59,627
Trading
we did 10 million last year

419
00:20:59,872 --> 00:21:02,033
we think we can do
64 this year.

420
00:21:02,274 --> 00:21:03,138
This is the key.

421
00:21:03,375 --> 00:21:04,239
We're going to move from

422
00:21:04,443 --> 00:21:06,377
mark-to-market accounting
to something

423
00:21:06,579 --> 00:21:09,104
I call H, F, V

424
00:21:09,348 --> 00:21:12,841
Hypothetical
Future Value accounting.

425
00:21:13,253 --> 00:21:16,222
If we do that
we can add a kazillion dollars

426
00:21:16,456 --> 00:21:17,548
to the bottom line.

427
00:21:17,757 --> 00:21:22,820
Whoa! Jeff... alright!
That sounds fantastic.

428
00:21:23,063 --> 00:21:26,897
Oh Jeff, thank you.
That's just supurb performance.

429
00:21:27,100 --> 00:21:28,897
And you're going to go far,
my boy.

430
00:21:29,135 --> 00:21:30,966
Probably President of
the company one day.

431
00:21:31,271 --> 00:21:32,533
You think so?
I think!

432
00:21:32,739 --> 00:21:34,799
He really believed that
the idea was everything.

433
00:21:35,009 --> 00:21:36,374
And that when you came up
with an idea,

434
00:21:36,611 --> 00:21:38,943
you should be able to book
the profits from that idea,

435
00:21:39,280 --> 00:21:40,247
right away.

436
00:21:40,448 --> 00:21:42,882
Because otherwise some lesser
man was taking the profits

437
00:21:43,117 --> 00:21:44,607
from the idea
that some greater man

438
00:21:44,852 --> 00:21:46,513
had come up with in the past.

439
00:21:47,922 --> 00:21:50,413
When Jeff Skilling applied to
Harvard Business School,

440
00:21:50,658 --> 00:21:52,785
the professor asked him
if he was smart.

441
00:21:53,027 --> 00:21:55,655
He replied,
'I'm fucking smart.'

442
00:21:56,865 --> 00:21:59,993
One of his favorite books
was The Selfish Gene,

443
00:22:00,302 --> 00:22:02,964
about the ways human nature
is steered by greed

444
00:22:03,205 --> 00:22:05,935
and competition in the service
of passing on our genes.

445
00:22:07,042 --> 00:22:07,667
At Enron.

446
00:22:07,943 --> 00:22:10,503
Skilling wanted to set free
the basic instincts

447
00:22:10,812 --> 00:22:12,643
of survival of the fittest.

448
00:22:15,517 --> 00:22:18,112
Jeff had a very Darwinian
view of how the world worked.

449
00:22:18,388 --> 00:22:20,788
He was famous for saying once
in Enron's early years,

450
00:22:21,057 --> 00:22:23,457
that money was the only thing
that motivated people.

451
00:22:25,261 --> 00:22:27,388
Skilling's notion of
how the world should work

452
00:22:27,664 --> 00:22:28,460
really trickled down,

453
00:22:28,765 --> 00:22:30,960
and affected everything
about how Enron did business.

454
00:22:31,267 --> 00:22:32,962
He instituted the system
know as the PRC,

455
00:22:33,169 --> 00:22:34,636
or Perfomance Review Committee.

456
00:22:34,871 --> 00:22:37,840
It required that people be
graded from a one to a five.

457
00:22:38,041 --> 00:22:40,738
And roughly ten percent of
people had to be a five.

458
00:22:40,944 --> 00:22:42,935
And those people were
supposed to be fired.

459
00:22:43,180 --> 00:22:45,546
Hence, this came to be know
as 'Rank and Yank.'

460
00:22:45,816 --> 00:22:47,147
I, personally, am convinced

461
00:22:48,285 --> 00:22:51,345
that the PRC process
is the most important process

462
00:22:51,722 --> 00:22:53,690
that we conduct as a company.

463
00:22:53,891 --> 00:22:55,290
I've never heard of
a company yet

464
00:22:55,526 --> 00:22:57,824
that would be successful
terminating 15 percent

465
00:22:58,062 --> 00:22:59,461
of their people every year...

466
00:22:59,697 --> 00:23:02,131
just to satisfy the fact
that the other employees

467
00:23:02,333 --> 00:23:03,392
had to vote on them.

468
00:23:03,601 --> 00:23:05,501
And so when you're being
evaluated by that group,

469
00:23:05,704 --> 00:23:09,105
you are getting direct
communication from Ken and me

470
00:23:09,341 --> 00:23:11,309
about what the objectives
of the company are

471
00:23:11,509 --> 00:23:13,204
and how you fit
with those objectives.

472
00:23:13,445 --> 00:23:15,208
It was a brutal process.

473
00:23:15,447 --> 00:23:18,541
The ability for
a 25 year old to go in

474
00:23:18,817 --> 00:23:21,843
and to be reviewed
and to be superior...

475
00:23:22,454 --> 00:23:25,891
and as a consequence get
a five million dollar bonus.

476
00:23:26,459 --> 00:23:28,222
I don't think that's
repeated in many places

477
00:23:28,394 --> 00:23:29,452
in corporate America.

478
00:23:29,695 --> 00:23:31,287
Our culture is a tough culture.

479
00:23:31,530 --> 00:23:34,499
It is a very aggressive culture.

480
00:23:36,836 --> 00:23:37,393
At Enron,

481
00:23:37,670 --> 00:23:40,468
no one was more aggressive
than the traders.

482
00:23:41,674 --> 00:23:44,268
If I'm on the way to
my boss's office

483
00:23:44,510 --> 00:23:45,909
talking about my compensation.

484
00:23:46,112 --> 00:23:47,910
And if I step on somebody's
throat on the way

485
00:23:48,115 --> 00:23:48,877
that doubles it?

486
00:23:49,116 --> 00:23:50,811
Well, I'll stomp
on the guy's throat.

487
00:23:51,385 --> 00:23:54,252
You know,
that that's how people were.

488
00:23:55,489 --> 00:23:58,549
On the trading side
we got to be the biggest,

489
00:23:58,825 --> 00:24:00,918
baddest house in town.

490
00:24:01,294 --> 00:24:02,283
And by necessity,

491
00:24:02,562 --> 00:24:03,995
if you wanted to be
in the market,

492
00:24:04,264 --> 00:24:06,698
you had to deal with Enron.

493
00:24:08,902 --> 00:24:12,202
Enron's traders were like the
super powerful high school

494
00:24:12,373 --> 00:24:14,864
clique that even the principal
doesn't dare to reign in.

495
00:24:15,109 --> 00:24:17,441
They had become
the major engine of

496
00:24:17,745 --> 00:24:20,213
at least reported profits
at the company.

497
00:24:20,381 --> 00:24:23,077
They took Jeff Skilling and
Ken Lay's belief in free markets

498
00:24:23,351 --> 00:24:25,319
and turned it into an ideology.

499
00:24:25,553 --> 00:24:28,954
But they pitch it almost
as a new economic religion.

500
00:24:32,261 --> 00:24:34,821
Enron on-line will
change the markets

501
00:24:35,063 --> 00:24:36,690
for many many commodities.

502
00:24:36,999 --> 00:24:40,833
It is creating an open
transparent marketplace

503
00:24:41,103 --> 00:24:44,231
that replaces the dark
blind system that existed.

504
00:24:45,073 --> 00:24:46,665
It is real simple.

505
00:24:47,042 --> 00:24:49,704
You turn on your computer
and it's right there.

506
00:24:49,945 --> 00:24:50,570
That's our vision.

507
00:24:50,846 --> 00:24:52,541
We're trying to
change the world.

508
00:24:57,720 --> 00:24:59,950
I think Jeff Skilling
had a desperate

509
00:25:00,290 --> 00:25:01,917
need to believe
that Enron was a success.

510
00:25:02,158 --> 00:25:03,819
I think he identified
with Enron.

511
00:25:04,060 --> 00:25:06,551
He proclaimed, at one point,'
I am Enron'.

512
00:25:08,131 --> 00:25:09,996
The other thing
about people at Enron is,

513
00:25:10,233 --> 00:25:13,430
a lot of them were former nerds
and including Jeff Skilling.

514
00:25:13,670 --> 00:25:15,535
He had been paunchy.
He had big glasses.

515
00:25:15,773 --> 00:25:17,001
He was losing his hair.

516
00:25:17,241 --> 00:25:19,300
And Jeff Skilling
one day kinda woke up

517
00:25:19,543 --> 00:25:20,771
and decided to change himself.

518
00:25:21,011 --> 00:25:23,002
And he started working out,
lost a lot of weight.

519
00:25:23,280 --> 00:25:24,611
But he really did
remake himself

520
00:25:24,815 --> 00:25:27,909
through sheer will
and force of personality.

521
00:25:28,686 --> 00:25:32,213
When Jeff got Lasik on his eyes,
everybody at Enron got Lasik,

522
00:25:32,456 --> 00:25:34,617
so nobody was wearing glasses.

523
00:25:36,260 --> 00:25:38,752
I think Jeff Skilling
is really a tragic figure,

524
00:25:38,997 --> 00:25:40,259
in a classic sense of the word.

525
00:25:40,532 --> 00:25:43,558
He's a guy that people describe
as incandescently brilliant.

526
00:25:43,835 --> 00:25:46,497
But he's also a guy who
is radically different

527
00:25:46,705 --> 00:25:47,865
than he at times
portrays himself.

528
00:25:48,073 --> 00:25:50,007
He's portrayed himself
as somebody who has

529
00:25:50,275 --> 00:25:52,675
very tightly-monitored risk.
In reality, he's a gambler.

530
00:25:52,878 --> 00:25:55,870
He gambled away huge sums of
money before he was 20 years old,

531
00:25:56,114 --> 00:25:58,309
by making wild bets
on the market.

532
00:26:01,454 --> 00:26:03,183
To Jeff Skilling,
risk was glamorous.

533
00:26:03,356 --> 00:26:04,550
He was a huge risk taker.

534
00:26:04,757 --> 00:26:07,419
He actually talked about
wanting to go on trips that

535
00:26:07,627 --> 00:26:09,652
were so perilous that
someone could actually die.

536
00:26:14,267 --> 00:26:17,498
This manifested itself
in trips that Jeff Skilling led

537
00:26:17,770 --> 00:26:20,000
for a small group of friends
and customers.

538
00:26:24,945 --> 00:26:27,675
A core cadre of
Enron guys used to go on

539
00:26:27,948 --> 00:26:29,575
these wild adventures:

540
00:26:29,783 --> 00:26:32,445
Andy Fastow would go;
Ken Rice would go.

541
00:26:32,920 --> 00:26:34,444
The trips were legend.

542
00:26:34,655 --> 00:26:37,317
You know, we can sit and think
about what strange insecurities

543
00:26:37,591 --> 00:26:39,218
they were trying to overcome.

544
00:26:39,393 --> 00:26:41,452
But it made them
feel good as men.

545
00:26:42,329 --> 00:26:44,730
And they took a particularly
memorable trip to the Baja

546
00:26:45,033 --> 00:26:47,934
twelve hundred miles of
very rugged terrain in Mexico.

547
00:26:51,806 --> 00:26:54,604
This is a trip where
people crashed bikes.

548
00:26:54,943 --> 00:26:55,705
Ken Rice was on the trip,

549
00:26:56,010 --> 00:26:59,241
and he busted a lip and
required a bunch of stitches.

550
00:26:59,447 --> 00:27:00,778
People broke bones.

551
00:27:00,982 --> 00:27:03,576
One guy flipped a jeep
and almost got killed.

552
00:27:04,085 --> 00:27:06,610
Those sorts of stories
at Enron became legend.

553
00:27:07,089 --> 00:27:09,580
And it fed the whole macho
culture of the place.

554
00:27:19,768 --> 00:27:22,362
Jeff Skilling had a way of
describing people that he liked.

555
00:27:22,571 --> 00:27:24,004
He said,
'I like guys with spikes.'

556
00:27:24,239 --> 00:27:26,833
He liked somebody with
something extreme about them.

557
00:27:29,779 --> 00:27:31,474
Ken Rice was one of
the Men with Spikes.

558
00:27:31,715 --> 00:27:33,410
He was the salesman
of the group.

559
00:27:33,617 --> 00:27:36,245
Very amiable, fun, man's man.

560
00:27:36,453 --> 00:27:40,219
And was the guy out selling
deals to energy companies.

561
00:27:40,390 --> 00:27:43,086
In the case of Cliff Baxter,
the company's chief dealmaker

562
00:27:43,326 --> 00:27:45,851
he was extraordinarily talented
at just doing a deal.

563
00:27:46,262 --> 00:27:47,752
But he was a manic depressive.

564
00:27:49,432 --> 00:27:51,332
Baxter was a very bright guy,

565
00:27:51,535 --> 00:27:54,003
very blunt would
tell Skilling whatever

566
00:27:54,271 --> 00:27:56,432
he thought was closest
to Skilling, personally,

567
00:27:56,641 --> 00:27:57,903
than anyone else
in the company.

568
00:27:58,309 --> 00:28:00,004
There was a guy named Lou Pai,

569
00:28:00,277 --> 00:28:01,972
who was a key
Skilling lieutenant;

570
00:28:02,179 --> 00:28:03,578
helped build the trading
business in the early years;

571
00:28:03,814 --> 00:28:06,044
went on to run Enron's doomed

572
00:28:06,250 --> 00:28:07,774
effort called
Enron Energy Services.

573
00:28:08,052 --> 00:28:11,078
What was the job of EES,
as you ran it?

574
00:28:11,355 --> 00:28:15,656
Ah, it was to sell energy
services to end users,

575
00:28:15,927 --> 00:28:17,394
industrial end users.

576
00:28:17,663 --> 00:28:19,187
Lou Pai is
the guy that Skilling

577
00:28:19,331 --> 00:28:20,764
tapped to run the EES business.

578
00:28:20,999 --> 00:28:21,658
Because this was,

579
00:28:21,867 --> 00:28:23,232
this was so important
to the company,

580
00:28:23,435 --> 00:28:24,402
and to Skilling's future.

581
00:28:24,636 --> 00:28:26,399
He called Lou Pai 'my ICBM.'

582
00:28:26,872 --> 00:28:28,703
And Lou Pai dispatched
his enemies

583
00:28:28,940 --> 00:28:30,601
with incredible skill.

584
00:28:30,809 --> 00:28:33,209
And if that meant leaving
bodies behind him,

585
00:28:33,378 --> 00:28:34,845
Skilling was certainly
fine about that.

586
00:28:35,313 --> 00:28:37,248
I'm not feeling anything.

587
00:28:37,483 --> 00:28:39,508
Lou Pai was kind of
a mysterious figure.

588
00:28:39,719 --> 00:28:42,984
He was kind of like
the invisible CEO.

589
00:28:43,256 --> 00:28:45,816
For awhile he was located
on the 7th floor.

590
00:28:46,125 --> 00:28:49,993
And there's a long office.

591
00:28:50,263 --> 00:28:53,426
And it was all glass-enclosed,
and you would walk by there,

592
00:28:53,666 --> 00:28:56,134
and it was just almost
all the time it was empty.

593
00:28:58,004 --> 00:29:00,530
Details didn't
interest Lou Pai.

594
00:29:01,108 --> 00:29:03,372
Only two things seemed
to motivate Pai

595
00:29:03,677 --> 00:29:07,613
money and a peculiar
fascination with strippers.

596
00:29:08,282 --> 00:29:11,274
For Pai,
it was all about the numbers.

597
00:29:17,658 --> 00:29:19,182
He was there
every night after work

598
00:29:19,326 --> 00:29:21,761
and he usually brought some of
the traders along with him.

599
00:29:22,063 --> 00:29:24,190
He spent quite a lot of
money there as well.

600
00:29:24,599 --> 00:29:26,931
Much of it charged to
the Enron expense accounts.

601
00:29:27,235 --> 00:29:28,862
There were rumors that
he brought strippers up

602
00:29:29,070 --> 00:29:30,503
to the trading floor.

603
00:29:30,739 --> 00:29:32,570
Almost everyone knew the story.

604
00:29:32,841 --> 00:29:34,832
The story is that
because he's kind of a mild,

605
00:29:35,410 --> 00:29:36,604
soft-spoken,

606
00:29:36,811 --> 00:29:40,269
almost meek individual
that maybe these...

607
00:29:40,582 --> 00:29:43,746
these strippers didn't even
believe he was the CEO.

608
00:29:43,953 --> 00:29:46,820
So he took them up
to his office.

609
00:29:47,022 --> 00:29:47,954
And I guess they,

610
00:29:48,157 --> 00:29:50,318
they put on
a little show for him there.

611
00:29:54,997 --> 00:29:56,794
One night he was at a club.
And one of the guys said,

612
00:29:56,999 --> 00:29:59,832
you know, Lou,
all the rest of us are single.

613
00:30:00,069 --> 00:30:01,229
You know,
we don't have any problem.

614
00:30:01,370 --> 00:30:02,428
But how do you keep your wife

615
00:30:02,671 --> 00:30:04,639
from smelling
the strippers' perfume on you?

616
00:30:05,108 --> 00:30:06,803
And Lou said,
'oh, I've got a secret'.

617
00:30:07,110 --> 00:30:09,237
He said, 'I stop in at a gas
station on the way home.

618
00:30:09,479 --> 00:30:11,208
And I spill a little
gasoline on myself

619
00:30:11,515 --> 00:30:12,573
and it kills the scent.'

620
00:30:12,816 --> 00:30:14,647
So the other guy shot back,
he said, 'but Lou,

621
00:30:14,885 --> 00:30:15,647
doesn't your wife then think

622
00:30:15,852 --> 00:30:17,615
you're fucking
the gas station attendant? '

623
00:30:17,854 --> 00:30:20,118
In the context of Lou Pai,
everyone was horrified,

624
00:30:20,390 --> 00:30:22,756
a pall fell over the table.

625
00:30:22,993 --> 00:30:25,018
Because Lou Pai was
not a man to trifle with.

626
00:30:25,295 --> 00:30:27,491
Two days later,
the guy who told the joke,

627
00:30:27,732 --> 00:30:28,858
as Enron legend... has it,

628
00:30:29,100 --> 00:30:31,295
was dispatched to Calgary,
Canada.

629
00:30:35,706 --> 00:30:38,834
Lou Pai lost all interest
in running EES

630
00:30:39,043 --> 00:30:41,375
as soon as the numbers
got high enough.

631
00:30:43,347 --> 00:30:47,181
I netted approximately
a hundred million dollars.

632
00:30:47,485 --> 00:30:50,046
I don't know
if that number is accurate,

633
00:30:50,289 --> 00:30:51,620
plus or minus 20 million.

634
00:30:51,890 --> 00:30:53,949
He actually left Enron
with more money than anybody,

635
00:30:54,193 --> 00:30:55,626
250 million dollars,

636
00:30:55,894 --> 00:30:57,657
because he sold
all his stock in Enron

637
00:30:57,963 --> 00:31:00,295
after he got
a divorce from his wife,

638
00:31:00,532 --> 00:31:02,193
in order to marry
his stripper girlfriend,

639
00:31:02,401 --> 00:31:03,663
who had had his child.

640
00:31:07,272 --> 00:31:13,109
His exit from Enron was as
mysterious as his presence there.

641
00:31:13,379 --> 00:31:15,040
Just sort of one day,

642
00:31:15,281 --> 00:31:21,015
we all learned that Lou Pai
was no longer the CEO of EES.

643
00:31:23,022 --> 00:31:25,047
Though Lou Pai
flew away from Enron

644
00:31:25,291 --> 00:31:27,418
with 250 million dollars,

645
00:31:27,627 --> 00:31:29,117
the divisions he left behind

646
00:31:29,395 --> 00:31:31,920
lost a total of
nearly $1 billion.

647
00:31:32,398 --> 00:31:35,061
But Enron managed to
disguise that fact.

648
00:31:35,469 --> 00:31:39,633
Lou Pai became the second
largest landowner in Colorado.

649
00:31:42,810 --> 00:31:43,640
It was the number.

650
00:31:43,844 --> 00:31:45,106
It was always making
those numbers,

651
00:31:45,346 --> 00:31:46,938
and looking, you know,
it was, to me,

652
00:31:47,314 --> 00:31:49,748
the real mythology is
high school mythology.

653
00:31:49,950 --> 00:31:50,348
That, you know,

654
00:31:50,584 --> 00:31:52,677
you wanted to be the most
popular guy on Wall Street,

655
00:31:52,887 --> 00:31:56,289
and you were gonna do whatever
you had to do to stay there.

