Enron Os mais espertos da sala 2005 COMPLETO Legendado em português pt br

[Music] [Music] what's he building in there what the hell is he building in [Music] there it had taken Enron 16 years to go from about 10 billion of assets to 65 billion of assets and took him 24 days to go bankrupt what the hell is he building in there this company collapsed so quickly and so entirely I mean it was Into bankruptcy within a matter of weeks it just immediately had all the makings of a gigantic Scandal was hiding something from the rest of us the Fatal flaw at Enron if there is one you say

it was Pride but then it was arrogance intolerance greed so many of them were blinded by the money that they didn't see that they were sinking their own Lifeboat we have a right to know it just got hungrier and hungrier Sooner or later they were doomed to go off that Cliff at 90 mph it's astounding that they got away with it for so long in reality Enron was a house of cards what we didn't know is that the House of Cards had been built over a pool of gasoline it all sort of became smok and

mirrors committee will come to order this is a case of America's largest corporate bankruptcy the question here is what happened who Was responsible for it happening and what can we do to prevent this sort of thing from happening again I think the en run story is so fascinating because people perceive it as a story that's about numbers that it's somehow about all these complicated transactions but in reality it's a story about people and it's really a human tragedy Mama may have papa may have but God Bless the Child that's got His own that's got his

[Music] own yes the strong gets more while the weak ones fade empty Pockets don't ever make the grave Mama may have papa may have but God Bless the Child that's got his own that's got his [Music] Own money you got lots of friends crowding around the door [Music] when you're gone and spending on this date at 2:23 a.m. Sugarland police discovered John C Baxter um located inside his vehicle with an apparent gunshot wound to the Head uh at this time it has been a suicide note located any indication whether this was related to Enron bankruptcy

we do know that he was an Enron employee but as far as any other indications of why he committed I no we do not Mr Skilling let me uh touch on something that sort of sad and that's of course the suicide of Cliff Baxter and you you mentioned he was your best friend in your opening statement before he uh died did you have many conversations with him yes and were any of them relative to Enron Yes there's no one that knew Cliff toward the end that didn't realized that he was heartbroken by what had happened

and Cliff came over to my house and he said they're calling us child molesters he says that will never wash off but Mr skelling you don't believe that I don't believe what you don't believe that the press and everybody calling Cliff Baxter or yourself or anybody on the board directors denigrating or taining you you Don't think it's accurate is what you're saying to us here today I do not believe I did not do anything wrong that was not in the interest in all the time that I worked for Enron Corporation that was in the interest

of the shareholders of the company ultimately who was responsible for the downfall of Enron only a few years ago Enron was the nation's seventh largest corporation valued at almost $70 Billion pundits praised the company as a new business model this trading floor was manned by America's best and brightest charting the futures of energy and power and high above each with a private staircase Ken L and Jeff Skilling had built their own plush Stater rooms they were known as the smartest guys in the room captains of a ship too powerful to ever go down in the

Titanic the captain went down with the ship and Enron looks To me like uh the captain first gave himself and some friends a bonus then lowered himself and the top folks down in the Lifeboat and then hollered up and said by the way everything's going to be just fine like Skilling kenl said he hadn't done anything wrong real quick CNN uh really not this morning thank you beyond the financial issues some suspected a political conspiracy Enron had been the largest corporate contributor to the first Presidential campaign of George W bush this is not a political

issue it is a business issue you know inran had make made contributions to a lot of people around Washington DC and if they came to this Administration looking for help they didn't find any there say no help here is like uh I did not have political relations with that man Mr Lee what about the fact that George W bush calls kenl Kenny boy that's my nickname for my Husband which he overheard so it wasn't original with the president certainly wasn't it according to published reports your husband earned about $300 million in in compensation and stocks

from Enron over the last four years what happened to all that money it's gone it's gone there's nothing left the boxill this is the shredded evidence that we got that came out of menro we very quickly determined that the Insiders had Sold off a billion dollars of their stock in the preceding several months did you convert stock uh worth $66 million uh I don't know but I I don't would that be surprising to you to learn that you did that no that would that would not be surprising Mr Fasto got only 30 million in stock

proceeds from inran but he took another 30 million out with his side deals I think there was just an immediate sense of outrage at lay and Skilling and fasty when people Realized how much they had profited and how completely artificial the appearance of this company had [Music] been news of shredding at Enron raised more questions what answers were lost in the torn documents 20,000 employees had lost their jobs $2 billion doll in pensions and retirement funds had disappeared was Enron the work of a few bad men or the dark shadow of the American [Music] dream

Le comes to the story of Enron from very humble roots my father was a Baptist Minister and and he was ordained a Baptist Minister while I was very young probably 2 3 years old kite was a Baptist preacher son a family that had been poor all its life and he throughout his life worked several jobs as a kid um and clearly had in mind that things could be better and wanted things to be better And had a huge ambition to make wealth for himself he told a story later about sitting on a tractor dreaming about

the world of business and how different it could be from the way things were for him and his family L was a PhD in economics and he became very early on a real Apostle for deregulation he was way ahead of the curve on this he was thinking about energy markets that would be deregulated In and in particular a natural gas industry that was shackle B regulation and he pushed aggressively in Washington to change all of that in Washington lay became part of a new crusade to liberate businessmen from the rules and regulations of government government

is not the solution to our problem government is the problem the societies which have achieved the most spectacular broad-based economic progress in the shortest period of time Are not the most tightly controlled not necessarily the biggest in size or the wealthiest in natural resources no what unites them all is their willingness to believe in the magic of the marketplace that old Old Black Magic has me in it spell the magic power of deregulation pushed kenlay to found Enron in 1985 through a merger of vast networks of natural gas pipelines Le thought Enron would be poised

to take advantage of the government's decision to let gas prices float with the currents of the market kenlay had a view of uh deregulation from the standpoint of all the money that he thought could be made kenlay wasn't alone a couple of Texas oilmen shared his views on how to get government out of the energy business I think they could sort of understand each other it was you know professional courtesy between a Sidewinder in the Timber Ry night lay was closer to the father but while he was governor of Texas George W Bush was only

too happy to make phone calls for Kim L this absolutely has no precedent this is by Far and Away the most important major relationship of a presidential family with a single Corporation in American history when Rich Kinder one of enron's Executives left the company lay arranged for a video Valentine Rich I've um been asked to think of one thing I Could say to you on your departure from Enron and it' be this don't leave Texas Rich you have been fantastic to the Bush family I don't think anybody did more than you did to support George

and of course at this stage in my life and barbar's 2o that's what really matters your family your friends early on George Bush Senior helped secure billions in government subsidies for Enron International and he helped promote Lei as deregulations Ambassador at large Inran is a company uh that deals with everyone with absolute Integrity we want people to leave a transaction with Enron thinking that they've been dealt with in the highest the possible way as far as integrity and and truthfulness he always wrapped himself in the cloak of moral rectitude but there was one episode early

on that raised questions about whether he was actually walking the walk this was the Enron oil Scandal also known as the Valhalla Scandal while you were at Arthur Anderson were you involved in an investigation at a company called Enron oil yes I was the issue with the company in 1987 involved the misappropriate ation of monies by two traders in 1987 two oil traders made bets for Enron on whether the price of oil would rise or fall oil trading is like gambling sometimes you win sometimes you lose but Enron oil always seemed to win much to

Ken L's Delight I tried to explain to Kenl the tremendous risk that you have in that market you can lose uh 10 times your original investment a veteran trader Mike mckoy was suspicious of Enron oil's steady High profits well this oil trading business had profits that nobody could really understand and in fact that many of kl's lieutenants questioned they said this business can't be making this much money legitimately something weird is going on something weird was going on the first hint came From an anonymous tip about the president of the company Lewis borget boret had

taken some three plus million dollars of corporate funds and put it in a personal account of his there were offshore accounts phony books and a trail that led from the company's Treasurer Tom mastroeni to a mysterious Lebanese Speculator no one could find M yes what name did you suspect that was my ass you know and M smart I said that's Maxwell Smart I mean these guys Are playing games borget and mro en was summoned to Houston first they presented falsified bank records to Enron then then they admitted they had diverted company profits to personal accounts

it was brought to the attention of the Enron board Auditors were brought in as well to look at the whole thing at the board meeting the Auditors told leay that boret and his Traders were manipulating earnings destroying daily trading records and probably gambling Way Beyond their limits the next day we found out that Le's decision was and basically changed nothing as far as the operations concerned and the reason he gave was that this was the only part of the combined company that was making any money and that he could not you know kill the Golden

