I became a fan of Kurt Eichenwald after reading "The Informant". His journalistic style of writing and ability to turn even the most arcane business subjects into lightning paced stories, sets him apart from other writers in the same genre. So when I picked up a copy of "Conspiracy of Fools", I knew it wouldn't disappoint. It turned out to be a thrilling account of how the one of the largest corporations in America - Enron - was brought down by the greed and recklessness of its leaders.
The book was published in 2005, a year before the trial of Ken Lay and Jeff Skilling, so it does not describe their ultimate fate. Thankfully there's YouTube and C-Span for those of us who want to see the many congressional hearings! The book does take us from the very beginning of Enron's story, when the company was heralded as a pioneer in devising creative business strategies in the energy industry, which was just beginning to understand the opportunities and pitfalls of deregulation. Somewhere in the middle, Enron - under the misguided leadership of individuals who put a greater weight on short term gains over long term growth - started its downward spiral.. playing fast and loose with accounting rules, taking enormous risks without any regard for safety nets, rewarding reckless deal makers with huge bonuses and enabling one of the most flagrant corporate criminals to amass a fortune (it's own CFO.. Andy Fastow), while the company lost billions.
As you read the book, and the descriptions of the many convoluted deals that Fastow engineered to give the illusion of a healthy balance sheet for Enron (while keeping a cut of the loot for himself), you begin to realize that even though he was "stealing from the house", nobody was really "watching the house". I still cannot grasp the level of naivete that Ken Lay (as Chairman of the Board) and the 25 Board of Directors showed quarter after quarter. They never asked the hard-hitting questions that you would expect from the stewards of a company. Even when Sherron Whatkins (the self proclaimed Enron whistle blower) brought the various accounting issues to Lay's attention - he was not shrewd enough to ask for an independent review. He went on to project an image of confidence, when he knew there were inherent problems with many of Enron's divisions. Though, I'm not sure if "naive" is how I would describe Ken Lay - there are clues in the earlier part of the book that would lead me to believe that Ken's moral fibre left much to be desired.
The most fascinating aspect of the book is the unravelling of Jeff Skilling. As Enron's CEO - who resigned just months before the company declared bankruptcy - Skilling is a mass of contradictions. He was the one who decided to use "mark to market" accounting for evaluating Enron's energy contracts - something that was highly risky and signalled the "beginning of the end" for Enron. He was the one who gave the approval for Fastow's shady deals, without ever reading the details of the contracts. He had knowledge of the rot that had set into Enron's disastrous international projects, and yet continued to front a demeanour of success and confidence. The author gives an incredible look into how Skilling struggled under and ultimately gave in to the burden of maintaining this facade.
I just couldn't put down this book.. I started on a sleepy Sunday morning, and finished the following Sunday night. And even after I was done, I couldn't help scouring the internet for videos of congressional hearings, and trial scripts. The following YouTube videos are a must watch:
http://www.youtube.com/watch?v=9zxAJO7owy8
http://www.youtube.com/watch?v=hPqH3DrWEEU
I would also recommend an analysis of the Lay/Skilling trial, written by the lead prosecutor himself - "Behind the scenes of the Enron Trial: creating the decisive moments" by John C. Hueston. It's available on Amazon.com for $10, but worth it - because you get insights into the prosecution's strategy and the many missteps of the defense.