656
00:31:56,458 --> 00:31:57,982
And Jeff understood
those rules better than,

657
00:31:58,226 --> 00:31:59,386
I think, anyone else.

658
00:32:06,735 --> 00:32:08,726
Americans are making
a lot of money in stocks.

659
00:32:08,937 --> 00:32:11,906
The stock market soared to
near record highs yesterday.

660
00:32:12,107 --> 00:32:14,735
The stock market continued
its bull run Thursday.

661
00:32:14,943 --> 00:32:17,275
The Dow rose nearly 61 points.

662
00:32:17,512 --> 00:32:20,107
Even the person with
very little disposable income

663
00:32:20,416 --> 00:32:22,509
all of a sudden began to play
in the stock market,

664
00:32:22,752 --> 00:32:23,741
because nobody could fail.

665
00:32:23,986 --> 00:32:26,614
Because stock prices were
just going up and up and up.

666
00:32:26,822 --> 00:32:28,380
Another day, another record.

667
00:32:28,658 --> 00:32:30,057
And the internet
technology stocks,

668
00:32:30,326 --> 00:32:30,985
just going wild.

669
00:32:31,294 --> 00:32:34,627
Gained more than 100 points
to close at 7895.81,

670
00:32:34,864 --> 00:32:36,388
the highest finish ever.

671
00:32:36,732 --> 00:32:39,963
It was a time where
we had the biggest bull market

672
00:32:40,303 --> 00:32:41,362
in the history of the world.

673
00:32:41,605 --> 00:32:45,268
Ken Lay was right there,
acting as a cheerleader.

674
00:32:45,409 --> 00:32:47,274
Obviously our stock has
been doing very well.

675
00:32:47,544 --> 00:32:48,738
I think there's
a fairly good chance

676
00:32:48,979 --> 00:32:50,105
we could see the
stock price double

677
00:32:50,314 --> 00:32:52,009
again over the next year
to eighteen months.

678
00:33:01,325 --> 00:33:02,884
Enron mounted
a campaign to capture

679
00:33:03,127 --> 00:33:06,688
the hearts and minds
of stock analysts.

680
00:33:06,931 --> 00:33:08,956
The natural gas stocks
include Enron...

681
00:33:09,267 --> 00:33:10,234
We're never satisfied

682
00:33:10,401 --> 00:33:12,426
and I don't want us
to ever be satisfied

683
00:33:12,670 --> 00:33:14,228
with the stock price.
It should always be higher.

684
00:33:14,505 --> 00:33:17,599
Enron posted a 30-percent jump
in second-quarter profits,

685
00:33:17,875 --> 00:33:21,140
as Web-based trading boosted
its wholesale energy business.

686
00:33:21,379 --> 00:33:23,540
The game was played
on Wall Street in such

687
00:33:23,815 --> 00:33:26,478
an established way
throughout the 1990's.

688
00:33:26,719 --> 00:33:28,653
As long as
a company met or exceeded

689
00:33:28,887 --> 00:33:31,447
the analysts' projections for
quarterly earnings per share,

690
00:33:31,690 --> 00:33:32,554
the stock went higher.

691
00:33:32,858 --> 00:33:35,053
The game was called
'pump and dump.'

692
00:33:35,728 --> 00:33:37,662
Top execs would push
the stock price up

693
00:33:37,896 --> 00:33:41,457
and then cash in their
multi-million-dollar options.

694
00:33:41,734 --> 00:33:44,464
People at Enron got paid,
in large part, through stock.

695
00:33:44,770 --> 00:33:47,797
Everyone had a huge stake
in seeing the stock price go up.

696
00:33:48,308 --> 00:33:50,037
And it was driven,
very clearly,

697
00:33:50,310 --> 00:33:51,937
by the profits
every single quarter.

698
00:33:52,178 --> 00:33:53,770
They were exceedingly
conscious of that;

699
00:33:54,014 --> 00:33:55,345
Skilling was, and everyone
else in the company was.

700
00:33:55,582 --> 00:33:57,379
They posted the stock price
in the elevator.

701
00:33:57,617 --> 00:34:00,643
You were surrounded by
the health of the company;

702
00:34:00,854 --> 00:34:02,481
what's the stock price doing?

703
00:34:02,822 --> 00:34:03,846
We were consumed by it.

704
00:34:06,693 --> 00:34:10,460
This company was fixated
on its stock price

705
00:34:10,698 --> 00:34:15,226
and fixated on a massive
public relations campaign

706
00:34:15,736 --> 00:34:19,263
to convince the investment
community that they were new,

707
00:34:19,507 --> 00:34:20,769
different, innovative;

708
00:34:21,042 --> 00:34:24,671
almost heralding a new era of...
of corporate enterprise.

709
00:34:27,415 --> 00:34:28,939
Come work for us.

710
00:34:29,583 --> 00:34:31,312
We encourage our people
to do new things,

711
00:34:31,553 --> 00:34:35,250
try new things,
experiment step out.

712
00:34:35,424 --> 00:34:37,051
We begin by attracting
the kind of people

713
00:34:37,292 --> 00:34:39,260
that are more comfortable
in an environment of change.

714
00:34:40,028 --> 00:34:41,928
You know
when you work for Enron

715
00:34:42,164 --> 00:34:43,358
you're gonna see
the newest thinking.

716
00:34:43,565 --> 00:34:45,465
You're going to see the
newest markets opening up.

717
00:34:45,767 --> 00:34:48,600
Enron on-line, a fabulous,
fabulous story.

718
00:34:48,804 --> 00:34:50,897
They were so good
at their acting

719
00:34:51,139 --> 00:34:52,902
that they convinced
corporate America

720
00:34:53,141 --> 00:34:54,700
that they were smarter
than anyone else.

721
00:34:54,944 --> 00:34:57,435
Alan, with our sincere
thanks and admiration,

722
00:34:57,914 --> 00:35:01,111
we are pleased and indeed
honored to award you

723
00:35:01,317 --> 00:35:04,115
the Enron prize for
distinguished public service.

724
00:35:11,094 --> 00:35:12,391
They continued to
sell the company

725
00:35:12,628 --> 00:35:14,323
as being a very stable place

726
00:35:14,530 --> 00:35:16,556
where it could
predictably increase profits

727
00:35:16,800 --> 00:35:18,131
10 to 15 percent a year.

728
00:35:18,402 --> 00:35:20,529
In fact, to get to those
numbers Enron was doing

729
00:35:20,771 --> 00:35:23,239
all sorts of
questionable things;

730
00:35:23,440 --> 00:35:24,771
taking enormous risks.

731
00:35:25,008 --> 00:35:26,066
We like risk.

732
00:35:26,343 --> 00:35:28,368
Because you make money
by taking risk.

733
00:35:34,685 --> 00:35:37,245
By all accounts,
Enron was soaring.

734
00:35:39,824 --> 00:35:42,657
But in reality,
profits weren't going up;

735
00:35:42,894 --> 00:35:45,294
they were headed
in the opposite direction.

736
00:35:46,064 --> 00:35:50,057
Enron had vast natural gas
operations all over the world.

737
00:35:50,368 --> 00:35:52,268
They had cost
billions to build

738
00:35:52,537 --> 00:35:54,767
and most were
performing terribly.

739
00:35:55,306 --> 00:35:57,365
But in other places
in the world, in India,

740
00:35:57,609 --> 00:35:59,873
great quarter
and a great year in India.

741
00:36:00,311 --> 00:36:03,804
Phase one of Dabhol is
in operation generating power.

742
00:36:04,049 --> 00:36:06,643
Phase two is financed
and is under construction.

743
00:36:06,919 --> 00:36:09,945
My experience indicated
there were certain places that you

744
00:36:10,256 --> 00:36:12,224
assiduously stayed away from.

745
00:36:12,424 --> 00:36:14,221
And one of them,
as an example, was India.

746
00:36:14,393 --> 00:36:15,860
They built this
power plant in India.

747
00:36:16,095 --> 00:36:17,687
Nobody else would
do that at the time.

748
00:36:17,930 --> 00:36:19,693
They were terrified of
investing in India.

749
00:36:19,965 --> 00:36:22,399
Enron did it,
and did it in a big way.

750
00:36:23,336 --> 00:36:25,770
But Enron had failed to
see something basic.

751
00:36:26,039 --> 00:36:28,405
India couldn't
afford to pay for the power

752
00:36:28,675 --> 00:36:30,233
Enron's plant produced.

753
00:36:30,844 --> 00:36:33,278
Now Dabhol is a ruin.

754
00:36:35,048 --> 00:36:37,380
Though it lost a billion
dollars on the project,

755
00:36:37,617 --> 00:36:39,710
Enron paid out
multi-million dollar

756
00:36:39,920 --> 00:36:41,888
bonuses to executives based

757
00:36:42,122 --> 00:36:44,887
on imaginary profits
that never arrived.

758
00:36:45,826 --> 00:36:48,260
Where was the real money
going to come from?

759
00:36:49,163 --> 00:36:51,131
Of course the pressure
was enormous.

760
00:36:51,332 --> 00:36:52,993
You had to come up
with the next idea

761
00:36:53,301 --> 00:36:54,598
that would break through.

762
00:36:54,802 --> 00:36:56,895
Failure was not an option.

763
00:36:57,171 --> 00:36:58,866
A flurry of buy-outs
in the corporate world...

764
00:36:59,207 --> 00:36:59,866
the biggest:

765
00:37:00,074 --> 00:37:02,440
Enron announcing a buy out
of Portland General.

766
00:37:03,611 --> 00:37:07,446
The merger with PGE put Enron
in the electricity business.

767
00:37:07,649 --> 00:37:10,209
And Portland General's
position on the west coast

768
00:37:10,452 --> 00:37:14,821
gave Enron access to the newly
deregulated market of California.

769
00:37:15,991 --> 00:37:17,015
The merger, we think...

770
00:37:17,259 --> 00:37:19,227
it uniquely positions us
to ultimately

771
00:37:19,595 --> 00:37:23,053
become the largest marketer of
electricity and natural gas

772
00:37:23,365 --> 00:37:26,232
at both the wholesale
and retail level nationwide."

773
00:37:27,536 --> 00:37:29,596
What brought all this
on was the deregulation

774
00:37:29,839 --> 00:37:31,568
they said that
we would not survive,

775
00:37:31,808 --> 00:37:32,968
unless we joined forces.

776
00:37:33,276 --> 00:37:35,972
Enron, I'd never heard of 'em
until they were gonna buy us.

777
00:37:36,279 --> 00:37:38,713
They slid in here,
and when they purchased PGE,

778
00:37:39,015 --> 00:37:41,074
all the PGE stock became Enron.

779
00:37:41,384 --> 00:37:43,318
Just went through,
stamped every one of 'em.

780
00:37:43,519 --> 00:37:44,247
I looked around me,

781
00:37:44,454 --> 00:37:45,614
and all the guys that were
buyin' all this Enron,

782
00:37:45,855 --> 00:37:47,254
they were doublin' their money.

783
00:37:47,423 --> 00:37:49,755
And that whole time since then,
I put the maximum

784
00:37:49,993 --> 00:37:52,792
I could into
my 401 and savings.

785
00:37:53,030 --> 00:37:56,557
Portland General, again,
good earnings and cash flow.

786
00:37:56,867 --> 00:37:59,165
It's what's they call on Wall
Street a "trust me" story.

787
00:37:59,370 --> 00:38:00,928
People that had been
gas pipeline workers who

788
00:38:01,205 --> 00:38:02,763
for decades kept
all their money in the company

789
00:38:03,007 --> 00:38:05,339
because they thought
it was this traditional and,

790
00:38:06,443 --> 00:38:08,707
you know, safe investment
as it... as it had always been.

791
00:38:08,946 --> 00:38:10,311
And it was...
it wasn't anything close to that.

792
00:38:10,581 --> 00:38:13,311
Should we invest all of
our 401k in Enron stock?

793
00:38:13,517 --> 00:38:15,782
Absolutely.
Don't you guys agree?

794
00:38:30,101 --> 00:38:31,659
Enron is a big winner today

795
00:38:31,903 --> 00:38:33,734
One of the things
that fascinated me was that

796
00:38:33,938 --> 00:38:35,701
almost all of
the Wall Street analysts

797
00:38:35,974 --> 00:38:37,738
who covered Enron
had buy ratings

798
00:38:38,010 --> 00:38:39,637
or strong buy ratings
on the company's stock.

799
00:38:39,879 --> 00:38:45,613
Why were the analysts blinded
to the company's deceit?

800
00:38:45,818 --> 00:38:48,082
We relied on the information
that was available at the time.

801
00:38:48,287 --> 00:38:50,915
I trusted the integrity of
the company's certified

802
00:38:51,123 --> 00:38:51,987
financial statements,

803
00:38:52,291 --> 00:38:54,953
and the representations of
the company's management.

804
00:38:55,194 --> 00:38:57,128
And we've been absolutely
upfront with the analysts.

805
00:38:57,363 --> 00:38:59,696
Jeff Skilling was
the critical component

806
00:38:59,900 --> 00:39:01,697
in creating the Enron illusion.

807
00:39:02,135 --> 00:39:04,729
Time and time again
when we had a question

808
00:39:04,971 --> 00:39:07,872
to the sell-side analysts that
they couldn't answer,

809
00:39:08,241 --> 00:39:10,641
the response was,
'I'll give Jeff a call;

810
00:39:10,911 --> 00:39:12,503
I'll run this by Jeff.'

811
00:39:12,746 --> 00:39:14,407
By giving Jeff a call,

812
00:39:14,614 --> 00:39:16,912
the analysts weren't
'analyzing' at all.

813
00:39:17,150 --> 00:39:18,583
They were willing to
believe virtually

814
00:39:18,819 --> 00:39:20,720
anything Enron told them.

815
00:39:25,993 --> 00:39:28,553
Most of the analysts right
now have a target price on us

816
00:39:28,830 --> 00:39:31,458
from a hundred to a hundred
and fifteen dollars a share.

817
00:39:31,699 --> 00:39:33,599
Any analyst who didn't
buy the company line

818
00:39:33,801 --> 00:39:35,792
became an enemy of Enron.

819
00:39:36,037 --> 00:39:38,232
Enron's CFO, Andy Fastow,

820
00:39:38,473 --> 00:39:40,464
had his eye on John Olson

821
00:39:40,742 --> 00:39:43,803
one of the only analysts
skeptical of the Enron story.

822
00:39:44,046 --> 00:39:46,913
Enron loved analysts' strong
buy recommendations.

823
00:39:47,282 --> 00:39:49,307
Merrill was informed by Fastow,

824
00:39:49,585 --> 00:39:53,521
either you get somebody who is
on board with us as a strong

825
00:39:53,756 --> 00:39:57,852
buy recommendation
and loves us at the same time

826
00:39:58,394 --> 00:40:00,089
or we don't do
any business with you.

827
00:40:00,295 --> 00:40:03,196
I knew that my days
were numbered.

828
00:40:03,499 --> 00:40:04,967
This is an abuse.

829
00:40:05,235 --> 00:40:07,601
Merrill Lynch fired John Olson.

830
00:40:07,871 --> 00:40:10,032
Soon after Fastow
rewarded the bank

831
00:40:10,306 --> 00:40:12,103
with two investment
banking jobs

832
00:40:12,442 --> 00:40:14,171
worth 50 million dollars.

833
00:40:14,411 --> 00:40:16,572
Analysts were routinely
getting large bonuses

834
00:40:16,780 --> 00:40:18,543
from the investment banking
departments to bring

835
00:40:18,748 --> 00:40:21,808
in investment banking deals.
Ah... once that happens,

836
00:40:22,051 --> 00:40:25,077
you know, never was heard
a discouraging word.

837
00:40:26,389 --> 00:40:28,824
While Enron's stock
kept rising,

838
00:40:29,093 --> 00:40:31,118
its businesses kept
losing money.

839
00:40:31,996 --> 00:40:34,658
Looking at the soaring
stocks of the dot-coms,

840
00:40:34,932 --> 00:40:38,333
Skilling decided to take
Enron into cyberspace.

841
00:40:39,270 --> 00:40:41,067
We're now in
the process of seeing

842
00:40:41,305 --> 00:40:43,967
if we can create
a bandwidth trading market.

843
00:40:44,208 --> 00:40:46,199
Enron is using its
knowledge of trading gas

844
00:40:46,510 --> 00:40:48,569
to barter other forms of
energy even space

845
00:40:48,879 --> 00:40:51,178
on the information superhighway
called bandwidth.

846
00:40:51,650 --> 00:40:54,585
Ken Rice has worked at Enron
for twenty years.

847
00:40:54,820 --> 00:40:57,687
Enron has found a way to
stay ahead of the curve.

848
00:40:58,023 --> 00:41:01,288
From 7 PM to 7 AM
we're paying for bandwith that

849
00:41:01,493 --> 00:41:03,290
we are not using. Why?

850
00:41:04,062 --> 00:41:05,256
Why?

851
00:41:05,564 --> 00:41:08,362
One of our themes around here
is to always be asking why.

852
00:41:08,834 --> 00:41:10,734
Why something's
done a certain way

853
00:41:10,969 --> 00:41:12,699
or why it's not done
a different way.

854
00:41:13,005 --> 00:41:14,131
There's our market.

855
00:41:14,373 --> 00:41:16,739
Why can't we sell the
bandwidth to other companies?

856
00:41:17,043 --> 00:41:20,274
Make it a commodity
like a pork belly

857
00:41:28,955 --> 00:41:31,423
Just last week Enron
captivated Wall Street

858
00:41:31,691 --> 00:41:33,659
with its bold move
into broadband,

859
00:41:33,894 --> 00:41:36,886
teaming up with Blockbuster to
deliver movies on demand.

860
00:41:37,197 --> 00:41:41,065
It was like being
at a religious cult meeting.

861
00:41:41,335 --> 00:41:43,200
People started jumping up
from their seats,

862
00:41:43,437 --> 00:41:45,132
with their cell phones
and their Blackberrys,

863
00:41:45,506 --> 00:41:48,441
running out to the halls
to call their bosses.

864
00:41:48,909 --> 00:41:50,877
One analyst summed up
his recommendation

865
00:41:51,078 --> 00:41:53,046
to investors in one word

866
00:41:53,347 --> 00:41:58,308
Wow! Enron's stock soared
34 percent in two days.

867
00:41:58,853 --> 00:42:01,185
And you can tell from
the response of the stock market

868
00:42:01,523 --> 00:42:03,548
that they like the strategy.
It makes sense.

869
00:42:03,825 --> 00:42:05,417
They announced that they had
developed the technology.

870
00:42:05,660 --> 00:42:07,389
It would be in test markets
by the end of the year.

871
00:42:07,629 --> 00:42:08,926
And the technology works.

872
00:42:09,197 --> 00:42:11,688
The quality is great
and the customers like this,

873
00:42:11,966 --> 00:42:13,297
so we've made a lot of progress.

874
00:42:13,568 --> 00:42:16,264
The truth was that Enron
was just struggling

875
00:42:16,504 --> 00:42:18,871
with the technology
for video on demand.

876
00:42:19,108 --> 00:42:21,042
The technology didn't work

877
00:42:21,310 --> 00:42:24,438
and the deal with
Blockbuster soon collapsed.

878
00:42:24,747 --> 00:42:27,011
But with the magic of
mark-to-market Enron

879
00:42:27,216 --> 00:42:31,812
used future projections to book
$53 million in earnings

880
00:42:32,021 --> 00:42:34,387
on a deal that
didn't make a penny.

881
00:42:34,590 --> 00:42:36,023
By the end of the year 2000,

882
00:42:36,325 --> 00:42:37,792
Enron was running
out of ways to make

883
00:42:38,060 --> 00:42:39,857
the broadband business
look successful.

884
00:42:40,095 --> 00:42:43,361
They'd tried every trick
in the bag to try to create

885
00:42:43,567 --> 00:42:45,432
the illusion of a business
where there was none,

886
00:42:45,635 --> 00:42:46,567
and the people who were working

887
00:42:46,770 --> 00:42:48,431
there were getting
increasingly desperate.

888
00:42:48,939 --> 00:42:51,601
The executives started
selling their stock.

889
00:42:51,875 --> 00:42:55,811
By Enron's collapse,
Ken Rice had sold 53 million.

890
00:42:56,346 --> 00:42:59,042
Ken Lay had sold 300 million.

891
00:42:59,349 --> 00:43:01,408
Cliff Baxter 35 million.

892
00:43:01,651 --> 00:43:04,018
Jeff Skilling 200 million.

