"We are the good guys. We are on the side of the angels."

Jeffrey Skilling
former CEO of Enron

To Lowell Bergman in a documentary for Frontline


I worry about imperial storm troopers. Their plight has been on my mind since the early 70's when I saw the first Star Warz movie, but I've been able to live with it till a couple of years ago.

What makes someone sign up for the storm troopers? Why would you join an army whose leader is known as the Evil Emperor? Despite the cool alliteration and the neeto double-E initials, isn't the term "evil" a tip-off that your loyalty is misplaced?

With their leaders possessed by the notion the universe is best if everyone thought what they did, what's going through the mind of your average white-plastic-adorned low ranking trooper? Are they compelled by the belief their cause is just? Perhaps they're feeling they're on the winning side, no sense in fighting the inevitable, and that after they use the Death Star to obliterate all the other beings in the universe, things will be great for them.

Maybe a storm trooper who's standing around guarding a shipment of blorglegorp will let his mind wander to the day Peter Cushing blows the last inhabited planet to dust, and then like a kid in an empty swimming pool, will dream of how he'll revel in the freedom of not having to share the whale floaty with anyone.

Maybe you believe they're clones--mindless, soulless automatons. Like orcs. Sub human, barely living matter who turn back to mud when they're killed.

I tend to believe that if the universe was entirely a clockwork, unintelligent mechanism, there'd be no beings like us. My own existence makes me believe in it, and the existence of the master soul from whom we have all come. And so I believe in the inherent goodness of all men, and the capability of all men to impose great love upon the world.

So I believe imperial storm troopers are soulful beings. Maybe they were drafted. Maybe they volunteered. No matter--at the end of the day they believe working for Darth Vader will be best for them and their children. Hell, even Darth Vader believed in the sanctity of life and the soul before he got turned around by Joe Evil for a spell. He begat Princess Leia and Luke Skywalker, and must have loved them as all fathers love their children. Even when he met Luke in the second movie, he was compelled to try to bring his son to the dark side, because he thought it would be a good thing for both of them.

But in the end, we movie goers know that if Darth Vader gets his way, thing's aren't going to be good. Even Darth will be fairly miserable, because like the kid who suddenly finds himself alone in the pool, what good is a swimming pool and a whale floaty with nobody to share it with?

All those poor storm troopers. All those poor wives and husbands and children who wind up alone in the universe after Evil has its way and all the purpose of everything is drained to zilch.

What the hell are they thinking? What does the Empire actually stand for?

The reason it's bugging me is I saw a picture in a book I'm reading. The picture was of a woman sitting on a curb in Houston, Texas, America. The woman was on the curb with her coat in her lap and her purse on her coat. She had a folder of papers beside the purse.

She was drying her eyes, but it wasn't doing any good because she was still crying.

She'd lost her job. There she was, like an imperial maintenance lady, busily shining the silverware in the Death Star's galley, when Luke Skywalker uses the force and blows her and her employers to bits.

She didn't know she was working for the dark forces. She didn't know the company that gave her the money to buy her coat would be soon reviled as the single most morally vacuous corporate entity ever to disgrace the history of American enterprise. She didn't know her company was single-handedly responsible for the near cataclysmic destruction of the fourth-largest economy in the world, the implosion of one of the world's most respected accounting firms, the evaporation of the pensions of thousands of workers who'd saved for lifetimes, the loss of faith in the people of the world for the American economy, and the destruction of tens of thousands of families.

She didn't know the big "E" in front of the building was the emperor's initial.

And now she was killed by the rebels who knew they were fighting evil.

It wasn't her fault.


You may think the story of Enron is a simple one. It's not. Though like all preceding stories of its type it can be distilled to the Greek mythological essence -- hubris is bad for everybody -- there are characteristics of the story which could only be enabled by the wheels of commerce which exist in the twentieth and twenty-first centuries. Euripides at light speed.

The men who started Enron weren't born terrible people. They did not set out to create an organization that had the end goal of bankrupting the economy of California, tossing millions of people out of their homes, closing schools and libraries, sending kids in the streets hungry.

