Murillo

Alexa Murillo
Mr. Constantini
English 10
May, 29, 2018

Enron

Last minute news: Fortune 500’s ‘Most Innovative Company’ for 6 years in a row turns into the
national scandal for one of the biggest accounting fraud cases in the country. Enron set the record for the
biggest bankruptcy in the history of the United States, leaving 4.000 people unemployed. Enron was the
perfect American company that was doing exorbitantly great and was on a roll winning millions daily. It
took a while until someone called it too good to be true! Was the Enron scandal the work of few bad men
or the dark shadow of the American dream? Definitely, this scandal was the making of a few bad men at
the top of the pyramid of the company who put their personal interests before ethics at the expense of the
company and its employees.

Interview: When did you start realizing that the company was a fraud?
There were several clues giving an idea that something was out of order. Among these clues
were: There were a certain level of fear and/or bullying pressure that existed on investment banking
industry analyst in questioning Enron’s business model fundamentals, afraid of the consequences of
questioning how does the company makes money. Theses consequences including discriminatory
behavior from the bank in which they work because of the risk of losing business. A public
acknowledgment of not understanding the business model of the company that was voted seven years in a
row as the most innovative company in America. And fear of issuing an analyst assessment or report in a
different direction of the rest of the reports issued by another analyst in the industry. There were was
never enough cash generated by the company to fund the company growth. A continuous processes for
taking on additional debt, a continuous process of seeking to maximize debt for every new project. The
incentive for executives were aligned on to taking an increasing risk with every project because
executives received large bonuses in cash, shares or stock option for every expected “accounting profit”
for each new project executed regardless the risk, term and the real profitability of the project. As the
Enron share continue to rise as well as the rest of the stock market, there were huger amounts of profits
for Enron’s executives in selling Enron shares of stock options in the market. These created a vicious
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circle of getting on more riskier and complex projects to generate bigger bonuses and feed news to the
market that in turn with push up the price of the shares. Creative accounting, marked to markets
accounting, works perfectly for commodity trading. However, pushing marked to market accounting into
energy projects does not necessarily reflects the risk of all variables involved in them. Hence, this type of
accounting overstated real profits. Arthur Anderson the premier accounting firm of the USA supported it.
In summary, corporate and executive greed plus the collateral effects of 9/11 on risky assets ​(Murillo,
2018).

Since day one Enron was a fraud; it was a fraud that on paper looked completely legit and
trustworthy. The people at the top of the pyramid in Enron decided what profits they wanted to report,
they invented numbers for the rest of the world to think they were doing really good so that people would
invest in the company and they could profit from it. Regardless of how much profit there really was,
company stocks started going on the rise. Jeff Skilling was the mastermind behind the billion-dollar idea
of fraud. He had the bright idea of selling commodities that didn’t really exist, but in the end, it was a new
way to make more money without much effort. Along with other executives in Enron, they created a
culture of competition where they incentivized people to step on other’s throats in order to get a bigger
bonus and keep their job. “Enron has been described by many employees as having an absolutely
cutthroat cultures that pitted one employee against another” ​(Fusaro & Miller What went wrong at
Enron, 2002)​. They implemented the 15% Solution; this was basically firing 15% of the employees every
year where employees had to vote on who to fire. In this highly-competitive environment, Enron traders
would resort to all kinds of underhanded dealings in order to make money and keep their high-paying
jobs. “An ex-trader of Enron Corp. said “I was on my way to my boss’ office to discuss my compensation
and he would tell me if I stepped on somebody’s throat on the way my compensation would be doubled,
so what did I do, well I stomped on the guys throat” ​(Alex Gibney, "Smartest guy in the room ", 2005)​.
“Enron's traders were the super powerful high school clique that even the principal doesn’t dare to reign
in,” said Bethany McLean. They took Jeff Skilling and Ken Lay’s belief of the free market and turned it
in into an ideology​ (Alex Gibney, "Smartest guy in the room ", 2005)​. Besides, Enron would post their
stocks everywhere so that people would see how good there were doing and more people would invest in
Enron stocks. “You were surrounded by the health of the company... you were consumed by it” ​(Alex
Gibney, "Smartest guy in the room ", 2005).

Since the very beginning, Mike Muckleroy told Ken Lay that going into the oil business could be
risky because “you could lose 10 times your original investment” ​(Alex Gibney, "Smartest guy in the
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room ", 2005)​. Ken Lay didn’t care and disregarded his comment. However, Enron Oil always won, this
was no ordinary situation for a company; clearly, something illegal going on. Later on, they realized that
Enron Oil was winning money and not losing. They didn’t contemplate the possibility that their traders
could act wrongfully. “They had drawn in 90 million dollars in the previous five days,” said Muckleroy
about two traders” ​(Alex Gibney, "Smartest guy in the room”, 2005)​. The next day the real books came
to light by Mastrolenni and they realized that the traders had gambled away all of Enron’s reserves. To the
company’s benefit, Muckleroy acted fast and “bluffed the market and managed to save the company”
(Alex Gibney, "Smartest guy in the room", 2005)​. Mike Muckleroy was suspicious with the steady
high profits even before they had drawn that 90 million dollars later on after this Mastroeni and Borget
went to a meeting where they presented falsified records, phony books and then they admitted that they
had drifted company profits into personal accounts. Ken Lay didn’t fire them or even punished Instead,
Ken Lay just sent him a letter saying “keep making us millions”​(Alex Gibney, "Smartest guy in the
room", 2005)​. Later the police convicted them of fraud.