Goose the Traders weren't fired or even disciplined instead Enron sent a Telex to boret please keep making us Millions instead of reducing enron's Risk Lei encouraged his traders to gamble more but then their luck changed 2 months later I got this Panic call that they had drawn down $90 million in the previous 5 days what we could do is just try to find out what kind of gorilla we had uh loose up there mckoy hopped on the next plane to New York he knew mastroeni had another set of books and he would do whatever it

took to get them I basically stood over Tom and I told him one of two things was Going to happen either one of the trading partners that was crooked with boret who was a German arms deer either was going to kill him or I was I said I'll track you down and find you no matter where you go and sooner or later I'll get you the next day mastroeni came in with the real books the Traders had gambled away all of enron's reserves by acting fast mckoy bluffed the market and managed to save the [Music]

company after Valhalla kenlay maintained that he had been shocked that the Traders had gambled so recklessly but kenlay had known all along about the risks that were taken he had seen the reports warning him about the traitor's behavior since the fall of Enron kenl has said he can't be responsible for things he didn't know about sounds like what he said about Valhalla do you believe that he didn't know I can answer Only for one I can answer for balla because KL did in fact know about this thing because I had told him myself the Auditors

adamantly told Mr Ken L that the two Rogue Traders should be fired L read the report and he read his budget and estimated how much they the two Rogue Executives made and if they were fired what he could lose my conclusion was that this guy is a guy who puts earnings before Scruples rather than reacting to the dishonesty right in Front of him Master wenny received a suspended sentence boret was convicted of Fraud and spent one year in jail with his biggest Money Maker Now Behind Bars Klay had a problem who could he find to

make money for Enron every year every day every week you have to come up with new ideas I'm going straight to the to kenl saw in Jeff steing the guy who had the answer to what the future of the natural gas business was supposed to be Kenlay is also a guy who considers himself a Visionary and he liked other people he thought of as Visionaries he liked people with big IDE ideas and Jeff Skilling was a person with the biggest ideas of all Jeff skilling's biggest single idea was to find a new way to deliver

energy rather than be bound by the physical flow of the pipeline Enron would become a kind of stock market for natural gas it was a magical new idea transform energy into financial Instruments that could be traded like stocks and bonds so that was the one good idea in 1992 using that good idea we became largest buyer and seller of natural gas in North America Jeff was like the prophet he came in and said there's a whole new world out there forget about this pipeline stuff you know the stayed pipeline in the ground and gas in

and gas out we we can recreate this entire industry an attorney from Vincent and Elkin Amanda Martin was one of the first Executives hired by Jeff Skilling and became part of his inner circle the excitement was palpable you cannot imagine how proud we all were to be there and then of course we had a leader who imbued us with a sense of confidence that if we were smart anything could be accomplished and in the bottom line we began to make money and that in of itself was a reaffirmation that this could be Big Skilling saw

the opportunity to build an industry new and to start a business from scratch but he had one specific condition that had to be met before he joined Enron and it was that he'd be allowed to use a certain kind of accounting known as Mar to Market Arthur Anderson signed off and the SEC approved it I remember walking in and going what's going on and Coy and everybody I mean everyone was so excited and then came the Champaign and we'd got Mark to Market accounting treatment and I often think about how clear my memory was about

that event and that was the beginning of a major Cog in the downfall ultimately of Enron Mark to Market accounting allowed Enron to book potential future profits on the very day a deal was signed no matter how little cash actually came in the door to the outside world enron's profits could be whatever Enron said they Were very subjective and very it it left it open to manipulation and they were saying that we're going to s sell power out of this power plant in 10 years for x per kilowatt and there was no way anybody could

prove that they could do it well finally great Jeff good to see Todd sit down we've been working hard on this and we've really pulled out all the stops look what we got origination we Did 20 million last year I think we do $120 million this year trading we did 10 million last year we think we can do 64 this year this is the key we're going to move from Mark to Market accounting to something I call hfv hypothetical future value accounting W if we do that we can add a kazillion dollars to the bottom

line W Jeff all right that sounds fantastic oh Jeff thank you that's just superb performance and you're going to go far my boy Probably president of the company one day you think so I he really believed that the idea was everything and that when you came up with an idea you should be able to book the profits from that idea right away because otherwise some lesser man was taking the profits from the idea that some greater man had come up with in the past when Jeff Skilling applied to Harvard Business School the professor asked him

if he was smart he replied I'm [ __ ] smart one of his favorite books was the selfish Gene about the ways human nature is Ste Ed by greed and competition in the service of passing on our genes at Enron Skilling wanted to set free the Basic Instincts of survival of the fittest Jeff had a very darwinian view of how the world worked he was famous for saying once in enron's early years that money was the only thing that Motivated people skilling's notion of how the world should work really trickled down and affected everything about

how Enron did business he instituted a system known as the PRC or performance review committee it required that people be graded from a 1 to a five and roughly 10% of people had to be a five and those people were supposed to be fired hence this came to be known as Rank and yank I personally am Convinced that the PRC process is the most important process that we conduct as a company I've never heard of a company yet that would be successful terminating 15% of their people every year uh just to satisfy the fact that

the other empy always had to vote on them and so when you're being evaluated by that group you are getting direct communication from Ken and me about what the objectives of the company are and how you fit with those objectives it was A brutal process the ability for a 25-year-old to go in and to be reviewed and to be superior and as a consequence get a $5 million bonus I don't think that's repeated in many places in Corporate America our culture is is a tough culture it is a very uh very aggressive cultureal at Enron

no one was more aggressive than the Traders you're not going to make 17 million if I'm on the way to my boss's office to argue about My compensation and if I step on somebody's throat on the way that doubles it well I'll stomp on the guy's throat you know that that's how people work that 4 and half M on the trading side we got to be the biggest baddest house in town and by necess if you wanted to be in the market you had to deal with Enron try to reconcile your big numbers here enron's

Traders were like the super powerful High School click that even the principal doesn't Dare to reain in they had become the major engine of at least reported profits at the company they took Jeff Skilling and klay's belief in free markets and turned it into an ideology what they pitch it almost as a new economic religion Enron online will change the markets for many many Commodities it is creating an open transparent Marketplace that replaces the dark blind system that existed it is real simple you turn on Your computer and it's right there that's our vision we're

trying to change the [Music] world I think Jeff Skilling had a desperate need to believe that Enron was a success I think he identified with Enron he proclaimed at one point I am Enron the other thing about people at Enron is a lot of them were former nerds and including Jeff Skilling he had been ponchy he had big glasses he losing his Hair and Jeff Skilling one day kind of woke up and decided to change himself and he started working out lost a lot of weight but he really did remake himself through sheer will and

force of personality when Jeff got Lasix on his eyes everybody at Enron got Bic so nobody was wearing glasses I think Jeff skelling is really a tragic figure in a classic sense of the word he's a guy that people describe as incandescently brilliant but he's Also a guy who is radically different than he at times portrays himself he's portrayed himself as somebody who was very tightly monitored risk in reality he's a gambler he gambled away huge sums of money before he was 20 years old by making wild bets on the market toest Skilling risk was

glamorous he was a huge risk taker he actually talked about wanting to go on a trips that were so perilous that someone could actually [Music] die this manifest itself in trips that Jeff Skilling LED for a small group of friends and [Music] customers a core c of Enron guys used to go on these Wild Adventures Andy fasta would go Ken rice would go the trips were Legend you know we can sit and think about what strange insecurities they were trying to overcome but it made them feel good as men and they took a Particularly memorable

trip to the Bahan 12200 miles in a very rugged terrain in [Music] Mexico this is a trip where people crash bikes k r on the trip and he busted a lip and required a bunch of stitches people broke bones one guy flipped a Jeep and almost got killed those sorts of stories at Enron became Legend and it fed the whole Macho culture of the [Applause] [Music] Place Jeff skelling had a way of describing people that he liked he said I like guys with spikes he liked somebody with something extreme about them Ken rice was one

of the men with spikes was a Salesman of the group very amiable fun man's man and was the guy out selling deals to energy companies in the case of Cliff Baxter the company's chief dealmaker he was extraordinarily talented at just doing a deal but he was a manic Depressive Baxter was a very bright guy very blunt would tell Skilling whatever he thought was closest to Skilling personally than anyone else of the company there was a guy named l p who was a key Skilling lieutenant helped build the trading business in the early years went on