893
00:43:04,555 --> 00:43:06,546
As the fraud is perpetuated,

894
00:43:06,791 --> 00:43:09,419
all the various lies
and artifices

895
00:43:09,660 --> 00:43:11,685
begin to convince
the ringmaster,

896
00:43:11,896 --> 00:43:13,124
if you will, himself

897
00:43:13,431 --> 00:43:16,559
that it's thi
own bizarre reality.

898
00:43:16,767 --> 00:43:18,257
That in fact,
the fraud is the reality.

899
00:43:18,536 --> 00:43:20,128
The perception is the reality.

900
00:43:20,371 --> 00:43:22,271
As long as you can keep
the perception going on,

901
00:43:22,506 --> 00:43:24,030
it really isn't fraud.

902
00:43:24,575 --> 00:43:26,043
You spoke about
bandwidth trading,

903
00:43:26,311 --> 00:43:28,279
what about weather
options or futures?

904
00:43:28,447 --> 00:43:29,937
How is that market developing?

905
00:43:30,182 --> 00:43:32,514
Yeah, we have
a market in weather.

906
00:43:35,320 --> 00:43:38,653
When Enron announced its
latest plan to trade weather,

907
00:43:38,890 --> 00:43:40,983
people wondered whether
it was good science

908
00:43:41,326 --> 00:43:42,850
or science fiction.

909
00:43:44,529 --> 00:43:46,121
Do the weather guys
get punished here

910
00:43:46,365 --> 00:43:47,298
if the weather is wrong?

911
00:43:47,533 --> 00:43:48,090
I mean they predict wrong?

912
00:43:48,334 --> 00:43:49,801
I don't know, do you have any
whip marks on your back there?

913
00:43:50,103 --> 00:43:51,968
Well, it's unfortunate.
That's a good call.

914
00:43:53,840 --> 00:43:55,000
Jeff, as time went on,

915
00:43:55,341 --> 00:43:57,935
had a harder time
admitting things were wrong.

916
00:43:58,878 --> 00:44:01,312
And I have to believe that,

917
00:44:01,481 --> 00:44:04,473
you know, when the lights
went out at night,

918
00:44:04,717 --> 00:44:06,685
he knew what was coming.

919
00:44:11,425 --> 00:44:13,154
I would liken it
to the Titanic,

920
00:44:13,394 --> 00:44:14,986
when you've got
a captain who's saying,

921
00:44:15,295 --> 00:44:16,284
'maintain full speed'

922
00:44:16,530 --> 00:44:17,861
and they bump into
a couple of icebergs,

923
00:44:18,165 --> 00:44:20,793
and then they still
keep full speed going.

924
00:44:22,803 --> 00:44:25,101
The captain of this ship,
Enron,

925
00:44:25,339 --> 00:44:27,068
he ignored
all the warning signs.

926
00:44:27,307 --> 00:44:29,002
And there were plenty of them.

927
00:44:29,209 --> 00:44:30,437
And the captain
of the ship was?

928
00:44:30,644 --> 00:44:31,805
Kenneth Lay

929
00:44:42,957 --> 00:44:45,289
It was one of the bloodiest
days in Wall Street history.

930
00:44:45,794 --> 00:44:47,625
Shares plummeted
thirty one percent.

931
00:44:47,896 --> 00:44:49,830
High tech stocks led
Friday's fierce sell-off

932
00:44:50,031 --> 00:44:51,862
This is really
a great wake-up call.

933
00:44:52,100 --> 00:44:54,035
Millions of nervous
investors following

934
00:44:54,236 --> 00:44:56,397
the huge drop on Friday.
The Dow Jones

935
00:44:56,639 --> 00:44:59,164
Enron was especially
a big deal by the end

936
00:44:59,375 --> 00:45:01,104
of the year 2000
because by then,

937
00:45:01,343 --> 00:45:03,436
most Internet companies had
already begun to fall,

938
00:45:03,646 --> 00:45:06,114
and everybody on Wall Street was
looking for the next big thing.

939
00:45:06,382 --> 00:45:07,349
And here you had Enron,

940
00:45:07,616 --> 00:45:09,846
which appeared to be
this shining star

941
00:45:10,086 --> 00:45:11,246
of a new-economy company.

942
00:45:11,387 --> 00:45:14,288
Its stock price went up
90 percent in the year 2000,

943
00:45:14,490 --> 00:45:17,153
and had gone up over 50 percent
the year before that.

944
00:45:17,494 --> 00:45:19,291
It was an it' stock
on Wall Street

945
00:45:19,496 --> 00:45:21,896
one of those companies
that can seemingly do no wrong.

946
00:45:23,800 --> 00:45:25,893
We were the poster child
for the new economy.

947
00:45:26,136 --> 00:45:28,969
We had this culture
that had a lot of focus on

948
00:45:29,206 --> 00:45:31,140
reminding us how good we were.

949
00:45:31,408 --> 00:45:32,898
And as that culture emerged,

950
00:45:33,143 --> 00:45:35,077
then we get to Fortune
magazine telling us

951
00:45:35,312 --> 00:45:37,280
we were the most innovative
corporation in America.

952
00:45:37,481 --> 00:45:40,110
Then we really began to
feel good about ourselves.

953
00:45:40,785 --> 00:45:42,377
Well, you all did it again.

954
00:45:42,887 --> 00:45:46,050
Enron was just
recently chosen, again,

955
00:45:46,324 --> 00:45:48,121
for the sixth year in a row

956
00:45:48,359 --> 00:45:50,987
in the
most-admired-company survey

957
00:45:51,229 --> 00:45:55,495
by Fortune magazine as the most
innovative company in America.

958
00:45:56,534 --> 00:45:58,468
Well deserved. Well deserved.

959
00:45:59,337 --> 00:46:01,499
The sales pitch
still sounded good.

960
00:46:01,774 --> 00:46:04,743
But one investor saw something
in Enron's numbers

961
00:46:04,943 --> 00:46:07,241
that the stock
analysts had missed.

962
00:46:07,579 --> 00:46:09,376
By and large,
the analysts admitted to us,

963
00:46:09,581 --> 00:46:12,072
in person, 'it's a black box.
You have to take it on faith.

964
00:46:12,284 --> 00:46:13,273
'Who knows where
the earnings come from?

965
00:46:13,552 --> 00:46:14,382
They just pop out.

966
00:46:14,586 --> 00:46:15,951
And all we know is,
they're always good.'

967
00:46:16,488 --> 00:46:18,149
And I kept pointing out, well,

968
00:46:18,357 --> 00:46:19,517
yeah, isn't that
the whole point of...

969
00:46:19,825 --> 00:46:23,057
if the black box is
there to fool you,

970
00:46:23,296 --> 00:46:24,263
the numbers are always
going to be good,

971
00:46:24,430 --> 00:46:25,488
until they're not.

972
00:46:25,865 --> 00:46:27,093
I'm not a beat reporter,

973
00:46:27,367 --> 00:46:29,494
so I would have had no reason
to look at Enron.

974
00:46:29,736 --> 00:46:32,364
But Jim Chanos mentioned to me
that I should take a closer

975
00:46:32,572 --> 00:46:34,096
look at Enron's
financial statements.

976
00:46:34,340 --> 00:46:36,672
And it wasn't clear from Enron's
financial statements that

977
00:46:36,910 --> 00:46:38,036
there was fraud here.

978
00:46:38,344 --> 00:46:41,438
But what was clear is that
something didn't add up.

979
00:46:41,714 --> 00:46:44,080
In March 2001, Bethany Mclean,

980
00:46:44,350 --> 00:46:46,046
a reporter
with Fortune magazine,

981
00:46:46,320 --> 00:46:49,346
first raised questions about
Enron's financial condition.

982
00:46:49,623 --> 00:46:50,920
She asked a simple question

983
00:46:51,158 --> 00:46:53,558
in the article that no one
could seem to answer,

984
00:46:53,861 --> 00:46:57,456
'how exactly does
Enron make its money? '

985
00:46:59,333 --> 00:47:00,891
You got very upset with her,
didn't you?

986
00:47:01,168 --> 00:47:05,036
I very specifically remember
the telephone conversation

987
00:47:05,272 --> 00:47:07,605
that I had with...
the Fortune reporter.

988
00:47:07,909 --> 00:47:10,241
She called up and started
asking some very,

989
00:47:10,478 --> 00:47:13,345
very specific questions about
accounting treatment on things.

990
00:47:13,582 --> 00:47:16,050
I am not an accountant.
And I could not answer them.

991
00:47:16,284 --> 00:47:18,115
He became really,
really agitated.

992
00:47:18,420 --> 00:47:20,650
He said that people who
raise questions like this

993
00:47:20,889 --> 00:47:22,413
were just trying to throw
rocks at the company.

994
00:47:22,624 --> 00:47:24,455
And that I was not ethical

995
00:47:24,726 --> 00:47:26,250
because I hadn't done
enough homework.

996
00:47:26,461 --> 00:47:27,792
And if I had done
enough homework,

997
00:47:27,996 --> 00:47:30,124
I would understand how off-base
my questions were.

998
00:47:30,466 --> 00:47:32,297
Mr. Skilling, it appears as

999
00:47:32,535 --> 00:47:35,299
if you were trying to
bully someone

1000
00:47:35,605 --> 00:47:39,268
who was asking very basic
questions about Enron.

1001
00:47:39,508 --> 00:47:40,805
I said... said to her

1002
00:47:41,010 --> 00:47:42,875
I have got six minutes left

1003
00:47:43,312 --> 00:47:44,677
before I have to be
in a meeting.

1004
00:47:44,981 --> 00:47:46,812
And I can't get
into the details.

1005
00:47:47,049 --> 00:47:48,277
And I'm not an accountant.'

1006
00:47:48,584 --> 00:47:49,710
And she said,
'well, that's fine.

1007
00:47:49,919 --> 00:47:51,011
We're going to do
the article anyway.'

1008
00:47:51,320 --> 00:47:52,879
And I said, 'if you do that,

1009
00:47:53,123 --> 00:47:54,920
I personally think
that's unethical.'

1010
00:47:55,125 --> 00:47:56,149
And then the next day...

1011
00:47:56,393 --> 00:47:57,621
Let me interrupt you.
Our chief financial officer

1012
00:47:57,861 --> 00:47:59,294
and our chief
accounting officer

1013
00:47:59,496 --> 00:48:02,294
flew to New York at Enron's
expense, to sit down,

1014
00:48:02,532 --> 00:48:03,464
not with the editors,

1015
00:48:03,734 --> 00:48:06,430
but to sit down with
the reporter on that story,

1016
00:48:06,670 --> 00:48:09,230
and help her understand the
questions that she was asking.

1017
00:48:09,439 --> 00:48:11,066
And the next day
we sat in this small,

1018
00:48:11,308 --> 00:48:13,435
dark, windowless conference room
for about three hours,

1019
00:48:13,677 --> 00:48:16,613
going through the various aspects
of the company's business.

1020
00:48:16,814 --> 00:48:18,042
And I'll never forget this.

1021
00:48:18,283 --> 00:48:19,910
When the interview was over,

1022
00:48:20,118 --> 00:48:21,050
the other
two executives packed up

1023
00:48:21,352 --> 00:48:22,614
their things
and had left the room,

1024
00:48:22,820 --> 00:48:25,482
and Andy Fastow turned around
and looked at my editor and me,

1025
00:48:25,690 --> 00:48:27,920
and said, 'I don't care what
you write about the company,

1026
00:48:28,126 --> 00:48:29,957
just don't make me look bad.'

1027
00:48:30,361 --> 00:48:34,957
And Fastow had good reasons
for not wanting to look bad.

1028
00:48:36,100 --> 00:48:39,036
There were these partnerships
that were run by Andy Fastow

1029
00:48:39,305 --> 00:48:40,829
that were doing business
with Enron.

1030
00:48:41,073 --> 00:48:42,597
And these were disclosed

1031
00:48:42,808 --> 00:48:43,797
in the company's
financial statements.

1032
00:48:44,009 --> 00:48:45,840
But I didn't mention them
in the story I wrote,

1033
00:48:46,045 --> 00:48:46,568
because I thought,

1034
00:48:46,812 --> 00:48:48,006
well, the accountants
and the board of directors

1035
00:48:48,213 --> 00:48:49,544
have said that this is okay.

1036
00:48:49,815 --> 00:48:52,682
So I must be crazy to think
there's anything wrong with this.

1037
00:48:53,385 --> 00:48:55,319
The story
I ran was actually pretty meek.

1038
00:48:55,587 --> 00:48:57,578
The title was
'ls Enron Overpriced? '

1039
00:48:57,890 --> 00:49:00,189
But in the end,
I couldn't prove that

1040
00:49:00,393 --> 00:49:02,122
it was anything more than
an overvalued stock.

1041
00:49:02,329 --> 00:49:04,661
And I was probably too naive
to suspect that it was anything...

1042
00:49:04,864 --> 00:49:06,024
anything more than that.

1043
00:49:06,266 --> 00:49:07,790
And was her article critical?

1044
00:49:08,101 --> 00:49:09,363
Yes it was.

1045
00:49:09,736 --> 00:49:12,330
The Fortune magazine article
that's out the headline is,

1046
00:49:12,539 --> 00:49:14,234
'ls Enron's Stock Overvalued? '

1047
00:49:14,507 --> 00:49:16,907
The gist of the article is that

1048
00:49:17,377 --> 00:49:19,402
Enron is sort of a black box...

1049
00:49:19,679 --> 00:49:21,079
which, sorry, it's true.

1050
00:49:21,282 --> 00:49:22,772
I mean,
it's just difficult for us

1051
00:49:23,017 --> 00:49:26,680
to show people the specifics of
how money flows through,

1052
00:49:26,887 --> 00:49:28,149
particularly
the wholesale business.

1053
00:49:28,389 --> 00:49:30,949
The entire reason
that this analysis

1054
00:49:31,192 --> 00:49:32,352
was done by Fortune magazine

1055
00:49:32,593 --> 00:49:34,823
is because Business Week
had a favorable article

1056
00:49:35,062 --> 00:49:37,326
about Enron the week before.

1057
00:49:37,565 --> 00:49:39,294
And there's this competition
with the news...

1058
00:49:39,533 --> 00:49:42,434
the news magazines have,
where one says something good,

1059
00:49:42,636 --> 00:49:44,104
the other one has to come
and find something bad.

1060
00:49:44,306 --> 00:49:46,274
So I think that was kind of
the genesis of it.

1061
00:49:46,408 --> 00:49:49,400
So the criticism,
I think, is kind of ridiculous.

1062
00:49:49,611 --> 00:49:52,603
When Bethany McLean at Fortune

1063
00:49:53,048 --> 00:49:54,675
started analyzing cash flows,

1064
00:49:54,916 --> 00:49:56,383
and she had this
wonderful article saying,

1065
00:49:56,651 --> 00:49:59,085
'take a look at first quarter,
second quarter, third quarter,

1066
00:49:59,321 --> 00:50:01,516
and end of year cash flows.'

1067
00:50:01,790 --> 00:50:03,382
There's a reason
she didn't invest in Enron

1068
00:50:03,658 --> 00:50:05,593
'cause the financials
didn't make sense.

1069
00:50:05,862 --> 00:50:07,853
But you have to be
willing to say

1070
00:50:08,131 --> 00:50:09,894
that the emperor
doesn't have any clothes.

1071
00:50:10,099 --> 00:50:13,330
And this emperor was
pretty powerful.

1072
00:50:13,803 --> 00:50:15,862
We are going to
unveil this morning

1073
00:50:16,105 --> 00:50:17,697
a new corporate vision.

1074
00:50:18,074 --> 00:50:21,441
Okay, you ready?
One, two, three.

1075
00:50:24,180 --> 00:50:25,442
How's this?

1076
00:50:28,886 --> 00:50:29,910
It's really hard to know

1077
00:50:30,220 --> 00:50:33,747
when Enron first crossed the
line into outright fraud.

1078
00:50:34,058 --> 00:50:35,150
But there isn't any doubt

1079
00:50:35,392 --> 00:50:37,189
about who the guy was
who led them there.

1080
00:50:37,394 --> 00:50:39,021
It was a protege
of Jeff Skilling's

1081
00:50:39,229 --> 00:50:41,026
by the name of Andy Fastow.

1082
00:50:48,639 --> 00:50:51,973
Andy Fastow was Enron's
chief financial officer.

1083
00:50:52,277 --> 00:50:54,177
His job was to
cover up the fact

1084
00:50:54,479 --> 00:50:57,937
that Enron was becoming
a financial fantasyland.

1085
00:50:58,216 --> 00:51:00,684
Enron essentially was
losing money on a cash basis,

1086
00:51:00,885 --> 00:51:01,943
year after year.

1087
00:51:02,253 --> 00:51:03,845
And yet it was
reporting profits.

1088
00:51:04,122 --> 00:51:06,283
So it was defying
laws of financial gravity.

1089
00:51:06,491 --> 00:51:07,480
And the way he was doing it

1090
00:51:07,792 --> 00:51:09,760
was with something called
structured finance.

1091
00:51:10,061 --> 00:51:13,327
And the maestro of all that
at Enron was Andy Fastow.

1092
00:51:13,833 --> 00:51:15,300
Andy was very young.

1093
00:51:15,568 --> 00:51:18,503
He was hired by Jeff Skilling
probably before he was even 30

1094
00:51:18,804 --> 00:51:21,637
and he idolized Jeff Skilling.

1095
00:51:21,874 --> 00:51:24,934
And he certainly wanted to
please the boss.

1096
00:51:25,478 --> 00:51:26,775
To please the Boss,

1097
00:51:27,012 --> 00:51:30,539
Fastow had to figure out a way
to keep the stock price up

1098
00:51:30,783 --> 00:51:32,717
by hiding the fact
that Enron was

1099
00:51:32,918 --> 00:51:35,012
thirty billion dollars in debt.

1100
00:51:35,755 --> 00:51:39,748
People pressured by the need
to keep the stock price up

1101
00:51:39,993 --> 00:51:41,426
begin to cheat a little bit.

1102
00:51:41,661 --> 00:51:43,629
But then the
next quarter comes along

1103
00:51:43,864 --> 00:51:45,729
and you have to
cheat a little more to

1104
00:51:46,233 --> 00:51:50,431
do the new cheating to
make up for the old cheating.

1105
00:51:50,704 --> 00:51:52,729
And before long,

1106
00:51:53,106 --> 00:51:58,409
you've created a momentum
that now you can't stop.

1107
00:51:58,946 --> 00:52:01,471
Fastow created hundreds
of special companies

1108
00:52:01,716 --> 00:52:03,377
to perform a magic trick...

1109
00:52:03,618 --> 00:52:07,076
prop up Enron's stock by
making its debt disappear.

1110
00:52:07,955 --> 00:52:09,286
To outsider investors

1111
00:52:09,490 --> 00:52:11,515
it looked like cash was
coming in the door.

1112
00:52:11,726 --> 00:52:15,787
In fact Enron was just stashing
its debt in Fastow's companies

1113
00:52:15,997 --> 00:52:17,828
where investors
couldn't see it.

1114
00:52:18,834 --> 00:52:20,893
It was black magic.
It really was.

1115
00:52:21,136 --> 00:52:23,070
You were pulling some
rabbits out of a hat.

1116
00:52:28,110 --> 00:52:30,908
They could bury debt;
they could bury losses.

1117
00:52:31,146 --> 00:52:33,546
Many of the companies
had exotic names:

1118
00:52:33,782 --> 00:52:36,649
Jedi, Chewco Raptors.

1119
00:52:37,052 --> 00:52:40,317
LJM was Fastow's
most ambitious creation.

1120
00:52:40,455 --> 00:52:42,151
It would work magic for Enron

1121
00:52:42,458 --> 00:52:44,449
and it would allow
Fastow to conjure

1122
00:52:44,694 --> 00:52:47,686
45 million dollars for himself.

1123
00:52:51,834 --> 00:52:53,495
Andy, in many ways,

1124
00:52:53,703 --> 00:52:57,571
was someone we all knew didn't
have a strong moral compass.

1125
00:52:57,840 --> 00:52:59,535
It's almost like
Jeff Skilling said,

1126
00:52:59,742 --> 00:53:01,676
'okay, we're hitting
some troubled times.

1127
00:53:01,911 --> 00:53:04,779
Let's set up Andy so we can
fill the earnings' holes

1128
00:53:05,049 --> 00:53:05,777
when we need to',

1129
00:53:05,983 --> 00:53:09,544
knowing that Andy would
probably skim a little bit

1130
00:53:09,853 --> 00:53:12,287
off each transaction
for himself.