They set out to build a company that moved and provided natural gas, when the business of natural gas was miserable. Natural gas was always viewed as a kind of nuisance commodity. It burned, but it got in the way of the oil. Later on, people realized it was much cleaner than oil. Better for the environment. If you have to burn a petrochemical, natural gas is one of the better ones, Earth wise.

They helped make natural gas burning electric plants a reality.

They made money in the process. Good money. They were aggressive. Did deals. Built plants in lots of countries. Tried to stimulate flagging economies around the world.

It was kind of a normal, OK sort of business where people sold things to other people. The company got big. It hired a bunch of other people who helped it get bigger.

The Enron guys, by any objective measure, were normal, well-meaning, ultra-hard working businessmen. They weren't looking for something for nothing. They worked their asses off and like lucky entrepreneurs, were rewarded handsomely for their efforts.

Another trait of the Enron guys is that they were, also by any objective measure, extremely smart. Some would say, brilliant.

The misapplication of their brilliance is one reason why in communist purges, all the learned people get lined up along a wall and killed. Really brilliant people scare the rest of us. Most of the time, we have nothing to fear from smart people. Say you were walking in a dark alley in Tikrit and you came across Albert Einstein carrying an AK-47. You probably wouldn't even think twice. You might even ask him if he needed any extra bullets.

On the other hand, if you were an employee of the state of California and had been investing in your pension program for the past 30 years and you came across Andrew Fastow holding a calculator in a shopping mall, you might be well served by notifying the FBI and the FASB and making a citizen's arrest.

How did it get that bad? How did such brilliant, hard-working, well-meaning people do so many bad things to so many people for so long without once thinking about it? While parallels to the Third Reich are neither warranted nor accurate it's hard not to consider the hypnotic vortex Enron created similar to that of a suicide cult or a doomsday religion for smart people.

And you might say to yourself, "That's what happens when you worship mammon," but the truth is these men did not worship wealth. Money was a side effect of their faith, and they were sure their faith justified their deeds, which never seemed to them anything but fair business.

No, they did not worship money. They are guilty of doing to the extreme what the mothers of all successful people insist they do: they believed in themselves. And it got out of hand. And then they worshipped themselves.


The Enron debacle is still under analysis, and so the nuances of the causes and effects are yet to be fully detailed. What can be said is this:

At some point, Enron stopped trying to sell, buy, build, real things as its primary business and began selling and buying "futures" -- the agreement to buy or sell or build something real in the future. Here's what futures are:

  • Futures are contracts to buy or sell something real at a later date. For instance, if you know you're going to need a lot of orange juice two months from now, say 20,000 gallons, and you're afraid the price of oranges is going to go up because winter lasted too long in Florida, you might buy a "future" to buy 20,000 gallons of orange juice at a today's price two months from now. If the price of orange juice goes up, it doesn't matter. You're locked in at today's price. Now the contract will cost you some money above and beyond the $1/gal, but that's ok, it's insurance. It's called time value.

  • The value of a "futures" contract can and WILL change over time due to the market conditions. So for instance, if you have a contract to buy 20,000 gallons of orange juice two months from now at $1 a gallon, and suddenly the price of orange juice goes to $2 a gallon because boll weevils have eaten half the orange groves in Florida, guess what, you have a deal going. Because you can buy the OJ for $1/gal, and sell it to someone else two months from now at $2/gal, and pocket the extra dollar per gallon. In fact, you don't even have to buy and sell the juice to do it. You can just sell the "future" contract to someone else, because it gives you the POTENTIAL to make money buying and selling the actual thing.
  • Of course, if you're holding a contract to buy 20,000 gallons of OJ at $1/gal, and there's a glut of juice on the market and the OJ suppliers start selling it for $0.50/gal, durn. Your contract is worthless. Who wants to buy OJ at $1/gal when you can get it for $0.50? Nobody. So now your insurance policy that you paid for in the form of a $1/gal for 20,000 OJ contract has just gone up in flames.
  • The market for futures is pretty liquid in some commodities. Liquid means it's easy to buy or sell the contracts. They get bought and sold on commodities markets. The people who buy and sell them often are in that particular business. For instance, an oil company will trade oil futures to "hedge" or protect themselves against changes in oil prices. (Sometimes people buy or sell futures who aren't in that particular business. It's not a good idea, generally.) Enron started a whole futures market in natural gas. They were deemed geniuses for doing that.
  • As a side note, the time value of a futures contract declines to zero the closer you get to the delivery date, which is the date upon which you will buy or sell the underlying commodity. So, if you have a contract to buy 20,000 gallons of orange juice on March 1st, 2004 for $1/gal, that contract may be worth, say, a couple thousand dollars in January when the price of OJ is $1/gal, because who knows, maybe the price of OJ will go up. If March 1st comes around and the price is $1/gal or less, the contract is worthless. Nobody's going to buy OJ for more than the going market price. If the market price of OJ is over $1/gal, it's worth whatever the difference is, but you'd better exercise it fast because on March 2nd, the OJ is delivered.