to run enron's doomed effort called Enron Energy Services what was the job of EES as you read uh it was to uh sell Energy Services to end users industrial end users lupai is the guy That Skilling tapped to run the eses business because this was this was so important to the company and to skilling's future he called lupai my ICBM and lupai dispatched his enemies with Incredible skill and if that meant leaving bodies behind him Skilling was certainly fine about that not feeling anything blue pie was kind of a mysterious figure he's kind of like

the invisible CEO for a while he was located on the seventh floor and there there was Long office and it was all glass enclosed and and you would walk by there and it was just almost all the time it was empty details didn't interest Lou pie only two things seemed to motivate Pi money and A peculiar fascination with strippers for pi it was all about the numbers 1 2 3 1 2 3 4 he was there every night after work and he usually brought some of the Traders along with him he spent quite a Lot

of money there as well uh much of it charged to the Enron expense accounts there were rumors that he brought strippers up to the trading floor almost everyone knew the story the story is that because he's kind of a mild softspoken almost Meek individual that maybe the the strippers didn't even believe he was the CEO so he took him up to his office and I guess they they put on a little show for him there one night he was at a club and one Of the guys said you know Lou all the rest of us

are single you know we don't have any problem but how how do you keep your wife from smelling the stripper's perfume on you and Lou said oh I've got a secret said I stop in at the gas station on the way home and I spill a little gasoline on myself and it kills the scent so the other guy shot back said but Lou doesn't your wife then think you're [ __ ] the gas station attendant in in the context of L pie Everyone was horrified the Paul fell over the table because Lou pie was not

a man to trifle with two days later the guy who told the joke as en Ron Legend has it was dispatched to Calgary Canada lupai lost all interest in running EES as soon as the numbers got high enough I netted approximately $100 million but I don't know if that number is accurate plus or minus 20 million and he actually left Enron with more money than anybody $250 million because he Sold all his stock in Enron after he uh got a divorce from his wife in order to marry his rer girlfriend who had had his child

his exit from Enron was as mysterious as his presence there just sort of one day we all learned that Lou pie was no longer the CEO of U EES though Lup Pai flew away from Enron with $250 million the divisions he left behind lost a total of nearly 1 billion ion but Enron managed to disguise that fact Lup Pai became the second largest Landowner in Colorado it was the number it was always making those numbers and looking you know was to me the real mythology is high school mythology that you know you wanted to be

the most popular guy on Wall Street and you were going to do whatever you had to do to stay there and Jeff understood those rules better than I think anyone else [Music] Americans are making a lot of money in stocks the stock market soar to near record highs yesterday the stock market continued each Bull Run Thursday the Dow Rose at nearly 61 points even the person with very little disposable income all of a sudden began to play in the stock market because nobody could fail because stock prices would just going up and up and up

another day another record and the internet and technology stocks just going wild more than 100 points to close At 78 9581 the highest finish ever it was a time where we had the biggest bull market in the history of the world kenlay was right there acting as a cheerleader obviously our stock has been doing very well I think there's a fairly good chance we could see this stock price double again over the next year to 18 [Music] months mounted a campaign to capture the hearts and minds of stock analysts the Natural gas stocks include Enron

We're Never Satisfied and and and I don't want us to ever be satisfied with the stock price it should always be higher Enron posted a 30% jump in second quarter profits as web-based trading boosted its wholesale energy business the game was played on Wall Street in such an established way throughout the 1990s as long as a company met or exceeded the analy projections for quarterly earnings per share the stock went higher the game Was called pump and dump top execs would push the stock price up and then cash in their multi-million dollar options people at

Enron got paid in large part through stock everyone had a huge stake in seeing the stock price go up and it was driven very clearly by the profits every single quarter they're exceedingly conscious of that skelling was and everyone else in the company was they posted the stock price in the elevator you were surrounded by the health of the Company what's the stock price doing we were consumed by it this company was fixated on its stock price and fixated on a massive public relations campaign to convince the investment community that they were new different Innovative

almost heralding a new era of of corporate [Music] Enterprise come work for us we encourage our people to do new things try new things experiment uh step out We Begin By tracting the kind of people that are more comfortable in an environment of change uh you know when you work for Enron you're going to see the newest thinking you're going to see the newest markets opening up Enron online a fabulous fabulous story probably put on they were so good at their acting that they convinced Corporate America that they were smarter than anyone else Allan with

our sincere thanks and admiration we are pleased and indeed honored to Award you the Enron prize for distinguished public [Applause] [Music] service power business continu to grow up 25% they continue to sell the company as being a very stable place where it could predictably increase profits 10 to 15% a year in fact to get to those numbers Enon was doing all sorts of questionable things taking enormous risks we like Risk because you make Money by taking risk got to take time to do new things can be by all accounts Enron was soaring but in reality

profits weren't going up they were headed in the opposite direction Enron had vast natural gas operations all over the world they had cost billions to build and most were performing terribly but in other places in the world in India great quarter and great year in India uh phase one of of D Is in operation generating power Phase 2 is finance and is under construction my experience indicated there were certain places that you assiduously estay away from and one of them as an example was India they built this power plant in India nobody else would do

that at the time they were terrified of investing in India Enron did it and did it in a big way but Enron had failed to see something basic India couldn't afford to pay for the power enron's plant produced Now now DB Hall is a ruin though it lost a billion dollars on the project Enron paid out multi million doll bonuses to Executives based on imaginary profits that never arrived where was the real money going to come from of course the pressure was enormous you had to come up with the next idea that would break through

failure was not an option a flurry of buyouts in a corporate world the biggest Enron Announcing a bi out to Portland General the merger with PGE put Enron in the electricity business and Portland General's position on the west coast gave Enron access to the newly deregulated Market of California the merger we think if uniquely positions us to to ultimately become the largest marketer of electricity and natural gas at both the wholesale and Retail level Nationwide what brought all this on was With deregulation they said that we would not survive unless we join forces Enron I'd

never heard of them until they were going to buy us they slid in here and when they purchased PGE all the PGE stock became Enron just went through stamped every one of them I looked around me and all the guys that were buying all this Enron they were doubling their money and that whole time since then I put the maximum I could into my 401 and savings Portland General again good earnings and cash flow it's what they call in Wall Street a trust me story people that have been gas pipeline workers at decades kept all

their money in the company because they thought it was as traditional and um you know safe an investment as it as it had always been and it was wasn't anything close to that should we invest all of our 401K in Enron stock absolutely don't you guys [Music] [Laughter] agree for Enron is a winner today one of the things that fascinated me was that almost all of the Wall Street analysts who covered Enron had buy ratings or strong buy ratings on the company stock why were the analysts blinded to the company's deceit we relied on the

information that was available at the time I trusted the Integrity of the company's certified financial statements And the representations of the company's management and we've been absolutely upfront with the analyst Jeff Skilling was the critical component in creating the enro on illusion time and time again when we had a question to the cellsite analysts that they couldn't answer the response was I'll give Jeff a call I'll run this by Jeff by giving Jeff a call the analysts weren't analyzing at all they were willing to believe virtually anything Enron told Them most of the analysts right

now have a Target price on us from $1 to $115 share any analyst who didn't buy the company line became an enemy of Enron enron's CFO Andy Fastow had his eye on John Olen one of the only analysts skeptical of the Enron story Enron loved to analyst strong buy recommendations Merill was informed by fast out either you get somebody who is on board with us and has a strong bu recommendation and loves us at the same time or we don't do Any business with you I knew that my days were numbered this is an abuse