1131
00:53:12,489 --> 00:53:16,186
There's a 'Body Heat'
kind of angle to this,

1132
00:53:16,460 --> 00:53:19,293
you know, where
Skilling is Kathleen Turner

1133
00:53:19,496 --> 00:53:21,293
and Andy is William Hurt.

1134
00:53:21,565 --> 00:53:22,589
You know, in the end,

1135
00:53:22,833 --> 00:53:25,701
he got suckered into
helping all the executives

1136
00:53:25,937 --> 00:53:27,097
meet their earnings.

1137
00:53:27,339 --> 00:53:28,966
What I wish, I, you know,
in retrospect?

1138
00:53:29,207 --> 00:53:30,538
I wish I'd never heard of LJM.

1139
00:53:30,775 --> 00:53:32,402
Is it your contention
that you knew of it

1140
00:53:32,611 --> 00:53:33,134
and it was appropriate?

1141
00:53:33,345 --> 00:53:34,573
Arthur Andersen
and our lawyers

1142
00:53:34,813 --> 00:53:36,872
had taken a very hard look
at this structure

1143
00:53:37,082 --> 00:53:38,174
and they believed
it was appropriate.

1144
00:53:38,383 --> 00:53:41,648
If the theory is that Fastow
went rogue somewhere deep

1145
00:53:41,853 --> 00:53:43,377
in the jungles of Enron

1146
00:53:43,655 --> 00:53:46,351
and was the sole agent
of the apocalypse,

1147
00:53:46,658 --> 00:53:47,956
I just don't buy it.

1148
00:53:48,261 --> 00:53:50,627
Skilling, Lay,
and the Enron board

1149
00:53:50,863 --> 00:53:53,730
had signed off
on Fastow's LJM funds.

1150
00:53:54,100 --> 00:53:56,193
They saw the benefits
of letting Fastow

1151
00:53:56,469 --> 00:53:58,061
do deals with himself.

1152
00:53:58,437 --> 00:54:00,132
It is in Enron's best interest,

1153
00:54:00,373 --> 00:54:01,965
because Enron needs the capital,
number one.

1154
00:54:02,208 --> 00:54:05,302
In a secret video tape that
surfaced after the bankruptcy,

1155
00:54:05,511 --> 00:54:08,105
Fastow can be seen selling LJM

1156
00:54:08,381 --> 00:54:10,680
to a group of
Merrill Lynch bankers.

1157
00:54:10,917 --> 00:54:13,351
He pitches them on the benefits
of investing in a fund

1158
00:54:13,620 --> 00:54:15,986
that only buys assets
from Enron.

1159
00:54:16,223 --> 00:54:18,851
Remember, I'm not sellling
the assets to myself.

1160
00:54:19,126 --> 00:54:22,493
They own the assets.
They're selling them to LJM2.

1161
00:54:22,863 --> 00:54:27,323
Fastow knew what kind of deal
he was offering as Enron's CFO.

1162
00:54:27,668 --> 00:54:30,831
He could guarantee
profits for LJM.

1163
00:54:31,238 --> 00:54:33,833
I think this is an
extraordinary opportunity.

1164
00:54:34,108 --> 00:54:36,872
He has a sort of Cheshire Cat
grin on his face as he talks

1165
00:54:37,078 --> 00:54:39,308
about all the ways that
the fund is gonna profit.

1166
00:54:39,480 --> 00:54:41,311
And he talks about the
informational advantages

1167
00:54:41,616 --> 00:54:45,211
that he is gonna have in
his dual role as Enron's CFO

1168
00:54:45,453 --> 00:54:46,943
and as the head of these funds.

1169
00:54:47,255 --> 00:54:48,916
Isn't there a question of
conflict of interest?

1170
00:54:49,157 --> 00:54:50,146
There is never
any question that

1171
00:54:50,391 --> 00:54:52,120
I will be on both sides
of the transaction.

1172
00:54:52,393 --> 00:54:54,555
I will always be on the LJM
side of the transaction.

1173
00:54:54,830 --> 00:54:57,390
He was general partner of LJM,
while at the same time,

1174
00:54:57,666 --> 00:54:58,963
being CFO of Enron.

1175
00:54:59,168 --> 00:55:00,396
You know, that's a whole
'nother ball of wax

1176
00:55:00,602 --> 00:55:02,365
when you want to talk about
that conflict of interest.

1177
00:55:02,571 --> 00:55:07,167
Because no human being should
be put in a situation where,

1178
00:55:07,710 --> 00:55:09,075
you know,
every single transaction,

1179
00:55:09,311 --> 00:55:10,505
they decide
whether they're looking

1180
00:55:10,713 --> 00:55:14,149
after Enron's best interests
or their limited partners.

1181
00:55:14,416 --> 00:55:17,318
Because this LJM
partnership existed

1182
00:55:17,554 --> 00:55:18,953
solely to do business
with Enron.

1183
00:55:19,756 --> 00:55:21,087
As you would expect,

1184
00:55:21,324 --> 00:55:23,292
Andy as Chief Financial
Officer of Enron,

1185
00:55:23,560 --> 00:55:26,757
is heavily banked, so to speak.

1186
00:55:27,030 --> 00:55:29,430
And as a result,

1187
00:55:29,699 --> 00:55:33,396
there are five or six
of the name brand banks

1188
00:55:33,670 --> 00:55:36,195
who have stepped up and said
they'll commit to this.

1189
00:55:36,740 --> 00:55:38,834
Commit they did.
And why not?

1190
00:55:39,343 --> 00:55:42,540
Fastow was letting them gamble
with Enron's chips.

1191
00:55:42,913 --> 00:55:45,507
Fastow was using Enron's stock

1192
00:55:45,750 --> 00:55:48,150
as collateral
for a lot of these things.

1193
00:55:48,352 --> 00:55:50,343
They were betting their own
company on the transactions.

1194
00:55:50,955 --> 00:55:52,718
With the prospect of returns

1195
00:55:52,957 --> 00:55:54,857
that would exceed
two thousand percent,

1196
00:55:55,159 --> 00:55:58,788
96 individual bankers
invested in LJM.

1197
00:55:59,029 --> 00:56:03,091
And America's major banks put up
as much as $25 million each.

1198
00:56:03,301 --> 00:56:06,134
It's sort of the Who's
Who of Wall Street:

1199
00:56:06,338 --> 00:56:11,002
JP Morgan Chase CS
First Boston Citibank

1200
00:56:11,309 --> 00:56:14,904
Merrill Lynch, DeutscheBank...

1201
00:56:15,313 --> 00:56:19,750
These are some of the premier
investment banks in the world.

1202
00:56:20,085 --> 00:56:22,280
It's hard for us
to poke holes in this.

1203
00:56:22,421 --> 00:56:23,286
Good.

1204
00:56:25,725 --> 00:56:27,750
It's just amazing
how skilled Enron

1205
00:56:27,994 --> 00:56:30,861
and Andy Fastow were
at working Wall Street,

1206
00:56:31,097 --> 00:56:32,621
playing on Wall Street's greed,

1207
00:56:32,865 --> 00:56:34,799
in order to get money
out of them.

1208
00:56:35,034 --> 00:56:38,128
To quote Lenin,

1209
00:56:38,538 --> 00:56:42,440
they were the investment
bankers useful idiots.

1210
00:56:45,512 --> 00:56:47,571
As disturbing as
Enron's own misconduct,

1211
00:56:47,815 --> 00:56:49,908
is the growing evidence that

1212
00:56:50,117 --> 00:56:52,210
leading U.S.
Financial institutions

1213
00:56:52,486 --> 00:56:56,115
not only took part in Enron's
deceptive practices,

1214
00:56:56,557 --> 00:57:00,891
but at times designed,
advanced and profited from them.

1215
00:57:01,161 --> 00:57:05,257
The Enron fraud is the story
of synergistic corruption.

1216
00:57:05,466 --> 00:57:08,265
There are supposed to be checks
and balances in the system.

1217
00:57:08,470 --> 00:57:10,495
The lawyers are
supposed to say no.

1218
00:57:10,738 --> 00:57:12,706
The accountants are
supposed to say no.

1219
00:57:12,974 --> 00:57:14,805
The bankers are supposed
to say no.

1220
00:57:15,043 --> 00:57:17,739
But no one who was supposed
to say no said no.

1221
00:57:17,946 --> 00:57:19,504
They all took their
share of the money,

1222
00:57:19,714 --> 00:57:21,545
from the fraud and put it
in their pockets.

1223
00:57:21,749 --> 00:57:23,774
Enron paid its advisers well.

1224
00:57:24,052 --> 00:57:27,351
In 2001 the accounting
firm Arthur Andersen

1225
00:57:27,589 --> 00:57:29,318
received one million a week.

1226
00:57:29,725 --> 00:57:31,955
Enron's law firm,
Vinson & Elkins,

1227
00:57:32,328 --> 00:57:33,886
did nearly as well.

1228
00:57:34,330 --> 00:57:38,096
Everyone had their
hand out at the table.

1229
00:57:38,334 --> 00:57:40,029
They were all being paid.

1230
00:57:40,336 --> 00:57:42,395
And as long as Enron continued,

1231
00:57:42,705 --> 00:57:44,570
they received their fees.

1232
00:57:45,007 --> 00:57:47,475
They were a part of the process.

1233
00:57:47,810 --> 00:57:49,300
So it's hard now to say,

1234
00:57:49,578 --> 00:57:51,136
'oh, we didn't know anything.'

1235
00:57:51,413 --> 00:57:54,679
Had we known then what we know
now about Enron's practices,

1236
00:57:54,985 --> 00:57:57,613
we would not have engaged in
these transactions with Enron.

1237
00:57:57,888 --> 00:58:00,083
The facts that we now have
come to light about Enron,

1238
00:58:00,357 --> 00:58:01,824
however,
were not known at the time.

1239
00:58:02,058 --> 00:58:03,685
I believe that
the Citigroup professionals

1240
00:58:03,960 --> 00:58:06,827
involved with these
transactions acted in good faith.

1241
00:58:07,097 --> 00:58:12,626
I'd like you here to
look at one Citi email,

1242
00:58:12,702 --> 00:58:16,264
The email trail here
is all too lurid.

1243
00:58:16,507 --> 00:58:18,532
Oh, for instance,
one email I remember,

1244
00:58:18,743 --> 00:58:22,645
where the banker writes,
'Enron loves these deals.

1245
00:58:22,947 --> 00:58:24,278
They produce cash,

1246
00:58:24,515 --> 00:58:26,710
but they don't have to show
the debt on the balance sheet.'

1247
00:58:26,951 --> 00:58:28,851
Now, a high school student
can figure out that.

1248
00:58:29,086 --> 00:58:33,546
The banks were all knowing
articipants in this wrong-doing.

1249
00:58:34,592 --> 00:58:37,653
Meryll Lynch assisted Enron
in cooking it's books

1250
00:58:37,996 --> 00:58:41,397
by pretending to purchase
an existing Enron asset

1251
00:58:41,633 --> 00:58:44,898
when it was really
engaged in a loan.

1252
00:58:45,871 --> 00:58:48,396
The accounting sham involved
the sale of an interest

1253
00:58:48,607 --> 00:58:50,404
in three Nigerian barges

1254
00:58:51,343 --> 00:58:53,971
Nigeria is a long way
from Manhattan.

1255
00:58:54,212 --> 00:58:55,008
Yet for some reason,

1256
00:58:55,247 --> 00:58:58,307
toward the end of
the fourth quarter in 1999

1257
00:58:58,483 --> 00:59:00,315
Merrill Lynch suddenly
decided to buy

1258
00:59:00,587 --> 00:59:03,784
three Nigerian power
barges from Enron.

1259
00:59:04,090 --> 00:59:06,285
Nigerian power barges
have nothing to do

1260
00:59:06,526 --> 00:59:07,891
with Merrill Lynch's business.

1261
00:59:08,127 --> 00:59:10,118
It was a blatantly
illegal transaction.

1262
00:59:10,697 --> 00:59:12,096
It was just taking the barges,

1263
00:59:12,365 --> 00:59:14,265
getting them off
of Enron's books,

1264
00:59:14,467 --> 00:59:16,526
having Merill Lynch,
if you will,

1265
00:59:16,803 --> 00:59:20,261
warehouse them for five months
and then buying them back.

1266
00:59:20,440 --> 00:59:22,466
Mr. Martin, you...
you've testified here today

1267
00:59:22,776 --> 00:59:26,268
that there was no guarantee.
And you said that under oath.

1268
00:59:28,115 --> 00:59:29,639
Here's a document,

1269
00:59:29,883 --> 00:59:32,477
saying that the head of
your whole division here

1270
00:59:32,953 --> 00:59:37,117
was going to confirm
that understanding.

1271
00:59:40,828 --> 00:59:42,090
Over the year 2001,

1272
00:59:42,329 --> 00:59:44,560
Skilling became
increasingly despondent.

1273
00:59:44,833 --> 00:59:46,300
He'd always been a moody guy,

1274
00:59:46,468 --> 00:59:47,935
but people who knew
him said he became

1275
00:59:48,203 --> 00:59:50,171
just increasingly volatile.

1276
00:59:50,372 --> 00:59:52,431
Show up for work unshaven,
looking blurry-eyed.

1277
00:59:52,674 --> 00:59:54,107
And I think it was
the battle of holding these

1278
00:59:54,342 --> 00:59:57,505
two totally disjointed
thoughts in his mind at...

1279
00:59:57,712 --> 00:59:58,474
at the same time.

1280
00:59:58,680 --> 01:00:00,614
One is Enron
a super-star company

1281
01:00:00,849 --> 01:00:03,682
and the other of feeling like
it was all crumbling away.

1282
01:00:04,452 --> 01:00:07,047
The first cracks
in Skilling's public image

1283
01:00:07,289 --> 01:00:08,847
appeared in
a conference call with

1284
01:00:09,091 --> 01:00:11,355
analysts in April, 2001.

1285
01:00:11,594 --> 01:00:13,323
And then Jeff Skilling
took questions.

1286
01:00:13,796 --> 01:00:16,162
And about mid-way
through the session...

1287
01:00:16,399 --> 01:00:17,627
there was a question.

1288
01:00:17,833 --> 01:00:21,997
It was sort of aggressively
wondering out loud

1289
01:00:22,204 --> 01:00:23,466
why it was that Enron,

1290
01:00:23,739 --> 01:00:26,003
as a financial services
company in effect,

1291
01:00:26,275 --> 01:00:28,574
could not release
a balance sheet

1292
01:00:28,779 --> 01:00:30,041
with its earning statement,

1293
01:00:30,247 --> 01:00:32,010
like most financial
institutions do.

1294
01:00:32,249 --> 01:00:34,547
You're the only financial
institution that can't produce

1295
01:00:34,751 --> 01:00:37,049
a balance sheet or a cash flow
statement with their earnings

1296
01:00:38,955 --> 01:00:40,889
Well, you, you...

1297
01:00:41,291 --> 01:00:45,557
Well, thank you very much.
We appreciate it, asshole.

1298
01:00:46,930 --> 01:00:48,261
And then quite audibly

1299
01:00:48,498 --> 01:00:50,592
you could here
Skilling say asshole!

1300
01:00:50,968 --> 01:00:52,731
And then he said, 'asshole'.

1301
01:00:52,970 --> 01:00:55,336
As I understand it,
you called him an asshole.

1302
01:00:56,107 --> 01:00:58,075
And this just
caused unbelievable

1303
01:00:58,309 --> 01:00:59,867
amounts of consternation
all across Wall Street

1304
01:01:00,111 --> 01:01:01,203
because people thought,

1305
01:01:01,412 --> 01:01:03,903
'A Fortune 500 CEO
losing it like this,

1306
01:01:04,115 --> 01:01:07,175
calling publicly
an investor an asshole? '

1307
01:01:07,418 --> 01:01:09,181
If I could go back
and redo things,

1308
01:01:09,387 --> 01:01:13,620
I would not now,
have used the term that I used.

1309
01:01:13,826 --> 01:01:15,885
Mark Palmer,
Enron's chief PR guy,

1310
01:01:16,095 --> 01:01:18,359
Even ran a note up to Skilling,
telling him to apologize.

1311
01:01:18,630 --> 01:01:20,325
And he just took
the piece of paper

1312
01:01:20,466 --> 01:01:22,525
and tucked it under the pile
of papers on his desk.

1313
01:01:22,801 --> 01:01:23,358
And afterwards,

1314
01:01:23,602 --> 01:01:25,160
Enron's traders who had
erupted in cheers

1315
01:01:25,370 --> 01:01:27,838
when Skilling called this guy
an asshole made him a sign.

1316
01:01:28,107 --> 01:01:29,506
It was a play off
Enron's motto

1317
01:01:29,742 --> 01:01:32,176
'Ask Why' and the sign said
'ask why asshole.'

1318
01:01:34,280 --> 01:01:37,545
My personal feeling was that
Jeff looked at the numbers

1319
01:01:38,184 --> 01:01:43,349
and he knew that
we were in a massive hole.

1320
01:01:43,890 --> 01:01:46,381
It was the only time
that I saw him truly,

1321
01:01:46,593 --> 01:01:50,085
truly worried about keeping
the stock price up.

1322
01:01:50,296 --> 01:01:51,729
And he just kept saying to me,

1323
01:01:51,931 --> 01:01:54,092
'I don't know what the hell
I'm going to do.'

1324
01:01:57,738 --> 01:02:00,036
The broadband business was
in complete meltdown.

1325
01:02:00,407 --> 01:02:02,238
And there were all sorts
of other problems

1326
01:02:02,476 --> 01:02:04,034
that Jeff Skilling
as the company's Chief

1327
01:02:04,245 --> 01:02:05,837
Operating Officer was
wrestling with.

1328
01:02:06,080 --> 01:02:07,479
And in the middle of all this,

1329
01:02:07,748 --> 01:02:10,046
Ken Lay walks in Jeff
Skilling's office holding up

1330
01:02:10,351 --> 01:02:14,014
fabric swatches for the new G5
45 million dollar corporate

1331
01:02:14,221 --> 01:02:15,188
jet he wanted to buy.

1332
01:02:15,489 --> 01:02:17,423
And he said to Jeff,

1333
01:02:17,691 --> 01:02:19,125
asked him
a very important question,

1334
01:02:19,394 --> 01:02:20,827
'which of these
cabin configurations

1335
01:02:21,129 --> 01:02:22,323
do you like best, Jeff? '

1336
01:02:23,698 --> 01:02:27,134
While Ken Lay was stressing
over the corporate jet,

1337
01:02:27,469 --> 01:02:29,903
EES was headed for
a crash landing.

1338
01:02:30,238 --> 01:02:32,798
Facing 500 million in losses,

1339
01:02:33,074 --> 01:02:35,235
Lou Pai's top leuitenant,
Tom White,

1340
01:02:35,544 --> 01:02:37,944
wondered how EES
could show a profit

1341
01:02:38,280 --> 01:02:39,747
by the end of the quarter.

1342
01:02:40,382 --> 01:02:43,614
One of the things
that was always a strange

1343
01:02:43,853 --> 01:02:44,945
occurrence at Enron was

1344
01:02:45,988 --> 01:02:49,355
for weeks before
a quarterly report

1345
01:02:50,092 --> 01:02:52,492
we would be under
the impression that

1346
01:02:52,728 --> 01:02:54,457
we weren't going to
make our numbers.

1347
01:02:54,730 --> 01:02:56,220
But then somehow,
miraculously,

1348
01:02:56,699 --> 01:02:59,759
we always made the numbers,
and then some.

1349
01:03:00,002 --> 01:03:03,268
But then a question was
asked to Tom White,

1350
01:03:03,440 --> 01:03:06,102
'how is it that
we made the numbers? '

1351
01:03:06,410 --> 01:03:11,177
And his answer was,
'One word, California.'

1352
01:03:19,756 --> 01:03:22,122
The first clues to
Enron's new strategy

1353
01:03:22,359 --> 01:03:24,327
hit California with a jolt.

1354
01:03:25,563 --> 01:03:27,997
It started at Noon
rolling across the state.

1355
01:03:28,199 --> 01:03:30,497
Sacramento, San Francisco,
Beverly Hills,

1356
01:03:30,735 --> 01:03:32,066
Long Beach, San Diego

1357
01:03:32,370 --> 01:03:35,669
Twenty six thousand miles of
California power lines.

1358
01:03:35,974 --> 01:03:37,373
Enough to circle the Earth.

1359
01:03:37,742 --> 01:03:39,209
But for the second day
in a row,

1360
01:03:39,444 --> 01:03:42,242
not enough electricity
for America's largest state,

1361
01:03:42,480 --> 01:03:44,573
and the world's
sixth largest economy.