    Eventually, the guys at Enron figured out how to make nearly everything a futures contract, or something just like it. Oil. Electricity. Risk itself. They made money by trading on the future of something being built or prices going up or down. The emphasis of the company went from providing energy and getting paid for it, to playing games with the price of energy and making money on the fluctuations. In essence, they tried to turn themselves into a market.

    That's a business that's like a casino. A casino makes money as long as people gamble. Doesn't matter if you win, most times. The casino makes money as long as you're there wagering.

    The difference between Enron and an actual casino, is that a casino provides entertainment, at the very least. Enron provided nothing. It simply churned money from one place to another, keeping piles as they passed through from one hand to another.

    Stock brokers do the same thing. But stock brokers help investors.

    Enron did nothing for anyone but Enron. For as long as the whole world was not yet absorbed by Enron, nobody but them and the people in collusion with them were going to benefit from doing business with them. They owned jets. They took expensive vacations. Bought homes in Aspen and Telluride, Cannes and Tahoe. They bought strip clubs and bars. They had fun being them. Life was good.

    And by the way--it was very profitable being in collusion with Enron.

    They needed lots of help, and they got it from well-respected people, and well-respected firms, all of whom knew something weird was going on at Enron, but none of whom wanted to admit they smelled something awful coming out of Houston.


    It is not normal for a corporation in America to do what Enron tried to do as a business--but all big companies play some of those games as a matter of course. The Enron guys stepped "over the line" at some point. Nobody can quite say when or where, but by the time they were caught, they were doing very weird, complex, illegal things.

    The simplest way to think about it is this: money laundering.

    A drug dealer tries to hide the cash he's getting by sending his money through sources which become ever more legitimate. Eventually, money changes hands so many times, no one can tell where it came from.

    Now, you might think you know why a corporation would try to hide where money came from, but you may not. Only evil people would try to hide money, you think. But wait, not so evil people may try to do it too. (If you ever need a tax shelter, you will be doing the same thing, sort of.)

    American corporations are not inherently evil for one simple reason--there's no money in evil. Evil is too expensive and unpopular and eventually if people catch you being evil, you're out of business, and that makes you poor, which is no good.

    Selling good stuff makes money, and making money is why corporations exist.

    There are several schools of thought about why anyone bothers to make money. In the old days, guys like Andrew Carnegie had the idea of how to do something like make steel to build railroads and buildings. They built big factories which fueled something called progress. Progress was good because it meant schools and health care and generally a good life. Companies grew up being places people retired from after a lifetime of service. You worked at a place for 25 years, collected your gold watch, and the company would take care of you in your golden years while you played golf and watched soap operas.

    Lots of companies in Europe still have this attitude. The attitude is the company is bigger than any one of us, and it will out live us, but it's here to serve us while we make things other people want.