Merill Lynch fired John Olson soon after Fastow rewarded the bank with two Investment Banking Jobs worth $50 million analysts were routinely getting large bonuses from the investment banking departments to bring in Investment Banking deals uh once that happens you know uh never was heard a discouraging word while enron's stock kept Rising its Businesses kept losing money looking at the soaring stocks of the Dooms Skilling decided to take Enron into cyberspace we're now in the process of seeing if we can create a bandwidth trading Market Enron is using its knowledge of trading gas to barter other

forms of energy even space on the information Super Highway called bandwidth hen rice has worked at Enron for 20 years Enron has found a way to Stay ahead of the curve from 7:00 p.m. to 7:00 a.m. we're paying for B with that we are not using why why one of our themes around here is to always be asking why uh why why something's done a certain way or why it's not done a different way there's our Market why can't we sell the bandwidth to other companies make it a commodity like a pork belly just last

week Enron captivated at Wall Street with its bold move into Broadband teaming up with Blockbuster to deliver movies on demand it was like being at a religious cult meeting people started jumping up from their seats with their cell phones and their blackberries running out to the Halls to call their bosses one analyst summed up his recommendation to investors in one word wow enron's stock soared 34% in 2 days and you can tell from the response in the stock market markets that they like the strategy it it makes sense they Announced that they had developed the

technology it would be in test markets by the end of the year and the technology works the quality is great and the customers like it so we've made a lot of progress the truth was that Enron was just struggling with the technology for video on demand the technology didn't work and the deal with Blockbuster soon collapsed but with the magic of Mark to Market Enron used future projections to book $53 million In earnings on a deal that didn't make a penny by the end of the year 2000 Enron was running out of ways to make

the Broadband business look successful they tried every trick in the bag to to try to create the illusion of a business where there was none and the people who were working there were getting increasingly desperate the executives started selling their stock by enron's collapse Ken rice had sold 53 million Ken L had sold 300 million Cliff Baxter 35 million Jeff Skilling 200 million as the fraud is perpetuated all the various lies and artifices begin to convince the ring Master if you will himself that it's this own bizarre reality in fact the fraud is the reality

the perception is the reality and as long as you can keep the perception going on it really isn't a fraud talk about bandwidth trading what about weather options or Futures how is that market developing yeah we have we have a A marketed weather when Enron announced its latest plan to trade weather people wondered whether it was good science or science fiction did the weather guys get punished here if there the weather is wrong I mean they whip marks on your back there forunate some good call Jeff's time went on had a harder time admitting things

were wrong and I have to believe that you know when the lights went out At night he knew what was coming I would liken it to the Titanic when you've got a captain who's saying maintain full speed and they bump into a couple of icebergs and then they still keep full speed going the captain of this ship Enron he ignored all the warning signs and there were plenty of them and the captain of the ship was that's [Music] way it was one of the bloodiest days in Wall Street history who was it Shear has plummeted

31% stocks LED Friday's Fierce selloff this is really a great wakeup call millions of nervous investors following the huge drop on Friday the Dow Jones en was especially a big deal by the end of the year 2000 because by then most internet companies had already begun to fall and everybody on Wall Street was looking for the next big thing and here you had Enron which appeared to be this shining star of a New economy company its stock price went up 90% in the year 2000 and had gone up um over 50% the year before that

it was an IT stock on Wall Street one of those companies that can seemingly do no wrong we would opposed to child for the new economy we had this culture that had a lot of focus on reminding us how good we were and as that culture emerged then we get to Fortune Magazine telling us we were the most Innovative Corporation in America then we really began to feel Good about ourselves well you all did it again uh inran was just recently chosen again for the six year in a row in the most admired company survey

by Fortune Magazine as the most Innovative company in America well deserved well deserved the sales pitch still sounded good but one investor saw something in enron's numbers that the stock analysts had missed by and large the analysts admitted to us in person it's a black Box you have to take it on faith who knows where the earnings come from they just pop out and all we know is they're always good and I kept pointing out well yeah isn't that the whole point of uh if if uh if it's a black box and it's there to

fool you the numbers are always going to be good until they're not I'm not a beat reporter so I would have had no reason to look at Enron but Jim chos mentioned to me that I should take a closer look at enron's financial Statements and it wasn't clear from enron's financial statements that there was fraud here but what was clear is that something didn't didn't add up in March 2001 Bethany McLean a reporter with Fortune Magazine first raised questions about enron's financial condition she asked a simple question in the article that no one could seem

to answer how exactly does Enron make its money you got very didn't you I very specifically uh remember the telephone Conversation that I had with uh with the fortune reporter she called up and started asking some very very specific questions about accounting treatment on things I am not an accountant and I could not answer them he became really really agitated he said that people who rais questions like this were just trying to throw rocks at the company and that I was not ethical because I hadn't done enough homework and if I had done enough homework

I would understand how Off based my questions were Mr Skilling it appears as if you were trying to bully someone who was asking very basic questions about Enron I said I said to her I have got six minutes left before I have to be in a meeting and I can't get into the details and I'm not an accountant and she said well that's fine we're going to do the article anyway and I said if you do that I personally think that's unethical the next day our Chief Financial Officer and our chief Accounting officer flew to

New York York at enron's expense to sit down not with the editors but to sit down with the reporter on that story and help her understand the questions that she was asking and the next day we sat in this small dark windowless conference room for about 3 hours going through the various aspects of the company's business and I'll never forget this when the um when the interview was over the other two Executives packed up their Things and had left the room and Andy Fastow turned around and looked at my editor and me and said I

don't care what you write about the company just don't make me look bad and Fastow had good reasons for not wanting to look bad there were these Partnerships that were run by Andy Fastow that were doing business with Enron and these were disclosed in the company's financial statements but I didn't mention them in the story I wrote Because I thought well The accountants and the board of directors have said that this is okay so I must be crazy to think there's anything wrong with this the story I ran was actually pretty Meek the title was

is Enron overpriced but in the end I couldn't prove that it was anything more than an overvalued stock and I was probably too naive to suspect that it was anything anything more than that and was her article critical yes it wasn't Fortune magazine article that's out the Headline is is Enron stock overvalued uh the gist of the article is that uh uh Enron is sort of a black box uh which sorry it's true I mean it's it's just difficult for us to show people the specifics of how money flows through particularly the wholesale business um

the entire reason that this this analysis was done by Fortune Magazine is because Business Week had a favorable article about Enron the week before and there's this competition that the news The news magazines have where one says something good the other one has to come and find something bad so I think that was kind of the Genesis of it so I the criticism I think is is kind of ridiculous when Bethany mlan at Fortune started analyzing cash flows and she had this wonderful article saying take a look at first quarter second quarter third quarter and

end of year cash flows there's a reason she didn't invest in Enron because the financials didn't make Sense but you have to be willing to say that the emperor doesn't have any clothes and this Emperor was pretty powerful we are going to unveil this morning a new corporate Vision okay you ready one two 3 how's this it's really hard to know when Enron first crossed the line into outright fraud but there isn't any doubt about who the guy was who led them there it was a protege of Jeff skillings by the Name of Andy [Music]

Fasto Andy Fastow was enron's Chief Financial Officer his job was to cover up the fact that Enron was becoming a financial Fantasy Land Enron essentially was losing money on a camp Cash basis year after year and yet it was reporting profits so it was defying the laws of financial gravity and the way it was doing it was with something called structured finance and the Maestro of All that at en run was Andy fown Andy was very young he was hired by Jeff Skilling probably before he was even 30 and he idolized Jeff Skilling and he

certainly wanted to please the boss to please the boss Fastow had to figure out a way to keep the stock price up by hiding the fact that Enron was $30 billion in debt people pressured by the need to keep the stock price up begin to cheat a little bit but then the next quarter Comes along and you have to cheat a little more to do the new cheating to make up for the old cheating and before long you've created a momentum that now you can't stop Fastow created hundreds of special companies to perform a magic

trick prop up enron's stock by making its debt disappear to outside investors it looked like cash was coming in the door in fact Enron was just stashing its debt in fast house companies where investors couldn't See it it was black magic it really was you were pulling some rabbits out of a hat [Music] something they could bury debt they could bury bosses many of the companies had exotic names Jedi chco Raptors ljm was fast's most ambitious creation it would work magic for Enron and it would allow Fastow to conjure $45 million for [Music] himself Million