1362
01:03:44,849 --> 01:03:46,339
The first thing we heard about
this energy crisis is well,

1363
01:03:46,517 --> 01:03:48,076
our lights are going to go off
in the middle of winter

1364
01:03:48,287 --> 01:03:49,720
when we're using half
the electricity

1365
01:03:49,922 --> 01:03:51,253
we normally use
during the summer.

1366
01:03:51,557 --> 01:03:53,149
The Bay Area got hit
by not one,

1367
01:03:53,425 --> 01:03:54,983
but two rolling blackouts.

1368
01:03:55,227 --> 01:03:57,627
We only need
twenty eight thousand

1369
01:03:57,830 --> 01:03:59,127
to thirty thousand
megawatts in December.

1370
01:03:59,398 --> 01:04:02,060
We have an installed capacity
in California at the time

1371
01:04:02,301 --> 01:04:03,791
forty-five thousand megawatts.

1372
01:04:04,003 --> 01:04:06,733
Plenty o' power to meet
our electric demand.

1373
01:04:06,972 --> 01:04:09,031
Of course,
we had blackouts in December.

1374
01:04:09,375 --> 01:04:11,844
The people who control
California's power grid

1375
01:04:12,045 --> 01:04:14,206
say once again they're worried
about having to blackout

1376
01:04:14,414 --> 01:04:16,006
the Northern half of the state.

1377
01:04:16,349 --> 01:04:18,317
When the rolling blackouts
started hitting California

1378
01:04:18,518 --> 01:04:20,145
there was definitely a lot of
excitement in the air.

1379
01:04:20,453 --> 01:04:21,545
It was something new.

1380
01:04:21,755 --> 01:04:23,416
It was something that hadn't
been encountered before.

1381
01:04:23,623 --> 01:04:26,319
It was,
'how is this event going to

1382
01:04:26,493 --> 01:04:27,425
effect the price of power? '

1383
01:04:27,661 --> 01:04:29,629
Control's rotating attitudes
are being implemented.

1384
01:04:29,896 --> 01:04:30,828
I knew.

1385
01:04:31,097 --> 01:04:34,090
I knew that there was
illegality going on.

1386
01:04:34,368 --> 01:04:35,596
I could feel it.
I could smell it.

1387
01:04:35,803 --> 01:04:36,428
I could sense it.

1388
01:04:36,704 --> 01:04:37,966
And there was
no other explanation.

1389
01:04:38,172 --> 01:04:40,003
Because the numbers
just didn't add up.

1390
01:04:40,207 --> 01:04:41,765
We had enough power
in California.

1391
01:04:42,043 --> 01:04:43,943
It was never
about lack of supply.

1392
01:04:44,178 --> 01:04:45,475
When I ran for Governor
in 1998,

1393
01:04:45,746 --> 01:04:48,214
not one human being asked me
about electricity.

1394
01:04:48,416 --> 01:04:50,008
This thing kind of
came out of the woods,

1395
01:04:50,217 --> 01:04:51,047
as far as I was concerned.

1396
01:04:51,285 --> 01:04:52,343
And I was trying
in the early days

1397
01:04:52,586 --> 01:04:55,454
to learn what was happening;
how we could fix the problem.

1398
01:04:58,193 --> 01:05:00,457
California was
selected by Enron

1399
01:05:00,729 --> 01:05:02,856
as the prime place
to experiment

1400
01:05:03,131 --> 01:05:05,531
with this new concept of
deregulated electricity.

1401
01:05:05,734 --> 01:05:08,168
Reducing electricity cost
is only one benefit

1402
01:05:08,770 --> 01:05:10,397
from choice and competition.

1403
01:05:10,739 --> 01:05:13,572
In 1996, under pressure
from energy companies,

1404
01:05:13,842 --> 01:05:16,106
Governor Pete Wilson and
the California legislature

1405
01:05:16,378 --> 01:05:20,076
passed a bill allowing for
the deregulation of electricity.

1406
01:05:20,416 --> 01:05:22,714
I wasn't in
the Legislature in 1996,

1407
01:05:22,952 --> 01:05:25,716
but I can tell you that there
isn't a legislator alive

1408
01:05:25,922 --> 01:05:28,482
that can tell you
with any sophistication

1409
01:05:28,791 --> 01:05:31,760
how a deregulated electricity
market ought to work.

1410
01:05:32,061 --> 01:05:33,119
Not a one.

1411
01:05:33,863 --> 01:05:37,128
California's deregulated system
was a bizarre compromise

1412
01:05:37,367 --> 01:05:40,064
between legislators
and free-market advocates.

1413
01:05:40,371 --> 01:05:42,931
The rules were complicated
and hard to follow.

1414
01:05:43,841 --> 01:05:45,138
Inside Enron,

1415
01:05:45,409 --> 01:05:48,003
California's system was
little more than a joke.

1416
01:05:48,278 --> 01:05:49,472
And once in place,

1417
01:05:49,780 --> 01:05:53,841
Enron made sure that the joke
would be on California.

1418
01:05:54,184 --> 01:05:56,152
I remember the conversation
I had with Ken.

1419
01:05:56,387 --> 01:05:57,877
At the end of it he says 'Well,

1420
01:05:58,155 --> 01:05:59,087
Dave, old buddy,
let me just tell you.

1421
01:05:59,423 --> 01:06:01,654
It doesn't matter really to us

1422
01:06:01,893 --> 01:06:04,623
what kooky rules you
Californians put in place.

1423
01:06:04,896 --> 01:06:06,659
I got a bunch of really
smart people down here

1424
01:06:06,931 --> 01:06:08,865
who will figure out how to
make money anyhow.'

1425
01:06:10,735 --> 01:06:13,863
One of the smartest guys
at Enron was Tim Belden,

1426
01:06:14,105 --> 01:06:16,198
who ran the west
coast trading desk.

1427
01:06:17,042 --> 01:06:18,771
Tim Belden was
a fervent believer

1428
01:06:19,010 --> 01:06:20,500
in the idea of free markets

1429
01:06:20,745 --> 01:06:23,306
and as such he spent hours
poring over the new rules

1430
01:06:23,516 --> 01:06:25,916
for the deregulation of
California's energy industry,

1431
01:06:26,352 --> 01:06:29,321
looking for loopholes that Enron
could exploit to make money.

1432
01:06:29,889 --> 01:06:32,323
He found plenty.
After the bankruptcy,

1433
01:06:32,491 --> 01:06:34,652
a confidential memo surfaced
revealing the names of

1434
01:06:34,894 --> 01:06:38,523
Belden's strategies to game
the California market

1435
01:06:38,931 --> 01:06:42,128
Wheel Out, Get Shorty, Fat Boy

1436
01:06:42,902 --> 01:06:46,703
Recently, audio tapes of the
Enron traders were discovered.

1437
01:06:46,973 --> 01:06:48,201
What do you want to
call this project?

1438
01:06:48,809 --> 01:06:50,071
Probably have a catchy
name for that.

1439
01:06:51,044 --> 01:06:52,011
How about, you know,

1440
01:06:52,212 --> 01:06:54,146
something friendly
like 'Death Star'?

1441
01:06:58,985 --> 01:07:01,112
The tapes revealed
Enron's contempt

1442
01:07:01,388 --> 01:07:04,619
for any values except one,
making money.

1443
01:07:07,527 --> 01:07:08,654
Hey John, it's Tim.

1444
01:07:08,896 --> 01:07:10,454
Regulatory's all
in a big concern

1445
01:07:10,731 --> 01:07:13,097
about is we're wheeling power
out of California.

1446
01:07:13,334 --> 01:07:14,858
He just steals money
from California

1447
01:07:15,103 --> 01:07:16,695
to the tune of a million
Can you rephrase that?

1448
01:07:16,938 --> 01:07:19,338
Okay, he arbitrages
the California market

1449
01:07:19,574 --> 01:07:21,303
to the tune of a million
bucks or two a day.

1450
01:07:27,348 --> 01:07:29,680
An arbitrage opportunity
has been defined to me

1451
01:07:29,918 --> 01:07:31,977
as any opportunity to
make abnormal profits.

1452
01:07:32,187 --> 01:07:33,882
So an abnormal profit would be

1453
01:07:34,356 --> 01:07:37,553
returns above
and beyond the norm.

1454
01:07:37,793 --> 01:07:40,557
I was told that a good trader
is a creative trader.

1455
01:07:40,796 --> 01:07:42,627
And a creative
trader is a trader

1456
01:07:42,831 --> 01:07:45,459
that can find
arbitrage opportunities.

1457
01:07:46,235 --> 01:07:48,897
One of those opportunities
was called Ricochet.

1458
01:07:49,438 --> 01:07:51,838
I'll see you guys.
I'm takin' mine to the desert.

1459
01:07:52,208 --> 01:07:54,768
In the midst of energy
shortages Enron's traders

1460
01:07:55,178 --> 01:07:57,738
started to export power
out of the state.

1461
01:07:58,148 --> 01:08:00,912
When prices soared,
they brought it back in.

1462
01:08:01,251 --> 01:08:03,617
So we fuckin' export
like a motherfucker.

1463
01:08:03,920 --> 01:08:05,785
Getting rich?
Trying to.

1464
01:08:09,325 --> 01:08:11,589
Traders would stay after
a twelve hour shift

1465
01:08:11,928 --> 01:08:14,955
and pour over maps of
the western energy grid.

1466
01:08:15,199 --> 01:08:17,497
What are the permutations
and combinations of ways to

1467
01:08:17,735 --> 01:08:19,930
move power around the west.

1468
01:08:20,204 --> 01:08:22,502
And I think that's something
that Enron knew better

1469
01:08:22,740 --> 01:08:25,573
than any other Energy marketer
in the country, period.

1470
01:08:25,876 --> 01:08:28,572
We know all of
the California imports.

1471
01:08:28,946 --> 01:08:31,107
We know all of
the California load.

1472
01:08:31,382 --> 01:08:33,077
We're getting' pretty spoiled
with all this money.

1473
01:08:33,350 --> 01:08:34,408
You said you were
getting a little scared

1474
01:08:34,618 --> 01:08:36,849
we're making a little too much.
And I tend to agree with you.

1475
01:08:39,057 --> 01:08:42,618
These are two traders,
t-r-a-d-e-r-s.

1476
01:08:42,861 --> 01:08:44,055
This is what they say.

1477
01:08:44,362 --> 01:08:46,728
'What we did was overbook
the transmission line

1478
01:08:46,998 --> 01:08:49,796
we had the rights on and said
to California Utilities,

1479
01:08:50,035 --> 01:08:52,333
'lf you want to use the line,
pay us.'

1480
01:08:52,804 --> 01:08:55,170
By the time they agreed
to meet our price,

1481
01:08:55,440 --> 01:08:57,874
rolling blackouts
had already hit California

1482
01:08:58,143 --> 01:09:00,408
and the price for electricity
went through the roof.'

1483
01:09:00,680 --> 01:09:02,910
Did you have any knowledge
that this was happening?

1484
01:09:03,182 --> 01:09:05,275
The only thing that
I'm aware of Senator,

1485
01:09:05,484 --> 01:09:06,644
is there was a,

1486
01:09:06,886 --> 01:09:08,649
there was
a difference of opinion

1487
01:09:08,921 --> 01:09:10,946
on the rules of the
independent system operator.

1488
01:09:11,190 --> 01:09:13,988
It was just set up,
the rules weren't quite clear.

1489
01:09:14,193 --> 01:09:16,491
We have traders here
from Enron

1490
01:09:16,696 --> 01:09:18,027
who were saying
they did something wrong.

1491
01:09:18,331 --> 01:09:19,355
But you don't see
anything wrong.

1492
01:09:19,632 --> 01:09:22,067
I have one last question
and then I am done.

1493
01:09:23,670 --> 01:09:27,299
Traders soon discovered that
by shutting down power plants,

1494
01:09:27,541 --> 01:09:29,941
they could create
artificial shortages

1495
01:09:30,177 --> 01:09:32,475
that would push prices
even higher.

1496
01:09:35,515 --> 01:09:37,574
Hey, this is David up at Enron.

1497
01:09:38,352 --> 01:09:40,479
There's not much demand
for power at all here.

1498
01:09:40,721 --> 01:09:41,551
If we shut it down,

1499
01:09:41,755 --> 01:09:43,553
can you bring it back up
in 3 or 4 hours?

1500
01:09:43,858 --> 01:09:44,552
Oh, yeah.

1501
01:09:44,792 --> 01:09:46,123
Why don't you just go ahead
and shut her down then,

1502
01:09:46,361 --> 01:09:47,623
if that's ok?
Okay.

1503
01:09:47,862 --> 01:09:50,422
When you see two
or three energy companies

1504
01:09:50,732 --> 01:09:54,099
with 30, 35 percent of
their entire capacity down

1505
01:09:54,369 --> 01:09:55,961
for maintenance on a single day

1506
01:09:56,371 --> 01:09:59,966
and as a result
the price of electricity is

1507
01:10:00,208 --> 01:10:01,573
skyrocketing three or
four hundred percent

1508
01:10:01,843 --> 01:10:03,470
and then a week later
someone else does it up

1509
01:10:03,678 --> 01:10:05,009
in Northern California

1510
01:10:05,246 --> 01:10:07,613
you begin to believe something's
not smelling right here.

1511
01:10:07,916 --> 01:10:10,248
We want you guys to get
a little creative.

1512
01:10:10,486 --> 01:10:10,781
Okay.

1513
01:10:11,053 --> 01:10:12,111
And come up with
a reason to go down.

1514
01:10:12,354 --> 01:10:13,685
Like a forced
outage type thing?

1515
01:10:13,989 --> 01:10:14,717
Right.

1516
01:10:15,024 --> 01:10:16,924
Those guys
at the flip of a switch

1517
01:10:17,159 --> 01:10:18,888
could just yank
the California economy

1518
01:10:19,194 --> 01:10:20,593
on it's leash whenever
they wanted to.

1519
01:10:20,829 --> 01:10:21,727
And they did it,
and they did it,

1520
01:10:21,930 --> 01:10:23,261
and they did it.
And they made so much money.

1521
01:10:23,532 --> 01:10:26,433
The heart of it is
that an industry

1522
01:10:26,669 --> 01:10:30,231
that went for a hundred years
from the days of Edison built

1523
01:10:30,540 --> 01:10:32,974
the best electrical system
in the world,

1524
01:10:33,310 --> 01:10:35,608
sold the power at reasonable
prices to consumers

1525
01:10:35,812 --> 01:10:38,781
and was very reliable
was all of a sudden

1526
01:10:39,082 --> 01:10:40,640
turned into a casino.

1527
01:10:43,920 --> 01:10:46,616
These strategies made
some money for Enron.

1528
01:10:46,856 --> 01:10:48,824
But the real money was
made by betting

1529
01:10:49,125 --> 01:10:51,094
that the price of
energy would go up

1530
01:10:51,462 --> 01:10:52,360
It did.

1531
01:10:52,596 --> 01:10:54,086
And the West Coast traders made

1532
01:10:54,298 --> 01:10:56,766
nearly two billion dollars
for Enron.

1533
01:11:02,707 --> 01:11:05,676
You can't treat electricity
like you treat oranges.

1534
01:11:05,943 --> 01:11:07,808
It's the lifeblood
of the society.

1535
01:11:08,045 --> 01:11:08,602
It can't be stored.

1536
01:11:08,846 --> 01:11:10,336
You can't turn
these people loose

1537
01:11:10,548 --> 01:11:13,814
and let them
just have a quote free market

1538
01:11:14,019 --> 01:11:16,351
because a free market is God

1539
01:11:16,555 --> 01:11:18,580
Damn expensive to
the customers.

1540
01:11:19,091 --> 01:11:20,991
There would be
ample supply available

1541
01:11:21,226 --> 01:11:22,488
at the right fuckin' price.

1542
01:11:22,728 --> 01:11:23,387
Oh, sure there would.

1543
01:11:23,628 --> 01:11:24,117
It wasn't just Enron

1544
01:11:24,396 --> 01:11:27,160
"Every company traded
according to the rules

1545
01:11:27,432 --> 01:11:29,525
that California put up there.

1546
01:11:29,968 --> 01:11:31,731
We're the future of Enron.

1547
01:11:32,003 --> 01:11:35,838
And we're fucking making half
a billion dollars for Enron.

1548
01:11:36,142 --> 01:11:37,234
Can you believe that?

1549
01:11:37,777 --> 01:11:40,268
We'll definitely retire
by the time we're 30.

1550
01:11:40,613 --> 01:11:42,376
We're talking
about a commodity that

1551
01:11:42,582 --> 01:11:43,708
normally trades
in the thirty-five,

1552
01:11:43,916 --> 01:11:45,008
forty-five dollar range.

1553
01:11:45,218 --> 01:11:46,776
High prices are when it
gets into the fifties.

1554
01:11:47,887 --> 01:11:49,650
A thousand dollars?

1555
01:11:50,156 --> 01:11:53,648
Prices aren't going to stay
at 1,000 bucks forever.

1556
01:11:54,427 --> 01:11:56,122
It weeds out the weak
people in the market.

1557
01:11:56,730 --> 01:11:58,129
Get rid of them
and you know what,

1558
01:11:58,432 --> 01:12:00,400
the people who are strong
will stick around.

1559
01:12:00,734 --> 01:12:03,294
And the Enron traders never
seemed to step back and say,

1560
01:12:03,537 --> 01:12:05,471
'Wait.
Is what we're doing ethical?

1561
01:12:05,672 --> 01:12:07,333
Is it in our best
long term interests? '

1562
01:12:07,608 --> 01:12:10,202
'Does it help us
if we totally rape California? '

1563
01:12:10,444 --> 01:12:13,607
'Does that advance our goals
of nation-wide deregulation? '

1564
01:12:13,881 --> 01:12:16,042
Instead they sought
out every loophole

1565
01:12:16,383 --> 01:12:19,148
they could in order to profit
from California's misery.

1566
01:12:20,088 --> 01:12:23,785
Temperatures in California are
hitting higher than 100 degrees

1567
01:12:24,058 --> 01:12:27,892
fueling wildfires and fears that
California's strained power grid

1568
01:12:28,163 --> 01:12:30,154
could once again near collapse.

1569
01:12:31,399 --> 01:12:32,093
What's happening?

1570
01:12:32,500 --> 01:12:33,865
There's a fire under
the core line.

1571
01:12:34,135 --> 01:12:37,468
It's been de-rated
from 45 to 2100.

1572
01:12:38,039 --> 01:12:40,473
Burn, baby, burn.

1573
01:12:40,775 --> 01:12:42,209
That's a beautiful thing.

1574
01:12:45,147 --> 01:12:48,378
I was never comfortable
on the trading floor at Enron.

1575
01:12:49,218 --> 01:12:51,914
And if I had questions,
I didn't ask them,

1576
01:12:52,154 --> 01:12:54,247
because I didn't want
to know the answer.

1577
01:12:55,458 --> 01:12:56,652
You know,
I didn't want confirmed

1578
01:12:56,959 --> 01:12:59,689
what I suspected might be true.

1579
01:12:59,995 --> 01:13:02,828
That what I was doing was,
in fact,

1580
01:13:03,132 --> 01:13:08,765
unseemly or was,
at least, unethical,

1581
01:13:08,972 --> 01:13:10,530
if not worse.

1582
01:13:12,409 --> 01:13:14,707
Why did the traders do
what they did?

1583
01:13:15,045 --> 01:13:17,605
Was it their multi-million
dollar bonuses

1584
01:13:17,848 --> 01:13:20,544
or had Enron found
a way to exploit

1585
01:13:20,750 --> 01:13:23,048
the darker side of
human behavior?

1586
01:13:24,554 --> 01:13:26,716
In the early
60's Stanley Milgram

1587
01:13:26,991 --> 01:13:29,118
tried to figure out
what characteristics

1588
01:13:29,427 --> 01:13:30,553
there were of evil people.

1589
01:13:30,795 --> 01:13:33,628
Was there an evil strain
or could normal people

1590
01:13:33,831 --> 01:13:35,162
do really bad things?

1591
01:13:35,399 --> 01:13:37,094
And so he set up
this experiment.

1592
01:13:37,301 --> 01:13:39,826
In the experiment
he had an actor playing

1593
01:13:40,037 --> 01:13:43,438
an experimental subject
and a real experimental subject.

1594
01:13:44,075 --> 01:13:45,736
Want to step right
in here and have a seat?