    Somewhere in the 1980's all that changed in America. Suddenly companies stopped being places you retired from. While it was always true, now all that mattered was that a company was the possession of the shareholders, and the purpose of the company stopped being that of providing a livelihood and retirement mechanism for people while returning dividends to shareholders, and started being a way for shareholders to realize capital gains. Companies were and still are bought and sold like any other commodity, all for the purpose of "generating shareholder value". Because any so-and-so can now go to Charles Schwab and with nothing more than a driver's license, open a brokerage account and start buying and selling stock on margin, anybody can be a shareholder.

    That's the way we justify it.

    At some point Enron was no longer making enough money selling natural gas or electricity to justify the stock price it wanted for its investors. To "generate shareholder value" you have to make your stock price go up. You make your stock price go up by making more money.

    But wait--it's slightly less straightforward than that. Listen to this: your stock price goes up, usually, not because you made more money, but because you have the potential of making EVEN MORE money next year than you did this year. It's called "growth". Your stock price only goes up when you grow.

    Once Enron staff realized they couldn't show growth selling energy, they started playing all sorts of games to make it look like they were CONTINUOUSLY generating more money. They made it look like they were growing continuously, and they would never stop growing, forever.

    Isn't that just the most ridiculous, asinine thing you ever heard? I mean, at some point, when the entire UNIVERSE is Enron, what happens next? What were all these smart people thinking?

    In normal life, we call these things Ponzi schemes or pyramid schemes. They're for suckers. Enron figured maybe most people were suckers. Because on one hand, the money was coming from big banks and corporations.

    But where did they get the money from? Guess.

    Normal people. People putting their $100 per week into savings for a rainy day. The "widows and orphans" as the stock brokers say--the people who can least afford to lose it.

    Enron pegged everyone as suckers who wanted to try to cash in on what seemed like a sure thing, provided courtesy of your local energy company.

    We must have been suckers--because if we weren't, none of this would have happened.


    Enron execs were thinking they were smarter than everybody else in the world, and so they'd figure out how to make this continuous growth thing, or an illusion of it, happen long enough for them to bankroll a wad of dough and bail out, leaving the mess for someone else later.

    They did things like this:

    Say they wanted a bank to loan them money. Say a billion dollars.

    Most banks want INTEREST on their money, meaning you pay them back more than you borrow. This is totally normal. If you're a business and you borrow a billion dollars, you can't just tell the stock market you now have a billion more dollars, because they know it came from a bank and you have to pay it back with interest. It's actually a liability--meaning it subtracts from the value of your company. In a very simple minded way, your stock price should probably go down if you tell people you've done this.

    The Enron guys knew they needed more money to make up for the fact their energy businesses weren't growing, so they knew they had to start some new business sooner or later. So they'd borrow it, but hey, that would make the stock price go down.

    SO they'd try to hide the transaction. They'd go to a bank, and have the bank set up a "fake" little company somewhere, say on Turks Island in the Caribbean. They'd sell, say, a gazillion cubic feet of natural gas to fake company for a billion dollars. The bank would give Enron a billion dollars through the fake company. At the same time, Enron would buy a futures contract to buy a gazillion cubic feet of natural gas from the fake company for a billion dollars plus a bunch more, that happened to be the same amount as the interest they would pay if it had been a loan.

    The natural gas goes nowhere, because it just gets sold and bought back by Enron. Enron gets the billion bucks and pays it back with interest.

    What's the big deal? Seems ok.

    The big deal is that it doesn't go on the books as a liability. They've effectively hidden a billion dollar loan from the investors who are buying their stock. This is illegal. You're not allowed to not tell people where your money is coming and going if you're selling stock on the open market. The reason is that people have no idea what they're buying if you do that.

    So what happened to CalPERS, the Pension Fund for the state employees of California, is that their investments with Enron were all made under false pretenses. And if fact their money was used to cover up Enron abuses.

    That's illegal. You should go to jail for doing things like that. People do. They were eventually caught, and they're all under prosecution now.

    The heinous, and evil things they did that will send them to jail are much more convoluted and damaging than the simple scheme I've outlined here.

    And you would be within your right mind to say--wait: didn't you just say a BANK had to set up a false company to help them do that scheme?