Andy in many ways was someone we all knew didn't have a strong moral compass it's almost like Jeff Skilling said okay we're hitting some troubled times let's set up Andy so we can fill the earnings holes when we need to knowing that Andy would probably skim a little bit off each transaction for himself there's a body heat kind of angle to this you know where Skilling is Kathleen Turner and Andy is William Hurt You Know in the end he he got suckered Into helping all the executives meet their earnings what I wish I you know

retrospect I wish had never heard of ALG am is it your contention that you knew of it and it was appropriate Arthur Anderson and our lawyers had taken a very hard look at this structure and they believed it was appropriate but if the theory is that Fastow went rogue somewhere deep in the jungles of Enron and was a sole agent of the Apocalypse I just don't buy it Skilling Lei and the Enron board had signed off on Fastow ljm funds they saw the benefits of letting Fastow do deals with himself it is an Enon best

interest en needs the capital number one in a secret videotape that's surfaced after the bankruptcy Fastow can be seen selling ljm to a group of meril Lynch Bankers he pitches them on the benefits of investing in a fund that only buys assets from Enron remember I'm not selling the assets to myself they own the assets they're selling them to Ljm to fast down knew what kind of deal he was offering was Enron CFO he could guarantee profits for l JM yeah I think this is an extraordinary opportunity he has a sort of Cheshire Cat grin

on his face as he talks about all the ways that the fund is going to profit and he talks about the informational advantages that he's going to have in his dual role as as Enron CFO and as the head of these funds special arrang there is never there is never any question that I will Be on both sides of the transaction I will always be on the ljm side of the transaction he was General partner of ljm while at the same time being CFO of Enron now that's a whole another ball wax when you want

to talk about that conflict of interests because you know no human being should be put in a situation where you know every single transaction they decide whether they're looking after enron's best interests or their limited partners because this ljm Partnership existed solely to do business with Enron as you would expect Andy as Chief Financial Officer of Enron is heavily banged so to speak and U as a result there are five or six of the name brand Banks who have stepped up and said they'll commit to this commit they did and why not Fastow was letting

them gamble with enron's chips fast was using enron's stock as collateral for a lot of these things they were betting their own company on on the Transactions with a prospect of returns that would exceed 2,000% 96 individual Bankers invested in ljm and America's major Banks put up as much as 25 million each it's sort of a who's who of Wall Street JP Morgan Chase CS first Boston City Bank Marl Lynch Deutsche Bank uh these are some of the Premier investment banks in the [Music] world it's just amazing how skilled andran and Andy Fastow were at

work Wall Street playing on wall Street's greed in order to get money out of them uh to quote Lenin they were the investment bankers useful idiots is disturbing is enron's own misconduct is the growing evidence that leading us financial institutions not only took part in enron's deceptive practices but at times designed Advanced and profit Ed from them the Enron fraud Is the story of synergistic corruption there are supposed to be checks and balances in the system the lawyers are supposed to say no the accountants are supposed to say no the bankers are supposed to say

no but no one who is supposed to say no said no they all took their share of the money from the fraud and put it in their pockets Enron paid its advisers well in 2001 the accounting firm Arthur Anderson received 1 million a week enron's Law Firm Vincent and Elin Did nearly as well everyone had the handout at the table they were all being paid and as long as Enron continued they received their fees they were a part of the process so it's hard now to say oh we didn't know anything had we known then

what we know now about enron's practices we would not have engaged in these transactions with Enron the facts that we now have come to light about en Ron however were not known at the time I believe that the city group Professionals involved with these transactions acted in good faith I'd like you here to look at one city email exhibit 333i the email Trail here is all too lurd oh for instance one email I remember where the banker writes Enron loves these deals they produce cash but they don't have to show the debt on the balance

sheet now a high school student can figure out that the bank were all knowing participants in this Wrongdoing Marl Lynch assisted Enron in cooking its books by pretending to purchase an existing Enron asset when it was really engaged in a loan the accounting sham involved the sale of an interest in three Nigerian barges Nigeria is a long way from Manhattan yet for some reason toward the end of the fourth quarter in 1999 meril Lynch suddenly decided to buy three Nigerian power barges from Enron Nigerian power barges have nothing to do With Marl Lynch's business it

was a blatantly illegal transaction it was just taking the barges getting them off enron's books having Marl Lynch if you will Warehouse them for 5 months and then buying them back Mr Martin you you've testified here today that there was no guarantee and you said that under oath here's a document saying that the head of your whole division here was going to confirm that Understanding over the year 2001 Skilling became increasingly despondent he'd always been a moody guy but people who knew him said he became just increasingly volatile CH up for work unshaven looking blurry

eyed and I think it was the Battle of holding these two totally disjointed thoughts in his mind at at the same time one is Enron a superstar company and the other of feeling like it was all crumbling away the first cracks in skilling's Public Image appeared in a conference call with analysts in April 2001 and then Jeff Skilling uh took questions and uh about Midway through the session uh there was a questioner who was sort of aggressively wondering out loud why it was that Enron as a financial services company in effect could not release a

balance sheet with its earning statement like most financial institutions do you're the only financial institution that can't produce a balance sheet or a Cash flow statement with their earnings you you you well um thank you very much we appreciate appreciate it [ __ ] and then quite audibly you could hear Skilling say [ __ ] and then he said [ __ ] as I understand you call him an [ __ ] and this just caused unbelievable amounts of consternation all across W Street because people thought a Fortune 500 CEO losing it like this publicly calling

publicly calling An investor an [ __ ] if I could go back and redo things I would not now have used the term that I used Mark Palmer and Ron's Chief PR guy even ran a note up to Skilling telling him to apologize and he just took the piece of paper and tucked it under the pile of papers on his desk and afterwards enron's traders who had erupted in cheers when skelling called this guy an [ __ ] made him a sign there was a play off enron's motto ask why and the sign Said ask

why [ __ ] my personal feeling was that Jeff looked at the numbers and he knew that we were in a massive hole it was the only time but I saw him truly truly worried about keeping the stock price up and he just kept saying to me I don't know what the hell I'm going to do the Broadband business was in complete down and there were all sorts of other problems that Jeff Skilling is the company's Chief Operating Officer Was wrestling with in the middle of all of this kenl walks into Jeff skillings office holding

up fabric swatches for the new G5 $45 million corporate jet he wanted to buy and he said to Jeff asked a very important question which of these cabin configurations do you like best Jeff while Ken L was stressing over the corporate jet EES was headed for a crash Landing facing 500 million in losses lupie's top Lieutenant Tom white wondered how EES could show a profit by The end of the quarter one of the things that was always a strange Occurrence at Enron was for weeks before a quarterly report we would be under the impression that

we weren't going to make our numbers but then somehow miraculously we always made the numbers and then some but then a question was asked to Tom white how is it that we made the numbers and his answer was one word [Music] California the first Clues to enron's New strategy hit California with a jolt it started at noon rolling across the state Sacramento San Fran Isco Beverly Hills Long Beach San Diego 26,000 Mi of California power lines enough to circle the Earth but for the second day in a row not enough electricity for America's largest state

and the world's sixth largest economy the first thing we heard about this energy crisis is where our lights are going to go off in the middle of winter When we're using half the electricity we normally use during the summer the Bay Area got hit by not one but two rolling blackouts today we only need 28,000 to 30,000 megaw in December we have an installed capacity in California at the time of 45,000 megaw plento power to meet our electric demand of course we had blackouts in December the people who control California's power grids say once again

they're worried about having to black out the northern half of the State when the rolling blackouts started in California there was definitely a lot of excitement in the air it was something new it was something that hadn't been encountered before it was how is this event going to affect the price of power controlled rotating outages are being implemented I knew I knew that there was illegality going on I could feel it I could smell it I could sense it and there was no other explanation because the numbers just Didn't add up we had enough power

in California it was never about lack of Supply when I ran for governor 1998 not one human being asked me about electricity this thing kind of came out of the woods as far as I was concerned and I was trying in the early days to learn what was happening how we could fix the [Music] problem California was selected by Enron as the prime place to experiment with This new concept of deregulated electricity reducing electricity cost is only one benefit from choice and competition in 1996 under pressure from energy companies Governor Pete Wilson and the California

legislature passed a bill allowing for the deregulation of electricity I wasn't in the legislature in 1996 but I can tell you that there isn't a legislator alive that can tell you with any sophistication how deregulated electricity Market ought to Work not a one California's deregulated system was a bizarre compromise between legislators and free market Advocates the rules were complicated and hard to follow inside Enron California's system was little more than a joke and once in place Enron made sure that the joke would be on California and I remember the conversation i' had with Ken at

the end of it he says well D you old buddy let me just tell you it doesn't matter really to us what kooky rules you California's put in place I got a bunch of really smart people down here figure out how to make money anyhow one of the smartest guys at Enron was Tim Beldon who ran the West Coast Trading desk Tim Beldon was a fervent believer in the idea of free markets and as such he spent hours pouring over the new rules for the deregulation of California's energy industry looking for loopholes that Enron could