1595
01:13:45,977 --> 01:13:48,572
They went into this room
and he had an experimenter say,

1596
01:13:48,981 --> 01:13:51,245
'we're going to see
if mild electric shocks

1597
01:13:51,483 --> 01:13:53,383
will help people
memorize lists.

1598
01:13:54,186 --> 01:13:58,247
Incorrect... You'll now get
a shock of 75 volts.

1599
01:13:59,258 --> 01:14:00,953
Soft air.

1600
01:14:01,827 --> 01:14:03,419
He kind of did some
yelling in there.

1601
01:14:03,662 --> 01:14:05,994
The Milgram Experiment has
a lot to say about Enron

1602
01:14:06,231 --> 01:14:10,532
because I think people lost
their sense of morality.

1603
01:14:10,837 --> 01:14:12,464
Like Milgram,
once you accepted the idea

1604
01:14:12,739 --> 01:14:14,730
that behaving
inhumanly was okay,

1605
01:14:14,974 --> 01:14:15,906
you could do anything.

1606
01:14:16,175 --> 01:14:17,767
And the shocks increased
with the number

1607
01:14:18,044 --> 01:14:19,341
of mistakes that they made.

1608
01:14:19,646 --> 01:14:21,671
I can't stand the pain!
Let me out of here!

1609
01:14:21,915 --> 01:14:24,076
He can't stand it.
I'm not going to kill that man.

1610
01:14:24,417 --> 01:14:26,044
The subject,
the real subject is begging

1611
01:14:26,252 --> 01:14:28,447
the scientist-looking
person to stop too.

1612
01:14:28,688 --> 01:14:30,178
And the scientist only says

1613
01:14:30,490 --> 01:14:32,823
'the experiment requires
that you continue.

1614
01:14:33,127 --> 01:14:34,492
Please continue. Go on, please.

1615
01:14:35,262 --> 01:14:37,127
You accept all responsibility?

1616
01:14:37,398 --> 01:14:39,127
The responsibility is mine,
correct.

1617
01:14:39,400 --> 01:14:39,923
Please go on.

1618
01:14:40,234 --> 01:14:42,998
In a way,
Skilling was almost like the guy

1619
01:14:43,237 --> 01:14:44,431
telling those people below him

1620
01:14:44,705 --> 01:14:47,230
it was okay to up the power.

1621
01:14:49,076 --> 01:14:51,135
California's Electric Utilities

1622
01:14:51,412 --> 01:14:53,471
may have to pull the plug on
millions of customers.

1623
01:14:53,781 --> 01:14:56,774
It's the fucking coolest thing
I've done in a long time.

1624
01:14:57,018 --> 01:14:58,576
Holy fuck, yes.
You gotta love the west.

1625
01:14:58,920 --> 01:14:59,443
Oh.

1626
01:15:02,424 --> 01:15:04,324
During the height of
Wednesday's blackout,

1627
01:15:04,559 --> 01:15:07,357
fire crews had to free people
trapped in elevators.

1628
01:15:07,929 --> 01:15:09,863
All that money you guys
stole from those

1629
01:15:10,065 --> 01:15:11,327
poor grandmothers in California.

1630
01:15:11,633 --> 01:15:13,225
Yeah, Grandma Millie, man.

1631
01:15:13,468 --> 01:15:15,459
She's the one who couldn't
figure out how to fucking vote

1632
01:15:15,704 --> 01:15:16,763
on the butterfly ballot.

1633
01:15:17,006 --> 01:15:18,871
Now she wants her fucking money
back for all the power

1634
01:15:19,075 --> 01:15:20,736
you've charged right up her ass.

1635
01:15:29,652 --> 01:15:31,085
You must continue.
Go on, please.

1636
01:15:31,487 --> 01:15:34,513
You're gonna keep giving him
what... 450 volts every shot now?

1637
01:15:34,757 --> 01:15:36,384
That's correct. Continue.

1638
01:15:36,592 --> 01:15:38,184
It's kinda hard to say
well we should be,

1639
01:15:38,394 --> 01:15:40,158
you know we shouldn't do this
even though it's allowed

1640
01:15:40,397 --> 01:15:43,628
because you know.
I mean, that's what we do.

1641
01:15:43,867 --> 01:15:44,697
Right.

1642
01:15:45,135 --> 01:15:47,262
Best thing that could happen
is fucking an earthquake.

1643
01:15:47,504 --> 01:15:49,096
Let that thing float
out to the Pacific.

1644
01:15:49,406 --> 01:15:50,373
Put up fucking candles.

1645
01:15:53,944 --> 01:15:56,037
Milgram's discovery
was disturbing.

1646
01:15:56,279 --> 01:15:57,678
Fifty percent of
the subjects were

1647
01:15:57,881 --> 01:15:59,644
willing to shock to the death,

1648
01:15:59,916 --> 01:16:01,384
so long as the commands came

1649
01:16:01,619 --> 01:16:03,985
from a seemingly
legitimate source.

1650
01:16:12,964 --> 01:16:14,659
Tonight I'm declaring
a state of emergency

1651
01:16:14,899 --> 01:16:16,992
in California to give the state

1652
01:16:17,201 --> 01:16:19,101
the authority
and the resources to

1653
01:16:19,370 --> 01:16:20,632
keep the lights on
in California.

1654
01:16:20,838 --> 01:16:22,237
The Governor,
who's been basically

1655
01:16:23,007 --> 01:16:24,999
capitulating to
the demands of the energy

1656
01:16:25,210 --> 01:16:27,906
companies and utility companies,
needs to put his foot down.

1657
01:16:28,113 --> 01:16:30,343
We wanted the Governor to send
in the state police

1658
01:16:30,482 --> 01:16:33,110
or the National Guard to seize
control of the power plants

1659
01:16:33,385 --> 01:16:34,352
and put it back on-line.

1660
01:16:34,586 --> 01:16:35,883
And I thought we didn't have
to take over every plant,

1661
01:16:36,121 --> 01:16:37,554
we really only had to
take over one.

1662
01:16:37,823 --> 01:16:39,450
'Cause then they would
know he meant it.

1663
01:16:39,658 --> 01:16:41,649
I'm going to get
the nine billion dollars

1664
01:16:41,927 --> 01:16:42,825
back that Enron,

1665
01:16:43,028 --> 01:16:46,590
Dynergy and Reliant stole
from us and get it back to you.

1666
01:16:46,833 --> 01:16:48,357
Despite what the
people of California

1667
01:16:48,501 --> 01:16:51,834
think Enron's making money
despite California,

1668
01:16:52,038 --> 01:16:53,665
not because of California.

1669
01:16:54,140 --> 01:16:56,199
The year-long energy
crisis would cost

1670
01:16:56,443 --> 01:16:59,105
the state of California
$30 billion dollars.

1671
01:17:01,147 --> 01:17:04,913
The markets in California are
the most regulated market

1672
01:17:05,185 --> 01:17:07,210
in North America today.

1673
01:17:07,454 --> 01:17:09,787
And that's what's
causing the problem.

1674
01:17:10,191 --> 01:17:12,489
California,
it never deregulated.

1675
01:17:12,760 --> 01:17:14,751
Enron, buy stock today.

1676
01:17:15,963 --> 01:17:17,555
Thank you very much.

1677
01:17:17,832 --> 01:17:19,026
We are doing the right thing.

1678
01:17:19,366 --> 01:17:20,731
You're the good guys.

1679
01:17:21,001 --> 01:17:23,561
We are the good guys.
We are on the side of angels.

1680
01:17:24,371 --> 01:17:25,338
Oh, I can't help myself.

1681
01:17:25,573 --> 01:17:26,505
You know what the
difference is between

1682
01:17:26,707 --> 01:17:28,800
the state of California
and the Titanic?

1683
01:17:32,781 --> 01:17:34,772
This being a web cast,
I know I'm going to regret this.

1684
01:17:35,050 --> 01:17:36,745
At least when the
Titanic went down,

1685
01:17:37,018 --> 01:17:38,349
the lights were on.

1686
01:17:41,923 --> 01:17:45,586
Jeffery Skilling,
how's it feel to make a killing?

1687
01:17:45,794 --> 01:17:48,160
A top executive at one of
America's biggest power

1688
01:17:48,396 --> 01:17:52,162
companies received a raucous
welcome in San Francisco tonight.

1689
01:17:52,401 --> 01:17:54,926
Protestors heckled Enron's CEO,

1690
01:17:55,138 --> 01:17:57,368
Jeffery Skilling
outside and inside

1691
01:17:57,507 --> 01:17:59,407
during his appearance
at Commonwealth Club.

1692
01:17:59,675 --> 01:18:01,870
One of the protestors even
brought a blueberry pie

1693
01:18:02,078 --> 01:18:03,511
and delivered it herself.

1694
01:18:05,414 --> 01:18:06,312
Police!

1695
01:18:07,250 --> 01:18:10,310
A hundred and thirty two
million dollars is what he made.

1696
01:18:10,520 --> 01:18:13,887
We had a fifty percent hike
in utility rates.

1697
01:18:14,090 --> 01:18:16,025
Consumers in California
are angry.

1698
01:18:16,360 --> 01:18:17,327
And they should be.

1699
01:18:17,528 --> 01:18:18,722
And if we had anything
to do with this,

1700
01:18:18,929 --> 01:18:21,420
then we are the stupidest
people in the world.

1701
01:18:21,932 --> 01:18:23,627
I work for an organization.

1702
01:18:23,867 --> 01:18:25,232
Every day people call saying

1703
01:18:25,502 --> 01:18:27,129
they can't pay their
electricity bills!

1704
01:18:27,371 --> 01:18:30,238
You made millions of dollars
off of California...

1705
01:18:30,474 --> 01:18:31,202
Get out! Go to jail.

1706
01:18:31,408 --> 01:18:33,399
When the tidal
wave of public anger

1707
01:18:33,677 --> 01:18:35,975
started to grow
Ken Lay flew out here

1708
01:18:36,180 --> 01:18:38,046
and convened
a meeting of friends

1709
01:18:38,383 --> 01:18:40,681
and I guess he had a little
more foresight than we did.

1710
01:18:40,919 --> 01:18:43,080
He, he invited
Arnold Schwarzenegger.

1711
01:18:43,388 --> 01:18:44,650
Brought them together
at the Peninsula Hotel

1712
01:18:44,889 --> 01:18:45,719
and had a lunch meeting.

1713
01:18:45,957 --> 01:18:49,358
The notes from that meeting
really still have never surfaced,

1714
01:18:49,561 --> 01:18:51,688
but we know that
Ken Lay's pitch was

1715
01:18:51,996 --> 01:18:53,156
we've got to stay the course

1716
01:18:53,398 --> 01:18:55,889
with deregulation and
the market will correct itself

1717
01:18:56,134 --> 01:18:57,761
and everything will
turn out fine.

1718
01:18:58,403 --> 01:19:00,133
Now at... at the time
we didn't understand

1719
01:19:00,406 --> 01:19:01,771
really why he was so concerned.

1720
01:19:02,041 --> 01:19:02,632
But now we do.

1721
01:19:02,942 --> 01:19:04,136
The fact is that
Ken Lay was out here

1722
01:19:04,410 --> 01:19:05,741
because he understood that

1723
01:19:06,011 --> 01:19:07,774
Enron itself was
a house of cards

1724
01:19:08,013 --> 01:19:10,948
And if deregulation
were to collapse,

1725
01:19:11,183 --> 01:19:12,844
then Enron itself
would collapse.

1726
01:19:13,719 --> 01:19:15,482
But Ken Lay had a trump card.

1727
01:19:15,788 --> 01:19:18,052
In the midst of the energy
crisis his friend,

1728
01:19:18,357 --> 01:19:20,917
George W. Bush,
became president

1729
01:19:21,261 --> 01:19:24,196
I, George Walker Bush,
do solemnly swear.

1730
01:19:24,464 --> 01:19:26,455
I, George Walker Bush,
do solemnly swear.

1731
01:19:26,666 --> 01:19:28,224
Ken Lay's going to be
Secretary of Energy.

1732
01:19:29,369 --> 01:19:30,529
Get out of here.

1733
01:19:31,071 --> 01:19:33,232
How great would that be for
all the players in the market?

1734
01:19:33,506 --> 01:19:34,029
Lt'd be great.

1735
01:19:34,374 --> 01:19:36,501
I'd love to see Ken Lay be
Secretary of Energy.

1736
01:19:36,843 --> 01:19:40,370
Ken Lay did have easy access
to the Bush administration.

1737
01:19:40,647 --> 01:19:41,545
On April 17th,

1738
01:19:41,748 --> 01:19:43,649
he met with Vice
President Dick Cheney,

1739
01:19:43,985 --> 01:19:46,078
and strongly argued
against the imposition of

1740
01:19:46,454 --> 01:19:48,513
Federal price caps
in California.

1741
01:19:48,756 --> 01:19:50,587
We're doing everything
we can to help in California

1742
01:19:50,892 --> 01:19:52,723
on the short term basis.
There's not a lot you can do.

1743
01:19:52,960 --> 01:19:54,518
You can't manufacture kilowatts

1744
01:19:54,729 --> 01:19:55,855
in the West wing of
the White House.

1745
01:19:56,063 --> 01:19:58,031
We're fighting with both hands
tied behind our back.

1746
01:19:58,266 --> 01:19:59,824
We no longer have
the power to stop this.

1747
01:20:00,101 --> 01:20:01,432
If the federal government
doesn't help us,

1748
01:20:01,669 --> 01:20:02,601
we're a dead duck.

1749
01:20:03,137 --> 01:20:05,663
At the time,
Gray Davis was a likely candidate

1750
01:20:05,908 --> 01:20:07,102
to run for president.

1751
01:20:07,342 --> 01:20:09,970
Ken Lay knew that might give
his friend George Bush

1752
01:20:10,245 --> 01:20:12,736
a political reason
to oppose California's

1753
01:20:12,981 --> 01:20:15,415
appeals for federal
price controls.

1754
01:20:15,684 --> 01:20:18,448
They know full well
my administration's belief

1755
01:20:18,654 --> 01:20:22,112
that price controls will not
solve the problem.

1756
01:20:22,424 --> 01:20:24,324
His view was that
the Federal government

1757
01:20:24,559 --> 01:20:26,584
really shouldn't get involved.
This is California's problem.

1758
01:20:27,262 --> 01:20:29,288
And I'm saying,
'with all due... due respect,

1759
01:20:29,499 --> 01:20:31,933
Mr. President, our law said

1760
01:20:32,168 --> 01:20:34,033
the Federal government
regulates this,

1761
01:20:34,270 --> 01:20:35,430
so it is your problem.

1762
01:20:35,705 --> 01:20:37,605
And you make appointments to the
Federal Deregulatory Commission.

1763
01:20:37,840 --> 01:20:40,240
So, we had a polite,
but spirited discussion on that.

1764
01:20:40,543 --> 01:20:40,975
And he says,

1765
01:20:41,210 --> 01:20:42,199
'I just can't be of help
to you on that.'

1766
01:20:42,445 --> 01:20:44,310
As I said from the very beginning
of my administration,

1767
01:20:44,514 --> 01:20:46,038
we'll work to help California,

1768
01:20:46,349 --> 01:20:47,873
in any way we can.

1769
01:20:48,284 --> 01:20:50,981
And the best way we can is
to be good citizens.

1770
01:20:52,456 --> 01:20:55,857
FERC, the federal agency which
regulates energy in America,

1771
01:20:56,093 --> 01:20:57,583
refused to intervene.

1772
01:20:58,362 --> 01:21:01,763
What was FERC doing and why
was it not taking action?

1773
01:21:01,999 --> 01:21:04,092
The chairman of FERC
was Pat Wood,

1774
01:21:04,401 --> 01:21:07,859
the man Ken Lay had personally
recommended for the job.

1775
01:21:08,138 --> 01:21:10,436
It was easy for FERC
to do Enron's bidding

1776
01:21:10,674 --> 01:21:12,164
because all it had
to do was do nothing

1777
01:21:12,410 --> 01:21:13,570
which they did very well.

1778
01:21:13,878 --> 01:21:15,869
Federal Regulators are
being pressured to act

1779
01:21:16,147 --> 01:21:18,615
by the now Democratic
controlled Senate where here...

1780
01:21:18,850 --> 01:21:22,843
A Democratic Senate forced FERC
to impose regional price caps.

1781
01:21:23,088 --> 01:21:26,524
That ended the energy crisis,
but not the political one.

1782
01:21:26,791 --> 01:21:29,385
Did Ken Lay and George Bush
have a political agenda to

1783
01:21:29,627 --> 01:21:31,424
blame the energy crisis
on Gray Davis?

1784
01:21:31,763 --> 01:21:33,924
Oh hello.

1785
01:21:34,633 --> 01:21:37,397
It's one of those
'only in California' stories.

1786
01:21:37,603 --> 01:21:39,195
The state's unpopular Governor,

1787
01:21:39,438 --> 01:21:41,929
Gray Davis,
beset by an ailing economy

1788
01:21:42,174 --> 01:21:44,404
and thirty eight billion
dollar budget deficit,

1789
01:21:44,577 --> 01:21:46,306
faces possible recall.

1790
01:21:46,645 --> 01:21:49,614
And rumored as a possible
replacement for Davis,

1791
01:21:49,849 --> 01:21:51,976
movie star
Arnold Schwarzenegger.

1792
01:21:52,351 --> 01:21:53,613
The Terminator?

1793
01:21:53,886 --> 01:21:55,581
We'll see whether
he's back or not.

1794
01:21:55,821 --> 01:21:57,619
Gray Davis has
terminated opportunities

1795
01:21:57,891 --> 01:22:00,018
and now it's time
we terminate Gray Davis!

1796
01:22:00,794 --> 01:22:04,161
No Recall! No Recall!

1797
01:22:07,401 --> 01:22:09,869
Could I predict
a phony energy crisis

1798
01:22:10,137 --> 01:22:11,161
as a result of deregulation?

1799
01:22:11,505 --> 01:22:14,167
Yes. Could I predict that
Arnold Schwartzerneger

1800
01:22:14,441 --> 01:22:16,671
would be our Governor
as a result of deregulation?

1801
01:22:17,310 --> 01:22:18,368
Never would have
come up with that.

1802
01:22:18,578 --> 01:22:19,841
That's like a bad
science fiction movie.

1803
01:22:20,114 --> 01:22:22,275
Apparently we have
all been wrong,

1804
01:22:22,650 --> 01:22:25,414
it is pronounced Caly-forn-ya.

1805
01:22:25,753 --> 01:22:26,742
Ladies and gentlemen,

1806
01:22:26,954 --> 01:22:29,149
the Governor of the great
state of California,

1807
01:22:29,424 --> 01:22:30,891
Arnold Schwarzenegger!

1808
01:22:46,575 --> 01:22:48,566
We could just hear rumbles
all the way up and down

1809
01:22:49,578 --> 01:22:51,569
Main Street here
and all throughout the city

1810
01:22:51,780 --> 01:22:54,772
that things were
very difficult at Enron.

1811
01:22:55,017 --> 01:22:57,645
One guy who a year before had
come to me and said,

1812
01:22:57,853 --> 01:22:58,581
I'm working for Enron,

1813
01:22:58,787 --> 01:23:01,017
and was very excited
but within a year

1814
01:23:01,290 --> 01:23:03,349
was waking up every night
with nightmares.

1815
01:23:03,526 --> 01:23:05,391
'I've got no life left

1816
01:23:05,662 --> 01:23:07,857
and I feel like I'm being
consumed by this company.'

1817
01:23:08,731 --> 01:23:11,199
As doubts began to surface
about the company

1818
01:23:11,434 --> 01:23:13,800
and the erratic
behavior of its CEO

1819
01:23:14,070 --> 01:23:16,402
Enron's stock began to fall.

1820
01:23:17,040 --> 01:23:18,564
I remember one of
the most poignant meetings

1821
01:23:18,775 --> 01:23:19,833
I'd ever had with Jeff.

1822
01:23:20,043 --> 01:23:21,169
I had left Enron

1823
01:23:21,478 --> 01:23:23,173
and I had come over to
talk about whether or not

1824
01:23:23,413 --> 01:23:24,607
I would return to Enron.

1825
01:23:24,881 --> 01:23:26,679
And I said, 'Jeff,
you've got a real problem.

1826
01:23:27,017 --> 01:23:29,485
The traders,
they will cut your throat,

1827
01:23:29,753 --> 01:23:32,381
if they think it will get them
to the trough sooner.'

1828
01:23:32,923 --> 01:23:34,390
Jeff was silent.