    Yuppers. Think Citibank. Think Chase Manhattan. Chemical Bank. Credit Suisse First Boston.

    And WAIT--wouldn't they get audited every year by a big, respected accounting firm who would work in the public interest and uncover these shams, exposing them to the whole world? Wouldn't the brokerage houses smell something rotten and stop recommending Enron stock?

    Yup. Think Arthur Andersen. Think Goldman Sachs. Think Morgan Stanley.

    And wouldn't their board of directors have to know this stuff was going on, and in the best interest of the investors and the public, stop this from happening.

    Yup. Enron's board took a vote to exempt Andrew Fastow from the company's code of conduct in order to allow him to execute a plan that fundamentally robbed Enron shareholders to his own benefit (and his family's). In fact, they did it twice.

    Holy shit, iceowl, so the banks and the accounting firms and the stock brokers and the directors on the board--they all knew this was happening and nobody said a single thing??? Has the whole freaking world gone insane?

    Yes. This is why the stock market crashed and the whole world was plunged into an economic recession. Nobody knew who to trust anymore. And then we found other companies were playing these games, maybe to a lesser degree, but it was going on in Tyco and WorldCom, and others. Huge companies betraying the public trust that crumble under the weight of corporate corruptions and take giant chunks of societies infrastructure with them--this is why we've been out of work these past four years. This is why we can't retire and states like California went from running huge budget surplusses to deficits that are bankrupting entire school districts, fire departments, police forces.

    Down into the sucking black hole Enron created went budget surpluses and jobs. And along with them went Arthur Andersen. The entire firm with a hundred year history, toast. Arrests at Credit Suisse nearly shut down the place.

    You say, "My God. How will we ever get out of this mess if nobody in business can be trusted anymore? Who will light our homes and pipe us water and keep the roads in repair and grow food for our babies if every single person in the industrial complex is complicit in this sort of illegitimate behavior?"

    You tell me. I just live here.


    My theory for what makes people do what the Enron execs did is called: The Cult of Personality. I have witnessed it. I may have suffered from it myself at one point or another, which is why I feel I can speak of it with some degree of accuracy.

    The cult is exclusive. It's secretive. It's composed of exceptionally smart human beings who are not only driven to financial success above all other human needs, but have the will to shut off the rest of a normal human existence to focus solely on career. The cult will only allow members who have adopted this code. Once admitted, membership is retained only through continued performance.

    Cult members never make mistakes. When things go wrong, they redefine what's right.

    What drives the cult is not simple Gordon Gecko style, Wall Street greed. That kind of greed drives drug dealers and small time crooks. Their motivation is more akin to the high-profile jewel thief. The Ocean's Eleven scenario. Ultra-smart crooks outsmarting electronic security. Outsmarting the owners of valuables with cunning psychology and quick thinking.

    But different from the thief, who knows he's outside the law and plays the odds, the cult of personality convinces itself it is doing nothing wrong. This is business. Hurting another business is not wrong, it's competition, and winning is good for everyone. It creates jobs and strengthens the economy. It benefits employees and their families, and those who lose their jobs because they work for crushed competitors may come and work for the cult and join the party.

    After one's hard work brings him success in the form of millions of dollars, it's hard to believe you were ever wrong about anything. The infection pervades the rest of your life, because there is no rest of your life. Cult members are seldom home, because they're always on business trips. They frequently have romantic affairs with co-workers who share their lack of family time, and those trysts lead to divorce.

    Once I was in a meeting with a man named T.J. Rogers who started a successful semiconductor company called Cypress Semiconductor. We were trying to sell him software. He was worried we weren't going to be the type of people he wanted to work with, because we might not be as driven as he and his people were.

    He showed a picture. It was like a family portrait. It was his whole executive team out on vacation together, sans families.

    He said, "This is my team. All twelve. When we started together, we were all married. Now, none of us are."

    That's how the cult thinks. All will be sacrificed on the altar of "shareholder value". Wives. Husbands. Children. Morals. Gone.