exploit to make money He found plenty after the bankruptcy a confidential memo surfaced revealing the names of beldon's strategies to game the California market wheel out Get Shorty fat boy recently audio tapes of the Enron Traders were discovered what do you want to call this project uh have a catchy name for that how about you know something friendly like that [Music] star the tapes revealed enron's contempt for any values except one making Money res hey John it's Tim the regulator is all in a big concern about is we're Wheeling power out of California he just

steals money from California to the tune of rephrase that okay he arbitrages the California Market to the tune of a million bucks or two a day [Music] right an Arbitrage opportunity has been been defined to me as any opportunity to make abnormal profit so an abnormal Profit would be um returns above and beyond the norm I was told that a good Trader is a creative Trader and a creative Trader is a Trader that can find Arbitrage opportunities one of those opportunities was called Ricochet I'll see you guys I'm taking mine to the desert in the

midst of the energy shortages Enron Traders started to export power out of the state when prices soar they brought it back in so we [ __ ] Export like a [ __ ] getting rich trying to Traders would stay after a 12-hour shift and pour over maps of the Western Energy grid what are the permutations and combinations of ways to move power around the west and I think that that's something that Enron knew better than any other energy marketer in the country period we know all of the California Imports we all the California load we're

getting pretty spoiled on this money you Said you're getting a little scared we're making a little too much and I I tend to agree with you these are two Traders t r a d RS this is what they say what we did was overbook the transmission line we had the rights on and said to California utilities if you want to use the line pay us by the time they agreed to meet our price rolling blackouts had already hit California and the price for electricity went through the roof did You have any knowledge that this was

happening the only the only thing that I'm aware of Senator is there was uh there was a difference of opinion on the rules of the independent system operator it was just set up the rules weren't quite quite clear we have Traders here from Enron who were saying they did something wrong but you don't see anything wrong I have one last question and then I am done Traders soon discovered that by Shutting down power plants they could create artificial shortages that would push prices even higher hey this is David up at en uhhuh there's not much

uh demand for power at all and we're if we shut it down could you bring it back up in 3 or 4 hours oh yeah once just go ahead and shut her down then if that's okay okay when you see two three energy companies with 30 35% of their entire capacity down for maintenance on a single day and as a Result the price of electricity sky rcking 3 or 400% and then a week later someone else does it up in Northern California you begin to believe something's not smelling right here we want you guys to

get a little creative okay and come up with a reason to go down like a forced outage type thing right those guys at the flip of a switch could just yank the California economy on its leash whenever they wanted to and they did it and they did it and they did It and they made so much money the heart of it is that an industry that went for a 100 years from the day of Edison built the best electrical system in the world sold the power at reasonable prices to Consumers and was very reliable was

all of a sudden turned into a casino these strategies made some money for Enron but the real money was made by betting that the price of energy would go up it did and the West Coast traders made nearly $2 billion for Enron that's Nothing WR with the capital there's wither you can't treat electricity like you treat oranges it's the life blood of the society it can't be stored you can't turn these people loose and let them just have a quote free market because a free market is godamn expensive to customers there would be ample Supply

available at the right [ __ ] price oh sure there was it wasn't just Enron every company traded according to the to The rules that California put up there and where's the future of enun and we're [ __ ] making half a billion dollar for enun can you believe that yeah we'll definitely retire by we're 30 we're talking about a commodity that normally trades in the 35 to $45 range high prices are when it gets in the 50s or $1,000 prices aren't going to stay at 1,000 bucks forever we doubt the weak people in the

market get rid of them and you know what the people who are strong Stick around it the Enron Traders never seem to step back and say wait is what we're doing ethical is it in our best long-term interests does it help us if we totally rape California does that Advance our goals of Nationwide deregulation instead they sought out every every loophole they could in order to profit from California's misery temperatures in California are hitting higher than 100° fueling wildfires and fears that California's Strained power grid could once again near collapse what's happening there's a fire

under the cor line it's the Gated from 45 to 2100 burn baby burn that's a beautiful thing I was never comfortable on the trading floor at Enron and if I had questions I I didn't ask them because I I didn't want to know the answer you know I didn't want confirmed What what I suspected might be true that what I was doing was in fact unseemly um or was at least unethical if if not worse why did the Traders do what they did was it their multi-million doll bonuses or had Enron found a way to

exploit the darker side of human behavior in the early 60s Stanley Milgram tried to figure out what character istics there were of evil people was there an evil strain or could Normal people do really bad things and so he set up this experiment in the experiment he had an actor playing an experimental subject and a real experimental subject want to step right in here Lear have a seat they went into this room and he had an experimentor say we're going to see if mild electric shocks will help people memorize lists incorrect you'll now get a

shock of 75 volts soft Hair he kind of did some yelling in there the milgrim experiment has a lot to say about Enron because I think people lost their sense of morality like milgrim once you accepted the idea that behaving inhumanely was okay you could do anything and the shocks increased with the number of mistakes that they made I can't stand the pain me out of can't stand I'm not going to kill that man eh the subject the real subject is begging the scientist looking person to Stop too and the scientist only says the experiment

requires that you continue please continue go on please you accept all responsibility the responsibility is mine correct please go on in a way Skilling was almost like the guy telling those people below him that it was okay to up the power 40 volts California's Electric utilities may have to pull the plug on millions of customers it's the [ __ ] coolest thing I've done in a long time yeah holy [ __ ] guys you got to Love the West oh 4 35 volts during the height of Wednesday's blackout fire Crews had to Free People trapped

in elevators a money you guys stole from those poor grandmothers in California yeah Grandma Millie man but she's the one who couldn't figure out how to [ __ ] vote on the butterfly ballot now she wants her [ __ ] money back for the power you charg right up 50 BS yeah they're out there in California We must continue go on please you're going to keep giving what 450 volts heavy shot now that's correct continue it's kind of hard to say well we should be you know we shouldn't do this even though it's allowed because

you know I mean that's what we do right could happen is [ __ ] an earthquake let that thing float out to the Pacific and put [ __ ] candles 450 volts mgr's Discovery was disturbing 50% Of the subjects were willing to sh to the death so long as the commands came from a seemingly legitimate Source tonight I'm declaring a state of emergency in California to give the state the authority and the resources to keep the lights on in California the governor who's been basically um capitulating to the demands of the energy companies and the

utility companies needs to put his foot down we wanted the the governor to send in the State Police or the National Guard to seize control of the power plants and put them back online and I thought we didn't have to take over every plant we really only had to take over one cuz then they would know he meant it I'm going to get the $9 billion back that Enron dinery and Reliance St from us and get it back to you despite what the people in California think enron's making money despite California not because of California

the year-long Energy crisis would cost the state of California $30 billion the markets in California are the most regulated markets in North America today and that's what's causing the problem California it never deregulated Enon by stock today we are doing the right thing you're the good guys we are the good guys we are on the side of angels oh I can't help myself you know what the difference is between the state of California and the Titanic and this is being webcast I know I'm going to regret this at least when the Titanic went down the

lights were [Applause] on a top executive at one of America's biggest power companies received a rockus welcome in San Francisco tonight protesters heckled inran CEO Jeffrey Skilling outside and inside during his appearance Commonwealth Club one of the protesters even brought a blueberry pie And delivered it herself $132 million is what he made we have a 50% hike in utility rates consumers in California are angry and they should be and if we had anything to do with this then we are the stupidest people in the world I work first organization every day people C saying they

can't pay their electricity bills millions of dollars when the tidal wave of public anger started to grow Ken L flew out here and Convened a meeting of friends and and I guess he had a little more foresight than we did he he invited Arnold Schwarzenegger brought him together at the Peninsula Hotel and had a lunch meeting the notes from that meeting really still have never surfaced but we know that klay's pitch was we've got to stay the course with deregulation and the market will correct itself and everything will turn out fine now now at the

time we didn't understand really why He was so concerned but now we do the fact is that Kenley was out here because he understood that Enron itself was a house of cards and if deregulation were to collapse that Enron itself would collapse But Ken L had a trump card in the midst of the energy crisis his friend George W bush became president I George Walker Bush do solemnly swear I George Walker Bush do solemnly swear k l is going to be Secretary of Energy get out of here how great would that be For all the

players in the market it'd be great I'd love to see Kim be secretary energy Ken L did have easy access to the Bush Administration on April 17th he met with Vice President Dick Cheney and strongly argued against the imposition of federal price caps in California we're doing everything we can to help in California on a short-term basis there's not a lot you can do you can't manufacture kilowatts in the west wing of the White House we're fighting With both hands tied behind our back we know no longer have the power to stop this if the

federal government doesn't help us we're a dead duck at the time Gray Davis was a likely candidate to run for president Ken L knew that might give his friend George Bush a political reason to oppose California's appeals for federal price controls they know full well my administration's belief that price controls will not solve the problem his view was that the federal Government really shouldn't get involved this is California's problem and I'm saying with due respect Mr President our law said the federal government regulates this so it is your problem and you make appointments to the

federal regory commission so we had a polite but spirited discussion on that and he says I just can't be of helped you in that as I said from the very beginning of my Administration we'll work to help California in any way we can and the Best way we can is to be good citizens FK the federal agency which regulates energy in America refused to intervene what was FK doing and why was it not taking action the chairman of FK was Pat wood the man Ken L had personally recommended for the job it was easy for