1829
01:23:34,692 --> 01:23:36,990
And he looked out the window

1830
01:23:37,428 --> 01:23:39,396
and he looked back
at me and he said,

1831
01:23:39,597 --> 01:23:42,760
'Yeah Amanda,
you're most likely right.'

1832
01:23:44,135 --> 01:23:47,002
By the end,
the traders ran Enron.

1833
01:23:47,271 --> 01:23:49,399
You know, the inmates had
taken over the asylum.

1834
01:23:52,444 --> 01:23:55,709
All through the summer,
the stock continued to decline.

1835
01:23:56,148 --> 01:23:58,844
There was a buzz that a major

1836
01:23:59,084 --> 01:24:00,949
announcement was
going to take place.

1837
01:24:01,219 --> 01:24:05,485
But we all thought that
Ken Lay was leaving

1838
01:24:05,957 --> 01:24:08,118
Enron and that he had been

1839
01:24:08,460 --> 01:24:13,364
asked by the Bush administration
to join his administration.

1840
01:24:13,666 --> 01:24:15,531
But that wasn't
the case at all.

1841
01:24:15,768 --> 01:24:17,258
It was Jeff Skilling
announcing that

1842
01:24:17,537 --> 01:24:19,767
he was stepping down
as the CEO.

1843
01:24:20,039 --> 01:24:22,735
And that took everyone
by surprise.

1844
01:24:23,009 --> 01:24:24,567
No one could believe that.

1845
01:24:25,444 --> 01:24:27,105
CEO's generally,

1846
01:24:27,313 --> 01:24:29,372
don't just resign
out of the blue

1847
01:24:29,682 --> 01:24:33,278
without a well orchestrated PR
campaign beforehand

1848
01:24:33,587 --> 01:24:35,817
to pave the way
so there's no disruptions,

1849
01:24:36,023 --> 01:24:38,184
there's no questions,
there's no front page stories,

1850
01:24:38,425 --> 01:24:40,723
which is, of course,
exactly what happened.

1851
01:24:42,663 --> 01:24:44,631
It was at that point
that I knew,

1852
01:24:44,965 --> 01:24:46,523
the architect of
the disaster knows that

1853
01:24:46,800 --> 01:24:50,133
it's crumbling and the rat is
leaving the sinking ship.

1854
01:24:51,605 --> 01:24:54,803
Two days later
I met with him and Ken Lay

1855
01:24:55,043 --> 01:24:56,067
because I had
informed the company

1856
01:24:56,311 --> 01:24:57,539
that I was going to
downgrade the stock

1857
01:24:57,812 --> 01:24:59,939
on Skilling's resignation.

1858
01:25:00,181 --> 01:25:01,170
I asked Jeff Skilling,

1859
01:25:01,449 --> 01:25:03,076
'are there any more
shoes to drop.

1860
01:25:03,318 --> 01:25:04,444
Have we seen the worst of it.'

1861
01:25:04,652 --> 01:25:06,449
And I was concerned
about the energy crisis

1862
01:25:06,654 --> 01:25:08,349
that was occurring
in California.

1863
01:25:09,724 --> 01:25:12,887
Well, Skilling convinced me
that it was for personal reasons.

1864
01:25:13,161 --> 01:25:16,494
I left his meeting feeling
sort of emotional

1865
01:25:16,698 --> 01:25:19,167
because of the concern
that he seemed to be

1866
01:25:19,401 --> 01:25:22,268
showing about the relationship
he had with his family.

1867
01:25:22,571 --> 01:25:24,232
He appeared to be distraught.

1868
01:25:24,440 --> 01:25:26,101
And I remember saying
to an investor

1869
01:25:26,775 --> 01:25:28,970
'lf he's not telling the truth,

1870
01:25:29,245 --> 01:25:31,179
then it's a good thing
he quit his day job

1871
01:25:31,413 --> 01:25:32,880
because he needs to go
to Hollywood.

1872
01:25:33,249 --> 01:25:34,910
I left Enron on
August fourteenth,

1873
01:25:35,117 --> 01:25:37,244
2001 for personal reasons.

1874
01:25:37,586 --> 01:25:40,021
Mr. Skilling
a massive earthquake

1875
01:25:40,991 --> 01:25:43,016
struck Enron right
after your departure.

1876
01:25:43,627 --> 01:25:48,189
And people in far
inferior positions to you

1877
01:25:48,732 --> 01:25:50,529
could see cracks in the walls,

1878
01:25:50,800 --> 01:25:53,735
feel the tremors,
feel the windows rattling,

1879
01:25:54,237 --> 01:25:55,704
and you want us to believe

1880
01:25:56,006 --> 01:25:58,201
you sat there
in your office and didn't...

1881
01:25:58,441 --> 01:26:00,306
and had no clue

1882
01:26:00,543 --> 01:26:01,909
that this place was
about to collapse?

1883
01:26:02,446 --> 01:26:05,347
On the day I left,
on August fourteenth,

1884
01:26:05,549 --> 01:26:08,347
2001, I believed
the company was in strong,

1885
01:26:08,519 --> 01:26:09,417
financial condition.

1886
01:26:09,620 --> 01:26:11,212
I think he was smart enough

1887
01:26:11,455 --> 01:26:12,581
and he didn't even have
to be that smart,

1888
01:26:12,790 --> 01:26:16,089
he had seen documents that
I think predicted the future.

1889
01:26:16,394 --> 01:26:18,157
I think he was smart
enough to think

1890
01:26:18,429 --> 01:26:20,363
I can get out now
and this company

1891
01:26:20,598 --> 01:26:23,659
isn't going to collapse
for a year,

1892
01:26:23,869 --> 01:26:27,202
maybe a year and a half,
so I won't get the blame.

1893
01:26:27,439 --> 01:26:29,930
It was working fine
when I left, guys.

1894
01:26:31,543 --> 01:26:34,068
After Skilling resigned,
Enron's chairman,

1895
01:26:34,313 --> 01:26:36,508
Ken Lay took over as CEO.

1896
01:26:43,522 --> 01:26:45,251
Boy, I didn't expect that.

1897
01:26:47,226 --> 01:26:48,386
But thank you.

1898
01:26:48,528 --> 01:26:49,620
Thank you very much.

1899
01:26:49,962 --> 01:26:51,725
Well, I'm delighted to be back.

1900
01:26:52,432 --> 01:26:54,627
I'm sorry Jeff did resign.

1901
01:26:54,901 --> 01:26:56,892
It was a stunning announcement,

1902
01:26:57,236 --> 01:26:59,898
that he was stepping
down as CEO.

1903
01:27:00,173 --> 01:27:01,834
And I think the flags

1904
01:27:03,643 --> 01:27:05,941
started going up at
that point for everybody.

1905
01:27:06,212 --> 01:27:07,645
We are facing
a number of challenges,

1906
01:27:07,847 --> 01:27:09,543
but we're managing them.

1907
01:27:09,850 --> 01:27:12,478
Indeed I think the worst
of that's behind us.

1908
01:27:13,053 --> 01:27:15,112
And the business is
doing great.

1909
01:27:15,622 --> 01:27:17,112
We're not the only stock

1910
01:27:17,391 --> 01:27:18,858
that's decreased
in value this year.

1911
01:27:19,093 --> 01:27:20,685
It's just that we've been
hit a little harder than...

1912
01:27:20,928 --> 01:27:21,860
than many others.

1913
01:27:22,096 --> 01:27:24,223
If a few of these
other problems disappear,

1914
01:27:24,598 --> 01:27:26,532
like California, like India.

1915
01:27:26,867 --> 01:27:29,233
I think the worst is over.

1916
01:27:29,670 --> 01:27:31,195
And I'm excited.

1917
01:27:31,506 --> 01:27:33,440
August fourteenth 2001,

1918
01:27:33,875 --> 01:27:35,570
Jeff Skilling abruptly resigns.

1919
01:27:35,877 --> 01:27:37,174
And that made me angry.

1920
01:27:37,412 --> 01:27:39,744
It made loads of
employees angry.

1921
01:27:40,148 --> 01:27:42,241
I mean, there was
a real sense of betrayal

1922
01:27:42,517 --> 01:27:44,451
by the employees.
I mean, this was, you know,

1923
01:27:44,819 --> 01:27:46,844
Jim Jones feeding
us the Kool-Aid

1924
01:27:47,055 --> 01:27:48,989
and then deciding not to
drink it himself.

1925
01:27:53,696 --> 01:27:55,391
The day after
Skilling resigned,

1926
01:27:55,664 --> 01:27:58,531
Sherron Watkins
sent a letter to Ken Lay.

1927
01:27:58,801 --> 01:28:00,632
We will begin with Ms. Watkins.

1928
01:28:00,903 --> 01:28:02,200
I am Sherron Watkins.

1929
01:28:02,438 --> 01:28:04,429
Would you identify your
counsel for the committee.

1930
01:28:04,940 --> 01:28:06,999
Yes. My counsel is
Mr. Philip Hilder.

1931
01:28:07,476 --> 01:28:09,205
When you hear the story
for the first time,

1932
01:28:09,478 --> 01:28:11,139
it's unbelievable.

1933
01:28:11,380 --> 01:28:14,748
What Sherron was telling me
it was more than accounting

1934
01:28:14,985 --> 01:28:16,111
irregularities, as such.

1935
01:28:16,386 --> 01:28:20,049
I mean, it was a massive
fraud of enormous proportions.

1936
01:28:20,390 --> 01:28:22,585
In mid to late June of 2001,

1937
01:28:22,859 --> 01:28:25,384
upon the resignation
of Cliff Baxter,

1938
01:28:25,629 --> 01:28:27,790
I went to work directly
for Mr. Fastow.

1939
01:28:27,998 --> 01:28:31,798
It has evolved to the corporate
crime of the century.

1940
01:28:32,068 --> 01:28:35,196
I was highly alarmed by the
information I was receiving.

1941
01:28:36,540 --> 01:28:38,008
What Sherron Watkins discovered

1942
01:28:38,276 --> 01:28:41,712
began the unraveling of
Fastow's complex partnerships.

1943
01:28:42,079 --> 01:28:44,809
Andy put me in charge of
this asset listing.

1944
01:28:45,183 --> 01:28:49,916
And there were about a dozen
assets that had been hedged

1945
01:28:50,154 --> 01:28:53,453
with one of Andy's entities,
the Raptors.

1946
01:28:53,791 --> 01:28:56,259
So I was working with
this spreadsheet and,

1947
01:28:56,661 --> 01:28:58,788
you know,
the math just didn't add up.

1948
01:28:59,063 --> 01:29:00,588
It didn't make sense to me.

1949
01:29:00,799 --> 01:29:02,664
I mean, accounting doesn't
get that creative.

1950
01:29:02,935 --> 01:29:04,061
You know,
I couldn't believe that

1951
01:29:04,269 --> 01:29:05,429
Arthur Andersen had
signed off on it.

1952
01:29:05,771 --> 01:29:08,672
I couldn't believe that so
many people were going along.

1953
01:29:09,842 --> 01:29:11,537
Behind Fastow's partnerships

1954
01:29:11,877 --> 01:29:14,869
were enormous guarantees
of Enron's stock.

1955
01:29:15,280 --> 01:29:17,714
Fastow had gambled
Enron's future

1956
01:29:17,916 --> 01:29:20,885
on the hope that its stock
would never fall.

1957
01:29:21,286 --> 01:29:25,246
My first reaction was that
I should warn Ken Lay.

1958
01:29:25,725 --> 01:29:27,090
The day after Skilling left,

1959
01:29:27,293 --> 01:29:29,488
I sent this one page
anonymous letter.

1960
01:29:29,762 --> 01:29:31,923
But within a week
I was meeting with Ken Lay.

1961
01:29:32,165 --> 01:29:33,632
I identified myself

1962
01:29:33,900 --> 01:29:35,925
in the hopes of really
making my point

1963
01:29:36,202 --> 01:29:38,193
that Enron really needed to
address this situation.

1964
01:29:38,438 --> 01:29:40,804
Companies rarely get away
with cooking the books.

1965
01:29:41,074 --> 01:29:43,440
But when they do survive,
it's when they come clean.

1966
01:29:43,677 --> 01:29:46,271
Not when they're exposed
from the outside.

1967
01:29:46,647 --> 01:29:48,478
Ms. Watkins, I went through...

1968
01:29:48,716 --> 01:29:50,411
Ms. Watkins did not talk
to me, Senator.

1969
01:29:50,684 --> 01:29:54,085
Well, Ms. Watkins said
Clifford Baxter told her

1970
01:29:54,421 --> 01:29:57,982
that he met with you repeatedly
to express his concern.

1971
01:29:58,292 --> 01:30:01,386
Cliff and Andy have had a...
they didn't like each other.

1972
01:30:01,695 --> 01:30:04,459
They had a very strained
personal relationship

1973
01:30:04,798 --> 01:30:07,495
and Cliff's issue
had nothing to do

1974
01:30:07,836 --> 01:30:09,030
with the appropriateness

1975
01:30:09,271 --> 01:30:10,568
or inappropriateness of
the transactions

1976
01:30:10,805 --> 01:30:14,206
I mentioned Cliff Baxter
in these memos.

1977
01:30:14,409 --> 01:30:16,343
And I remember
I made the comment to him,

1978
01:30:16,878 --> 01:30:18,436
'you're one of the good guys,

1979
01:30:18,713 --> 01:30:19,611
you know,
you're one of the people

1980
01:30:19,814 --> 01:30:23,614
fighting against this.
And it'd be alright.'

1981
01:30:23,852 --> 01:30:24,944
And he said,

1982
01:30:25,186 --> 01:30:26,210
'oh I don't think
it's going to be alright

1983
01:30:26,454 --> 01:30:28,389
for any of us involved.'

1984
01:30:31,694 --> 01:30:33,662
When I started working
on the book with Sherron,

1985
01:30:33,963 --> 01:30:35,726
I was interested in writing
about a whistleblower.

1986
01:30:35,965 --> 01:30:38,160
People don't really appreciate

1987
01:30:38,801 --> 01:30:42,032
what she did and the bravery
that it took in that company.

1988
01:30:42,305 --> 01:30:44,830
Andy Fastow would not
have put his hands

1989
01:30:45,107 --> 01:30:47,803
in the Enron candy jar
without an explicit

1990
01:30:48,010 --> 01:30:50,980
or implicit approval to do
so by Mr. Skilling.

1991
01:30:51,214 --> 01:30:53,614
I can't for the life of me
see what basis she

1992
01:30:53,817 --> 01:30:55,978
would have for suggesting
that I would know some...

1993
01:30:56,219 --> 01:30:58,119
I mean, how would
she know that?

1994
01:30:58,322 --> 01:31:00,085
And I don't see that
it's at all inconsistent that

1995
01:31:00,290 --> 01:31:02,155
there would be some things
that I don't know

1996
01:31:02,426 --> 01:31:05,725
if some people purposely kept me
from knowing some things

1997
01:31:06,029 --> 01:31:09,556
I felt like I was one lone voice
within Enron saying,

1998
01:31:09,766 --> 01:31:11,529
'look, we've...
we've committed horrible fraud.'

1999
01:31:11,735 --> 01:31:13,067
And of course
all hell broke loose.

2000
01:31:13,271 --> 01:31:16,763
Within six short weeks Enron
was spinning out of control.

2001
01:31:21,646 --> 01:31:23,170
Probably in more
normal circumstances

2002
01:31:23,448 --> 01:31:24,938
I would have
a few more words to say

2003
01:31:25,183 --> 01:31:26,707
about September the eleventh.

2004
01:31:26,985 --> 01:31:30,113
Just like America is
under attack by terrorism,

2005
01:31:30,855 --> 01:31:33,449
I think we're under attack.
And of course.

2006
01:31:34,726 --> 01:31:39,926
Now we've got the SEC inquiry,
informal inquiry...

2007
01:31:40,766 --> 01:31:42,734
The SEC launched
an investigation

2008
01:31:43,002 --> 01:31:44,492
When the Wall Street
Journal published

2009
01:31:44,770 --> 01:31:47,762
articles revealing
Fastow's murky deals.

2010
01:31:48,107 --> 01:31:50,871
Enron announced massive
financial restatements.

2011
01:31:51,477 --> 01:31:53,445
Investors began to
worry that billions

2012
01:31:53,679 --> 01:31:57,013
in mark-to-market profits
were really losses.

2013
01:31:59,552 --> 01:32:01,213
As you can see foresee,

2014
01:32:01,488 --> 01:32:06,050
the underlying fundamentals of
our businesses are very strong.

2015
01:32:06,426 --> 01:32:08,451
Indeed the strongest
they've ever been.

2016
01:32:09,729 --> 01:32:11,458
But regrettably,

2017
01:32:12,165 --> 01:32:14,258
that's not what Wall Street
is focusing on.

2018
01:32:15,101 --> 01:32:17,399
And I doubt that's what
you're focusing on.

2019
01:32:17,637 --> 01:32:19,765
This inquiry will
take a lot of time

2020
01:32:20,174 --> 01:32:22,972
on the part of our accountants
and lawyers and others.

2021
01:32:25,246 --> 01:32:28,181
But it will finally
put these issues to rest.

2022
01:32:29,817 --> 01:32:32,809
At the very moment Ken Lay
was talking to employees,

2023
01:32:33,087 --> 01:32:36,113
only a few blocks away,
Enron's accounting firm,

2024
01:32:36,357 --> 01:32:37,289
Arthur Andersen,

2025
01:32:37,491 --> 01:32:39,891
had begun destroying
its Enron files.

2026
01:32:40,861 --> 01:32:42,454
On October 23rd,

2027
01:32:42,731 --> 01:32:45,791
Andersen shredded more than
one ton of paper.

2028
01:32:48,470 --> 01:32:50,802
Despite the rumors,
despite the speculation,

2029
01:32:51,073 --> 01:32:54,736
the company is doing well both
financially and operationally.

2030
01:32:54,943 --> 01:32:56,535
He was making
all kinds of statements.

2031
01:32:56,812 --> 01:32:58,837
Reassuring employees
and not just employees,

2032
01:32:59,081 --> 01:33:00,548
reassuring investors,

2033
01:33:00,782 --> 01:33:04,617
'we have no
accounting irregularities,

2034
01:33:04,821 --> 01:33:06,482
the company's in the best shape
it's ever been in'

2035
01:33:06,723 --> 01:33:08,384
From the standpoint
of Enron stock,

2036
01:33:08,558 --> 01:33:09,855
we're going to bring it back...

2037
01:33:10,126 --> 01:33:11,491
we're going to bring it back.

2038
01:33:11,728 --> 01:33:13,696
Alright,
we're down to questions.

2039
01:33:13,930 --> 01:33:15,397
I've got a few of them here.

2040
01:33:15,565 --> 01:33:17,829
'I would like to know
if you are on crack?

2041
01:33:21,637 --> 01:33:23,127
If so,
that would explain a lot.

2042
01:33:23,439 --> 01:33:24,701
If not. You may want to start

2043
01:33:24,941 --> 01:33:26,432
because it's going
to be a long time

2044
01:33:26,677 --> 01:33:28,144
before we trust you again.'

2045
01:33:28,846 --> 01:33:30,780
It certainly wasn't clear
to anyone at Enron,

2046
01:33:31,048 --> 01:33:32,242
much less anyone
outside of Enron

2047
01:33:32,483 --> 01:33:35,941
it wasn't really clear
what was going on or...

2048
01:33:36,220 --> 01:33:37,687
what was going to happen.

2049
01:33:37,921 --> 01:33:39,252
I know this is a lot...

2050
01:33:39,556 --> 01:33:42,116
There is a lot of speculation
about Andy's involvement

2051
01:33:42,459 --> 01:33:45,087
I and the board are
also sure that

2052
01:33:45,329 --> 01:33:48,231
Andy has operated
in the most ethical

2053
01:33:48,500 --> 01:33:50,468
and appropriate manner possible.

2054
01:33:51,069 --> 01:33:53,799
The next day,
Andy Fastow was fired

2055
01:33:54,139 --> 01:33:55,834
when the Enron board
discovered that

2056
01:33:56,141 --> 01:33:58,268
he had made more than
$45 million dollars

2057
01:33:58,510 --> 01:34:00,444
from his LJM partnerships.

2058
01:34:00,845 --> 01:34:03,439
The question, Mr. Fastow,
is how could you believe

2059
01:34:03,882 --> 01:34:07,010
that your actions were
in any way consistent

2060
01:34:07,252 --> 01:34:09,379
with your fiduciary
duties to Enron

2061
01:34:09,654 --> 01:34:12,215
and its shareholders
or with common sense

2062
01:34:12,458 --> 01:34:15,586
notions of corporate ethics
and propriety?