    Money is now the food that feeds the ego. It must be right if they're giving you money. You must be talented if they're giving you money. You're as talented as you think you are--maybe even more. Did you know you were THIS good? Have you ever seen what a million dollars will buy? Want another million? Nobody argues with someone who's banking millions, and you're ready to trounce anyone who tries.

    People don't know you anymore. And by the way, you don't need those old friends. After you've brought them to the country club a few times, it's getting boring. They can't keep up with your conversation. It's embarrassing for both of you so you may as well get new friends. Besides, who has time for friends anyway?

    Your subordinates at work begin to fear you. They know you're becoming ruthless. They cower when you walk past. They want to be where you are. You're the king, all powerful. You have the eye of the tiger that makes your investors happy you're on their side.

    Once you're ready to toss out your wife and kids so you can spend more time on business trips sleeping with the VP from across the hall, how much further do you think you have to go to get to the point where you can justify to yourself manipulating the structure of the power distribution system in California to meet your needs?

    Not far. And so we suckers in California were sucked clean of about 8.7 BILLION dollars by Enron who created false energy shortages to raise electric prices to about a HUNDRED times what they started at. Because we deserved it. Because we weren't as smart as the cult, who felt they were driving the prices to where they SHOULD have been all along.

    But electricity is infrastructure--and one you mess up infrastructure, the dominoes fall. Raise electricity prices, everything goes haywire. Businesses can't keep the computers turned on so they raise their prices to their customers. Factories can't afford to make stuff so they raise their prices to their customers. Hospitals can't keep on the lights in the operating rooms, so they send patients somewhere else. Gas stations have to raise gas prices because their electric pumps are costing them more, which raises transportation costs, which spirals out of control.

    Because the Enron guys believed they were smarter than anyone, they nearly wrecked the state of California. Millions of people. Thousands of businesses plunged into the darkness of the cult's self-admiration.

    And did anyone ever once imagine what would happen when the entire state of California went bankrupt, taking with it the entire economy of the United States, and so the economy of the world? They needed so freaking much money to present growth to the stock market, only the entire budget surplus of California was good enough to keep the pyramid scheme alive.

    Now we know exactly why the Evil Emperor needs to turn us all away from the force.

    They were Star Warz fans. They called it project Death Star. They thought it would be cool. Nobody on earth would be smart enough to figure it out.


    The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron. Bethany McLean and Peter Elkind
    24 Days: How Two Wall Street Journal Reporters Uncovered the Lies that Destroyed Faith in Corporate America. Rebecca Smith and John R. Emshwiller

    "What's the difference between the Titanic and California?
    When the Titanic went down, at least the lights were on."

    Jeffrey Skilling
    While he was CEO of Enron
    During the Enron-induced California energy crisis.


    The "gaming of California's energy markets" was only one of the deceptive practices in which Enron engaged. While Enron officials have been convicted for many other crimes, the architect of the California Power scheme, UC Berkeley grad Tim Belden, pled state's evidence and received reduced sentencing in return for his testimony against his former co workers.

    And it is absolutely true that while Enron may have been the first to exploit holes in the system for its gain to the detriment of the people of California, other companies followed suit, until the bill to the pirates ran up to $40 Billion. Most of this ill-gotten gain has never been, and will never be recovered. As a result, though, the state's budget surplus was consumed and with the ensuing recession the state of California faces one of the largest budget crises in its history, one which resulted in the ousting of the governor by special recall ballot, and the installation of an action movie star in that role.

    However, with several financial "holes" plugged in the system, we in California have miraculously not been subject to the power shortages of 2001/02, which Enron claimed were inevitable consequences of our own failing infrastructure. Somehow, with Enron eradicated, things are indeed better.

    To this day, Enron's senior officers claim they did nothing wrong. Despite the days of evidence shredding, the convictions of Enron employees and co-conspirators, the ruination of Arthur Andersen, Jeffrey Skilling firmly believes there was a "vendetta" against the company, and it was the public's rabid jealousy about Enron's success that "brought down an excellent company."

    And this only intensifies the dismay that the cult of personality will not dissolve in my lifetime.

    Log in or register to write something here or to contact authors.