FK to do enron's bidding because all they had to do was do nothing which they did very well Federal Regulators are being pressured to act by the now Democratic controlled Senate we Hearing a Democratic Senate forced FK to impose Regional price caps that ended the energy crisis but not the political one did kenl and George Bush have a political agenda to blame the energy crisis on GRE Davis said hello it's one of those only in California Stories the state's unpopular Governor Gray Davis beset by an ailing economy and a $ 38 billion budget deficit faces

possible recall and rumored as a possible replacement for Davis movie star Arnold Schwarzenegger The Terminator we'll see whether he's back or not Gray Davis has terminated opportunity is it now it's time we germinate Gray [Applause] Davis could I predict a phony energy crisis as a result of the IR regulation yes could I predict that Arnold schwarzer would be our governor as a result of deregulation never would have come up with that that's like a bad Science fiction movie apparently we have all been wrong it is pronounced California ladies and gentlemen the governor of the great

state of California [Applause] [Music] Arnold we could just hear rumbles all the way up and down Main Street here and all throughout the city that things were were very difficult at enrod one guy who a year before had come to me and said I'm working ran Ron was very excited but within a year was waking up every night with nightmares I've got no life left and I feel like I'm being consumed by this company as doubts began to surface about the company and the erratic behavior of its CEO enron's stock began to fall I remember

one of the most poignant meetings I'd ever had with Jeff I had left Enron and I had come over to talk about whether or not I would return to Enron I said Jeff you've got a real Problem the Traders they will cut your throat if they think it will get them to the trough sooner Jeff was silent and he looked out the window and he looked back at me and he said yeah Amanda you're most likely right by the end the Traders ran Enron you know the inmates had taken over the Asylum all through the

summer the stock continued to decline there was a buzz that a major announcement was going to take place but we all thought that Kenlay was leaving Enron and that he had been asked by the Bush Administration to uh join his administration but that wasn't the case at all it was Jeff Skilling announcing that he was stepping down as a CEO and that took Everyone by surprise no one could believe that CEOs generally don't just resign design out of the blue without a well orchestrated PR campaign beforehand to pave the way so there's no disruption There's

no questions there's no front page stories which of course is exactly what happened it was at that point that I knew the architect of the disaster knows that it's crumbling and the rat is leaving the sinking ship 2 days later I met with him and Klay as I had informed the company that I was going to downgrade the stock on skilling's resignation I asked Jeff Skilling are there any more shoes to Drop have we seen the worst of it and I was concerned about the energy crisis that was occurring in California well Skilling convinced me

that it was for personal reasons I left his meeting feeling sort of emotional because of the concern that he seemed to be showing about the relationship he had with his family he appeared to be distraught and I remember saying to an investor um if he's not telling the truth then it's a good thing he quit his Day job because he needs to go to Hollywood I left Enron on August 14th 2001 for personal reasons Mr SK a massive earthquake struck Enron right after your departure and people in Far inferior positions to you could see cracks

in the walls feel the Tremors feel the windows rattling and you want us to believe that you sat there in your office and didn't and and had no clue that this place was about to collapse on the day I left on August 14th 2011 I believe the company was in strong financial condition I think he was smart enough and he didn't even have to be that smart he had seen documents that I think predicted the future I think he was smart enough to think I can get out now and this company isn't going to collapse

for a year maybe a year and a half so I won't get the blame it it was working fine when I left guys after Skilling resigned enron's chairman Ken L took over as [Music] [Applause] CEO boy I didn't expect that but thank you thank you very much well I'm delighted to be back I'm sorry Jeff did resign it was a stunning announcement that he was stepping down as a CEO and I think the flags um started going up at that point for everybody we are facing a number of challenges but we're managing them indeed I

think the worst of that's Behind us and the business is doing great we're not the only stock that's decreased in value this year it's just that we've been hit a little harder than than many others if if a few of these other problems disappear uh like California like India uh I think the worse is over and I'm excited August 14th 2001 Jeff Skilling abruptly resigns and that made me angry it made loads of employees angry I mean there was a real sense of Betrayal by the employees I mean this was you know Jim Jones feeding

us the Kool-Aid and then deciding not to drink it [Music] himself the day after Skilling resigned Sharon Watkins sent a letter to Ken L we will begin with Miss Watkins I am Sharon Watkins would you identify your Council for the committee yes my council is Mr Philip Hilder when you hear the story for the first time it's unbelievable What Sharon was telling me um was more than accounting regularities as such I mean it was uh a massive fraud of enormous proportions in mid to late June of 2001 upon the resignation of Cliff Baxter I went

to work directly for Mr Fastow it has evolved to the uh corporate crime of the century I was highly alarmed by the information I was receiving what Sharon Watkins discovered began the unraveling of Fastow complex Partnerships Andy put me in charge of This asset listing and there were about a dozen assets that that had been hedged with one of Andy's um entities the Raptors and so I was working with a spreadsheet and you know the math just didn't add up it didn't make sense to me I mean accounting doesn't get that creative you know I

couldn't believe that Arthur Anderson had signed off on it I couldn't believe that so many people were going along behind Fastow Partnerships were Enormous guarantees of enron's stock Fastow had gambled enron's future on the hope that its stock would never fall my first reaction was that I should warn kinl the day after Skilling left I sent this one page Anonymous letter but within a week I was meeting with kenlay i' identified myself in the hopes of really making my point that Enron needed to address this situation I mean companies rarely get away with cooking the

books but when they do survive it's When they come clean not when they're exposed from the outside Miss Watkins I I went Miss Watkins did not talk to me Senator well miss Watkins said Clifford Baxter told her that he met with you repeatedly to express his concern cliff and Andy had had a they didn't like each other um they had a very strain personal relationship and Cliff's uh issue had nothing to do with the appropriateness or inappropriateness of the transaction I'd mentioned Cliff Baxter in these memos and I remember I made the comment to him

well you're one of the good guys you know you were one of the people fighting against this and it'll be all right and he said oh I don't think it's going to be all right for any of us involved in this when I started working on the book with Sheeran I was interested writing about a whistleblower people don't really appreciate what she did and The Bravery That it took in that company Andy fastel would not have put his hands in the Enron candy jar without an explicit or implicit approval to do so by Mr Skilling

I can't for the life of me see what basis she would have for suggesting that I would know some of that I mean how would she know that and and I don't see that it's at all inconsistent that there would be some things I don't know if some people purposely kept me from knowing some Things I felt like I was one lone Voice Within Enron saying look we' we've committed horrible fraud and of course all hell broke loose within six short weeks Enron was spinning out of control probably in more normal circumstances I would had

a few more words to say about September the 11th just like America is under attack by terrorism I think we're under attack uh and of course now we've got the SEC uh inquiry informal inquiry the SEC launched an investigation when the Wall Street Journal published articles revealing fow's murky deals Enron announced massive Financial restatements investors began to worry that billions in Mark tomarket profits were really losses as you can of course see the underlying fundamentals of our businesses uh are very strong indeed the strongest they've ever Been uh but regrettably uh that's not what Wall