2063
01:34:16,295 --> 01:34:17,091
How do you answer, sir?

2064
01:34:17,329 --> 01:34:19,729
Mr. Chairman on
the advice of my counsel,

2065
01:34:19,999 --> 01:34:22,024
I respectfully decline to
answer the questions

2066
01:34:22,568 --> 01:34:24,297
based on the protection
afforded me

2067
01:34:24,570 --> 01:34:26,595
under the United States
Constitution.

2068
01:34:30,676 --> 01:34:32,405
Andy, in many ways,

2069
01:34:32,679 --> 01:34:34,909
I think he was set up
as the fall guy.

2070
01:34:35,215 --> 01:34:38,776
All of the Enron executives
were saying,

2071
01:34:38,985 --> 01:34:41,283
'there's your man, Andy Fastow.
He's the crook.

2072
01:34:41,555 --> 01:34:43,318
You know, he's the one
that stole from Enron,

2073
01:34:43,557 --> 01:34:44,421
stole from LJM.

2074
01:34:44,624 --> 01:34:45,955
He's the one that
cooked the books.

2075
01:34:46,226 --> 01:34:47,318
Go after him.'

2076
01:34:47,894 --> 01:34:49,418
How will you plead, Mr. Fastow?

2077
01:34:50,163 --> 01:34:52,222
I've thought about this
and thought about this.

2078
01:34:52,465 --> 01:34:55,492
And it couldn't have
just been a few executives

2079
01:34:55,736 --> 01:34:58,136
at Enron that made this happen.

2080
01:34:58,372 --> 01:35:02,502
If you think of the banks
involved Chase,

2081
01:35:03,411 --> 01:35:05,743
Morgan, Citibank

2082
01:35:07,715 --> 01:35:11,617
the billions in loans
Arthur Andersen...

2083
01:35:11,886 --> 01:35:13,376
What about Vincent and Elkins,

2084
01:35:13,621 --> 01:35:16,784
the lawyers that
represented us?

2085
01:35:17,059 --> 01:35:19,857
There had to have been
complicity across the board.

2086
01:35:20,429 --> 01:35:22,556
Because it was all too easy;

2087
01:35:22,931 --> 01:35:25,126
all too easy.

2088
01:35:29,638 --> 01:35:32,129
The Enron collapse was
an enormous tragedy.

2089
01:35:32,908 --> 01:35:36,469
This is a company that had
over thirty thousand employees,

2090
01:35:36,845 --> 01:35:38,506
and clearly with
a company that size

2091
01:35:38,780 --> 01:35:40,408
you have a lot of
senior officers

2092
01:35:40,583 --> 01:35:43,711
that have a lot of authority in
which you place enormous trust.

2093
01:35:43,987 --> 01:35:46,421
But in the case
there was at least one,

2094
01:35:46,789 --> 01:35:49,622
Andy Fastow,
that betrayed that trust

2095
01:35:50,193 --> 01:35:51,421
to the extent that

2096
01:35:51,628 --> 01:35:53,220
I did not know
what he was doing,

2097
01:35:53,463 --> 01:35:55,522
he obviously didn't share
with me what he was doing,

2098
01:35:56,266 --> 01:35:59,861
then indeed I cannot take
responsibility for what he did

2099
01:36:00,103 --> 01:36:01,092
I never heard him say,

2100
01:36:01,304 --> 01:36:02,602
'I take responsibility'
for a thing.

2101
01:36:02,806 --> 01:36:06,207
It sounded to me like
the wonderful movie, 'Chicago'.

2102
01:36:06,844 --> 01:36:09,108
I was reminded of
the puppet strings

2103
01:36:09,413 --> 01:36:11,381
and the dancers
and the tap dancing

2104
01:36:11,548 --> 01:36:13,243
and pointing at the gun,
the gun, the gun.

2105
01:36:13,550 --> 01:36:17,384
I mean. Everybody's
in step with Johnny.

2106
01:36:17,655 --> 01:36:21,250
I continue to grieve,
as does my family,

2107
01:36:22,126 --> 01:36:23,992
over the loss of the company.

2108
01:36:24,262 --> 01:36:26,423
Linda and I saw
our net worth reduced

2109
01:36:26,631 --> 01:36:28,599
from several hundred
million dollars down to

2110
01:36:28,934 --> 01:36:30,629
something less than
twenty million dollars

2111
01:36:30,869 --> 01:36:31,893
on a net worth basis.

2112
01:36:32,137 --> 01:36:33,069
And of course,
as... as you said,

2113
01:36:33,271 --> 01:36:36,069
about a million dollars
or less in liquidity.

2114
01:36:37,709 --> 01:36:40,940
I don't know whether
I'd rather be shot as a crook

2115
01:36:41,212 --> 01:36:43,510
or as an idiot.

2116
01:36:44,015 --> 01:36:48,749
I believe the only venue for me
is the 'Ride of Broken Dreams.'

2117
01:36:49,021 --> 01:36:50,454
Oh, you mean the Enron ride!

2118
01:36:50,723 --> 01:36:51,189
Let's go!

2119
01:36:51,490 --> 01:36:52,855
Enron hit the National psyche.

2120
01:36:53,092 --> 01:36:55,788
It hit it as sort of,
the time-tested lesson.

2121
01:36:56,062 --> 01:36:57,893
And that is,
if it looks too good to be true,

2122
01:36:58,197 --> 01:36:59,562
sometimes it is.

2123
01:37:02,234 --> 01:37:03,826
We're all going to be rich!

2124
01:37:06,472 --> 01:37:07,769
We broke even.

2125
01:37:16,683 --> 01:37:18,583
It is my belief that
Enron's failure was

2126
01:37:18,785 --> 01:37:21,253
due to a classic
run on the bank.

2127
01:37:23,056 --> 01:37:24,887
Don't look now but there's
something funny going on

2128
01:37:25,125 --> 01:37:26,387
over there at the bank, George.

2129
01:37:26,560 --> 01:37:27,492
I've never really seen one,

2130
01:37:27,694 --> 01:37:29,662
but that's got all the
earmarks of being a run.

2131
01:37:38,139 --> 01:37:40,004
On December 2nd 2001,

2132
01:37:40,308 --> 01:37:43,141
less than four months
after Skilling's resignation

2133
01:37:43,478 --> 01:37:45,571
Enron declared bankruptcy.

2134
01:37:47,715 --> 01:37:50,878
I remember
it was just a strange,

2135
01:37:51,119 --> 01:37:52,518
kind of surreal day.

2136
01:37:52,755 --> 01:37:55,849
We learned around nine thirty
about the bankruptcy

2137
01:37:56,158 --> 01:37:58,183
and that we were
all being let go.

2138
01:37:59,695 --> 01:38:02,425
We all felt like
we were on the Titanic

2139
01:38:02,731 --> 01:38:05,564
and the last lifeboats
had long gone

2140
01:38:05,801 --> 01:38:09,396
and we were just now
on the sinking ship.

2141
01:38:10,806 --> 01:38:13,104
We had thirty minutes
to leave the building

2142
01:38:13,308 --> 01:38:15,277
and at that point
it was no longer

2143
01:38:15,545 --> 01:38:17,479
like being on the Titanic.

2144
01:38:17,814 --> 01:38:20,374
It was kind of like being
on the Lusitania.

2145
01:38:20,517 --> 01:38:21,677
The torpedo had hit

2146
01:38:21,985 --> 01:38:24,783
and there's twenty minutes
to get out.

2147
01:38:27,757 --> 01:38:29,884
There's a lot of disbelief.

2148
01:38:30,160 --> 01:38:33,823
Very few of the rank and file
people ever dreamed that

2149
01:38:34,064 --> 01:38:36,055
Enron would
actually go bankrupt.

2150
01:38:40,905 --> 01:38:42,873
Then all of a sudden,
it was like a ghost town.

2151
01:38:45,309 --> 01:38:47,800
I can remember going
into the old building,

2152
01:38:48,045 --> 01:38:50,411
on certain floors,
ah, late in the,

2153
01:38:50,614 --> 01:38:52,741
afternoon or evening.
And it was scary.

2154
01:38:53,150 --> 01:38:54,742
There'd be like paper
blowing around,

2155
01:38:55,019 --> 01:38:55,951
and nobody there,

2156
01:38:56,253 --> 01:38:58,915
and it was just...
it was very eerie.

2157
01:39:05,497 --> 01:39:07,863
Mr. Skilling,
your opening statement was

2158
01:39:08,100 --> 01:39:11,092
extremely compassionate
to the employees.

2159
01:39:11,536 --> 01:39:13,800
And I want to show you a tape.

2160
01:39:14,039 --> 01:39:15,973
And I believe
we have it ready to go.

2161
01:39:16,274 --> 01:39:17,639
Listen to this.

2162
01:39:17,943 --> 01:39:20,173
Should we invest all of
our 401k in Enron Stock?

2163
01:39:20,412 --> 01:39:23,211
Absolutely.
Don't you guys agree?

2164
01:39:27,120 --> 01:39:30,283
Why is it that you had begun
unloading your stock?

2165
01:39:30,623 --> 01:39:33,217
Pretty heavily
before that date

2166
01:39:33,459 --> 01:39:35,484
and yet led
the employees to think that

2167
01:39:35,695 --> 01:39:37,595
they should keep buying stock?

2168
01:39:39,532 --> 01:39:40,055
Ms. Senator,

2169
01:39:40,333 --> 01:39:44,270
I have been a major shareholder
in Enron Corporation

2170
01:39:44,505 --> 01:39:45,972
and you can take
the videotape to mean

2171
01:39:46,173 --> 01:39:47,140
what you want it to mean.

2172
01:39:47,341 --> 01:39:49,070
I was a supporter of
Enron Corporation.

2173
01:39:49,276 --> 01:39:50,607
You know what happened
to those people.

2174
01:39:50,878 --> 01:39:51,902
They lost everything.

2175
01:39:52,146 --> 01:39:56,014
I feel terrible about
what happened to the employees.

2176
01:39:58,051 --> 01:40:01,020
Oh at one time,
things were really rosy for us.

2177
01:40:01,922 --> 01:40:04,220
And we all had some
really nice-looking 401ks

2178
01:40:04,458 --> 01:40:06,825
and pensions
and then it peaked.

2179
01:40:07,028 --> 01:40:08,791
And then it
just started going down,

2180
01:40:09,063 --> 01:40:10,690
and it went lower
and lower and lower.

2181
01:40:10,999 --> 01:40:13,763
At the peak
I had about 348 thousand.

2182
01:40:14,102 --> 01:40:16,332
I sold it all for 1200 dollars;

2183
01:40:16,571 --> 01:40:18,334
was what I got for it,
when it was done.

2184
01:40:22,744 --> 01:40:24,609
While Enron's stock
was plummeting,

2185
01:40:24,913 --> 01:40:26,813
the retirement
accounts of Enron's rank

2186
01:40:27,081 --> 01:40:29,073
and file workers were frozen.

2187
01:40:29,385 --> 01:40:30,852
We were frozen out of
our accounts.

2188
01:40:31,120 --> 01:40:33,588
It was right about
thirty two dollars, I believe.

2189
01:40:34,023 --> 01:40:35,581
And over that time,

2190
01:40:35,824 --> 01:40:37,485
from when it was frozen to
when it opened up,

2191
01:40:37,760 --> 01:40:39,091
I think it went down to nine.

2192
01:40:39,328 --> 01:40:40,590
And we could not access it.

2193
01:40:40,829 --> 01:40:42,228
And what came out
later that was so bad,

2194
01:40:42,431 --> 01:40:45,628
was the fact that
Ken Lay and Skilling

2195
01:40:45,834 --> 01:40:48,359
and all the top people were
movin' their money then.

2196
01:40:49,171 --> 01:40:50,469
But we couldn't.

2197
01:40:52,609 --> 01:40:56,409
The insiders had sold off
a billion dollars of their stock.

2198
01:40:56,680 --> 01:40:59,911
Compare that to the lineman
who worked for a staid,

2199
01:41:00,150 --> 01:41:02,448
old utility company
for most of his life;

2200
01:41:02,686 --> 01:41:04,551
put away money each month.

2201
01:41:04,788 --> 01:41:07,154
And what's he have to show,
at the end day,

2202
01:41:07,457 --> 01:41:09,857
for his years of hard
and decent labor?

2203
01:41:10,093 --> 01:41:11,424
He gets a big goose egg.

2204
01:41:12,028 --> 01:41:14,827
And Pai is out
in Hawaii somewhere,

2205
01:41:15,099 --> 01:41:17,192
with 350 million dollars
in the bank.

2206
01:41:17,468 --> 01:41:18,833
That's wrong.

2207
01:41:26,143 --> 01:41:30,204
There is still to this city
a layer of anger and upset.

2208
01:41:30,948 --> 01:41:32,575
I am still doing counseling,

2209
01:41:32,883 --> 01:41:34,748
three years later,
with some families.

2210
01:41:37,389 --> 01:41:40,085
Where some of those
who are most reflective,

2211
01:41:40,325 --> 01:41:41,656
it's gone to a deeper layer.

2212
01:41:41,860 --> 01:41:44,522
And they are looking
at the corporate culture itself

2213
01:41:44,830 --> 01:41:45,888
in this country.

2214
01:41:46,198 --> 01:41:47,961
You know,
you can gain the whole world

2215
01:41:48,500 --> 01:41:49,933
and all the trinkets

2216
01:41:50,168 --> 01:41:51,226
and all the trophies
of the world,

2217
01:41:51,503 --> 01:41:53,903
the corner office,
and all the perks

2218
01:41:54,172 --> 01:41:57,472
and you really can lose
your soul in the midst of this.

2219
01:41:58,845 --> 01:42:01,279
On January 25th, 2002,

2220
01:42:01,514 --> 01:42:03,846
seven weeks after
the Enron bankruptcy,

2221
01:42:04,083 --> 01:42:06,415
Cliff Baxter committed suicide.

2222
01:42:06,753 --> 01:42:08,550
With the media hounding him

2223
01:42:08,855 --> 01:42:10,948
because he was mentioned
in my memos

2224
01:42:11,157 --> 01:42:13,148
and the fact that
he'd been sued civilly

2225
01:42:13,459 --> 01:42:15,484
because he'd cashed
in for about

2226
01:42:15,695 --> 01:42:17,026
thirty million dollars
worth of stock

2227
01:42:17,263 --> 01:42:19,425
I guess it all came
crashing down on him.

2228
01:42:20,100 --> 01:42:22,864
I think Cliff's suicide
note tells it all.

2229
01:42:23,070 --> 01:42:25,903
You know,
Where there was once great pride,

2230
01:42:26,206 --> 01:42:27,605
now there is none.

2231
01:42:31,545 --> 01:42:33,536
It's very hard for me
to talk about Cliff.

2232
01:42:33,781 --> 01:42:35,544
We were very close
for many years.

2233
01:42:37,484 --> 01:42:40,544
And he was a wonderful,
wonderful man.

2234
01:42:40,888 --> 01:42:44,848
But a lot of who Cliff
was tied up in how

2235
01:42:45,093 --> 01:42:47,118
he had succeeded at Enron.

2236
01:42:47,629 --> 01:42:50,564
It is hard to look at
your life's work and say

2237
01:42:51,700 --> 01:42:53,065
it's failed.

2238
01:42:53,368 --> 01:42:57,566
But you have to take a long,
cold look at yourself and say,

2239
01:42:58,273 --> 01:43:00,969
'who was I? Who did I become? '

2240
01:43:02,410 --> 01:43:06,313
And realize that you may
have seen your shadow.

2241
01:43:08,351 --> 01:43:12,412
Andy Fastow pled guilty to
conspiracy to commit wire fraud.

2242
01:43:12,655 --> 01:43:16,022
He agreed to forfeit 23
million dollars in assets.

2243
01:43:16,559 --> 01:43:19,153
His sentence was
reduced to ten years

2244
01:43:19,462 --> 01:43:23,762
in exchange for testifying
against other Enron executives.

2245
01:43:25,568 --> 01:43:26,297
Why Enron?

2246
01:43:26,603 --> 01:43:29,834
Why not Worldcom or Tyco
or Global Crossings?

2247
01:43:30,073 --> 01:43:34,840
Ultimately in Enron the fatal
flaw was a sense that brains

2248
01:43:35,479 --> 01:43:38,141
and wiliness could
out-think the way

2249
01:43:38,382 --> 01:43:39,940
that the system
will eventually work.

2250
01:43:40,350 --> 01:43:44,286
In 2004, Jeff Skilling was
indicted for insider trading

2251
01:43:44,554 --> 01:43:46,715
and conspiracy to
defraud investors.

2252
01:43:47,190 --> 01:43:48,157
Pleading innocent,

2253
01:43:48,493 --> 01:43:50,256
he paid his
attorneys a retainer of

2254
01:43:50,495 --> 01:43:53,055
23 million dollars
to defend him.

2255
01:43:53,765 --> 01:43:57,929
Enron should not be viewed
as an aberration,

2256
01:43:58,169 --> 01:44:00,262
something that can't
happen anywhere else.

2257
01:44:00,505 --> 01:44:03,269
Because it's all about
the rationalization

2258
01:44:03,841 --> 01:44:05,399
that you're not doing
anything wrong.

2259
01:44:05,643 --> 01:44:08,407
We've involved Arthur Andersen,
we've involved the lawyers.

2260
01:44:08,613 --> 01:44:10,205
The bankers know
what we're doing.

2261
01:44:10,649 --> 01:44:13,709
There's a sense the
diffusion of responsibility.

2262
01:44:14,052 --> 01:44:15,781
Everyone was on the bandwagon.

2263
01:44:16,555 --> 01:44:17,954
And it can happen again.

2264
01:44:19,858 --> 01:44:21,257
Enron's accounting firm.

2265
01:44:21,460 --> 01:44:22,449
Arthur Andersen,

2266
01:44:22,661 --> 01:44:24,822
was convicted of
obstructing justice.

2267
01:44:25,764 --> 01:44:28,324
With its reputation
for honesty destroyed,

2268
01:44:28,634 --> 01:44:32,570
America's oldest accounting
firm fell along with Enron

2269
01:44:32,806 --> 01:44:36,105
and twenty nine thousand people
lost their jobs.

2270
01:44:36,476 --> 01:44:38,706
Enron's shareholders
are suing Enron

2271
01:44:38,978 --> 01:44:41,538
and its banks
for 20 billion dollars.

2272
01:44:45,585 --> 01:44:48,918
Ken Lay was also indicted
for conspiracy to commit fraud.

2273
01:44:49,222 --> 01:44:52,316
His attorney maintains that
no one has been hurt more

2274
01:44:52,592 --> 01:44:55,323
by the Enron bankruptcy
than Ken Lay.

2275
01:44:56,363 --> 01:44:58,297
Nice of all of you to
show up this morning.

2276
01:44:58,499 --> 01:45:00,262
With today's arrest of Ken Lay,

2277
01:45:01,402 --> 01:45:03,870
the top echelon at Enron

2278
01:45:04,238 --> 01:45:07,571
has now been called to
account for their crimes.

2279
01:45:07,875 --> 01:45:09,536
Mr. Lay, do you have
anything to say, sir?

2280
01:45:09,810 --> 01:45:11,402
A little later today I will.

2281
01:45:11,712 --> 01:45:12,679
Looking at Enron is like

2282
01:45:12,913 --> 01:45:15,438
looking at the flip side of
so much possibility

2283
01:45:15,683 --> 01:45:18,050
because like most things
that end terribly,

2284
01:45:18,286 --> 01:45:19,446
it didn't start out that way.

2285
01:45:19,654 --> 01:45:21,645
It started with
a lot of people who thought

2286
01:45:21,890 --> 01:45:23,050
they were changing the world.

2287
01:45:23,358 --> 01:45:26,293
And over time they became
victims of their own hubris,

2288
01:45:26,528 --> 01:45:27,756
victims of their own greed

2289
01:45:28,029 --> 01:45:30,463
and so it's like taking
so much promise and possibility

2290
01:45:30,665 --> 01:45:32,189
and looking at it
in a mirror and seeing

2291
01:45:32,467 --> 01:45:34,435
the flip side reflected
back at you.

2292
01:45:36,471 --> 01:45:38,701
I think the larger lesson was

2293
01:45:38,940 --> 01:45:43,207
what Enron asked of
its employees which was ask why.

2294
01:45:44,480 --> 01:45:48,507
And you know I didn't ask
myself why enough;

2295
01:45:48,751 --> 01:45:50,309
I didn't ask
managers why enough,

2296
01:45:50,553 --> 01:45:53,989
I didn't ask
my colleagues why enough.