Street is focusing on and I doubt that's what you're focusing on this inquiry will take a lot of time on the part of our counts and lawyers and others uh but it will finally put these issues to ARR at the very moment kenlay was talking to employees only a few blocks away enron's accounting firm Arthur Anderson had begun destroying its Enron Files on October 23rd Anderson shredded more than one ton of paper despite the rumors despite the speculation the company is doing well both financially and operationally he was making all kinds of statements reassuring employ

employes and not just employees reinsuring investors we have no accounting irregularities um the company's in the best shape it's ever been in now from standpoint of Enron stock we're going to Bring it back we're going to bring it back all right we're down to questions and I've got a few up here I would like to know if you are on crack if so that would explain a lot if not you may want to start because it's going to be a long time before we trust you again certainly wasn't clear to anyone at Enron much less

anyone outside of Enron it wasn't really clear what was going on or or or what was going to happen I know This is a lot of there's a lot of speculation about Andy's involvement I and the board are also sure that Andy has operated in the most ethical and appropriate manner possible the next day Andy Fastow was fired when the Enron board discovered that he had made more than 45 million dollars from his ljn Partnerships question Mr Fastow is how could you believe that your actions were in any way consistent with your fiduciary duties to

enrod and its Shareholders or with common sense Notions of corporate ethics and propriety how do you answer Sir Mr chairman on the advice of my councel I respectfully declin to answer the questions based on the protection afforded me under the United States Constitution Andy in many ways I think he was set up as the Fall Guy all of the inran executives were saying there's your man Andy vastel he's the crook you know he's The one that stole from Enron stole from ljm he's the one that cooked the books go after him I've thought about this

and thought about this and it couldn't have just been a few Executives at Enron that made this happened if you think of the banks involved Chase Morgan City Bank um the billions in loans Arthur Anderson what about Vincent and Elin the the the lawyers that represented us there had to have been complicity across The board because it was all too easy all too easy the Enron collapse was an enormous tragedy this is a company that had over 30,000 employees and clearly in a company of that size you have a lot of senior officers that have

a lot of authority in which you place enormous trust clearly in this case there was at least one Andy Fastow that betrayed that trust to the extent that I did not know What he was doing that he obviously didn't share with me what he was doing uh then indeed I cannot take responsibility for what he did I never heard him say I take responsibility for a thing sounded to me like the wonderful movie Chicago I was reminded of the puppet strings and the dancers and the tap dancing and pointing at the gun the gun the

gun I mean everybody's uh everybody's in Step but Johnny I continue to Grieve as does my family over the loss of the company Lindon and I and saw our net worth reduced from several hundred million down to something less than $20 million on a net worth basis and of course as you said about a million dollar or less in liquidity I think I'm I don't know whether I'd be ra rather be shot as a crook or as a as an idiot I believe the only venue for me is the ride of Broken Dreams Oh you

mean the Enron ride let's go Enron hit the national psyche it hit it as sort of the time tested lesson and that is if it looks too good to be true sometimes it is we're all going to be [Music] rich we broke [Music] even it is my belief that enron's failure was due to a classic run on the bank don't look now but there's Something funny going on over there at the bank George I've never really seen one but that's got all the air marks of being a [Music] run on December 2nd 2001 less than

4 months after skilling's resignation Enron declared bankruptcy I remember it was just a strange kind of a surreal day we learned around 9:30 about the bankruptcy and that we were all Being let go we all felt like we were on the Titanic and the last lifeboats had long gone and we were just now on the sinking ship we had 30 minutes to leave the building and at that point it was no longer like being on the Titanic it was kind of like being on the Lucitania the torpedo had hit and there's 20 minutes to to

get out there's a lot of disbelief very few of the rank and file people ever dreamed That enmon would actually go [Music] bankrupt and then all of a sudden it was like a ghost town I can remember going into the old building on certain floors uh late in the uh afternoon or evening and it was scary there'd be like papers blowing around and nobody there and and it was it was just it was very [Music] eerie Mr Skilling your opening statement Was extremely compassionate to the employees and I want to show you a tape and

I believe we have it ready to go listen to this did we invest all of our 401K in Enron stock absolutely don't you guys agree why is it that you had begun unloading your stock pretty heavily uh before that date and yet led the employees to think they should keep buying stock um Mr Senator I have been a major Shareholder in Enron Corporation and you can take the videotape to mean what you want it to mean I was a supporter of Enron Corporation you know what happened to those people they lost everything I feel terrible

about what happened to the employees well at one time things were really Rosy for us and we all had some really nice looking 401ks and pensions and but it peaked and then it just started going down and went lower and lower and lower The peak I had about 348,000 and I sold it all for $1,200 was what I got for it when it was done while enron's stock was plummeting the retirement accounts of enron's rank and file workers were frozen we were frozen out of our accounts it was right about $32 I believe and over

that time from when it was frozen to when it opened up I think it went down to 9 and we could not access it and what came out later that was so bad was the fact that Uh kinlay and Skilling and all the top people were moving their money then but we couldn't the Insiders had sold off a billion dollars of their stock compared that to the lineman who worked for a state old utility company for most of his life put away money each month and what's he have to show at the end of the

day for his years of hard and decent labor he gets a big goose egg and Pie is out in Hawaii somewhere with $350 Million in the bank that's wrong there're still to this city a layer of anger and upset I am still doing counseling 3 years later with some families with some of those who are most reflective it's gone to a deeper layer and they are looking at the corporate culture itself in this country you know you can gain the whole world and all the Trinkets and all the trophies of the world the corner office

and all the perks and you really can Lose your soul in the midst of this on January 25th 2002 7 weeks after the Enron bankruptcy Cliff Baxter committed suicide with the media hounding him because he was mentioned in my memos and the fact that he had been sued civil because he'd cashed in for about $30 million worth of stock I guess it all came crashing down on him I think Cliff's suicide note tells it all you know which where there was once great pride now there is nothing [Applause] it's very hard for me to talk

about Cliff we were very close for many years and he was a wonderful wonderful man but a lot of who Cliff was was tied up in how he had succeeded at Enron it is hard to look at your life's work and say it's failed but you have to take a long cold look at yourself and say who was I who did I become and realize that you may have seen your Shadow Andy Fastow pled guilty to conspiracy to commit wire fraud he agreed to Forfeit $23 million in assets his sentence was reduced to 10 years

in exchange for testifying against other Enron Executives why Enron why not Worldcom or Tao or Global Crossings ultimately in Enron the Fatal flaw was a sense that brains and wiliness could outthink the way that the system eventually will work in 2004 Jeff Skilling was indicted for Insider trading and conspiracy to defraud investors pleading innocent he paid his attorneys a retainer of $23 million to defend him inran should not be viewed as an aberration something that can't happen anywhere else because it's all about the rationalization that that you're not doing anything wrong we've involved Arthur Anderson

we've involved the lawyers the bankers know what we're doing there's a sense the the diffusion of responsibility everyone was On the bandwagon and it can happen again enron's accounting firm Arthur Anderson was convicted of obstructing justice with its reputation for honesty destroyed America's oldest accounting firm fell along with Enron and 29,000 people lost their jobs enron's shareholders are suing Enron and its banks for $0 billion Ken L was also indicted for conspiracy to commit fraud his attorney Maintains that no one has been hurt more by the Enron bankruptcy than kenl to show up this morning

with today's arrest of Ken L the top Echelon at Enron has now been called to account for their crimes Mr you have anything to say Sir little later today looking at Enron is like looking at the flip side of so much possibility because like most things that end terribly it didn't start out that way it Started with a lot of people who thought they were changing the world and over time they became victims of their own hubris victims of their own greed and so it's like taking so much promise and possibility and looking at it

in a mirror and seeing the flip side reflected back at you I think the larger lesson was what Enron asked of its employees which was ask why and you know I I didn't ask myself Why enough I didn't ask managers why enough I didn't ask my colleagues why enough [Music] why [Music] [Music] why [Music] I sh your heart to the trunk man baby for a buck for a buck if you're looking for someone to P you out of that ditch You're out of luck you're out of luck sh is sinking the ship is sinking the

ship is sinking there Des a in the Boiler Room the poor the lame the blind who are the ones that we kept charge Killers thieves and warriors God way God God on business business taking up the T with the shov and the back it's a job it's a job part Mo Rising with the plag and the front to the B them M it's all over it's all over it's all over and there in the bo room the PO the lame the blind who are the ones in captain in charge Killers the lawyers conate conate conate

business [Music] [Applause] [Music] business God damn there's always such a big temptation to be good to be good there's always be chatter in the most TR baby it's a deal it's a deal [Music] come business business your your business business I narrow my eyes like a coin so baby there ring [Music] ring on [Music] [Music] bussiness