Jeff Skilling found a new way to deliver energy. He decided to create a stock market for natural
gas so they could transform energy into financial instruments that could be traded like stocks and bonds
(Alex Gibney, "Smartest guy in the room ", 2005​). This would take Enron to new levels of competing
in the energy industry and Ken Lay was happy about this. Jeff Skilling had had the best million dollar
idea that he could ask for that made Enron the largest buyer and seller of natural gas in North America
(Alex Gibney, "Smartest guy in the room ", 2005)​. Enron made a campaign that captured all stock
analysts’ eyes so that the stocks went even higher, and the people at the top would cash in. They
continued presenting the numbers they wanted the market to see for their benefit. Even though Enron was
losing money they reported that they were having a lot of profits. As long as you can keep the perception
up it is the reality. Skilling was “caught up in maintaining the illusion that Enron was, indeed, the World’s
Leading Company” ​(McLean & Elkind, The smartest guys in the room: the amazing rise and
scandalous fall of Enron, 2013).

Everyone believed Enron was a respectable, honest company, so no one investigated if what they were
reporting was real. Everyone believed in them, why would you not?

Interview: Do you think that it was only them or was the government inside the job?
No, but I think the lines were very blurred and thin. Ken Lay, Chairman and President, and other
Enron’s executives were at the time close advisors to President Bush on energy policy and deregulation.
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Thomas White, President, and CEO of Enron Energy Services, was at the same time US Secretary of the
Army. There was a very close relationship between Enron and Dick Cheney, Vice President of the US,
Chairman, as well as President of Halliburton, large oil & gas services company very closed to Enron Oil
and Gas operations. ​(Murillo, 2018)

“Government is not the solution to the problem; government is the problem”​ (Alex Gibney,
"Smartest guy in the room ", 2005)​. Ken Lay knew he needed to set apart the government from the
industry. A couple of Texas- oil men shared his views and knew how to get the government out of the
energy business ​(Alex Gibney, "Smartest guy in the room ", 2005)​. Ken Lay was a close friend of
George W. Bush’s father but when Bush was governor of Texas “he was only too happy to make phone
calls for him”. “George W. Bush senior helped secure billions in govt subsidies for Enron International
and he helped promote Ken Lay as Deregulations Ambassador at large” ​(Alex Gibney, "Smartest guy in
the room ", 2005)​. Even traders and people within the Enron community dreamed about Ken Lay
becoming Secretary of Energy. When his friend Bush became President he helped in an indirect way so
that California’s attempt to regulate energy prices didn’t go through. Even the FERC didn’t get involved.
They were even behind Arnold Schwarzenegger winning governor in California, since the other candidate
who was going for reelection, Grey Davis, was against Deregularization.
Before Skilling joined Enron he asked for one specific condition and it was that he could be
allowed to use a certain kind of accounting strategy that is called “market to market”. Skilling had a very
Darwinian view of how the world worked. He said that money was the only thing that motivated people
and because of that, he would do anything to get money, and lots of it. “I think that Jeff Skilling is, in the
classic sense of the word, a guy that is incontensenly brilliant, but he is also a guy who is radically
different as he portrays himself; he shows himself as a very tightly monitor risk and in reality he was a
gambler and he would gamble huge sums money even before he was 20 years old by making wild bets in
the market” ​(Alex Gibney, "Smartest guy in the room ", 2005)​. When Skilling joined Enron he didn’t
feel the normal constraints that are usually present in the gas business since he had never run any business
and he had never worked in the industry ​(McLean & Elkind The smartest guys in the room: the
amazing rise and scandalous fall of Enron, 2013).
Lou Pai was another of the high positioned guys at Enron. He joined Enron in 1989. At the
beginning, Skilling didn’t like him and wanted to fire him however later he proved himself and Skilling
even made him CEO of Energy Services. He became untouchable. Skilling gave him complete freedom to
run trading as he saw fit. He defined what Jeff Skilling looked for in an employee. “He was the architect
of Enron’s trading operation”. Skilling basically loved what he was doing for Enron, but the rest of the
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employees saw him as “an enigma and a terrible man to cross.”​ (McLean & Elkind, The smartest guys
in the room: The amazing rise and scandalous fall of Enron, 2013)​. He was a fierce corporate warlord
and who would take credit for other’s achievements, he would ridicule others behind their backs,
undermine them in front of colleagues, he would simply ignore orders he didn’t like. “He was very good
at eliminating anyone in his way”. He was also known for his infatuation with strippers. He made a lot of
money and later decided to leave the company; nobody really knew why. He left Enron with more money
than anybody; around 250 million dollars because he sold all of his Enron stocks.
Cliff Baxter had various important positions in Enron before he became the Vice Chairman in
2000. “He was extraordinarily talented at negotiating and closing Deals, but he was manic depressive, he
would tell Skilling everything he thought... he was personally closest to Skilling” ​(Alex Gibney,
"Smartest guy in the room ", 2005)​. Because of their close relationship, Skilling and Baxter had a
couple of clashes about different issues in which Enron was involved. Many saw Baxter as the
‘conscience of the company’ ​(Fusaro & Miller What went wrong at Enron, 2002)​. So a couple of
months after he was assigned as Vice Chairman he decided to resign, with the excuse that “he wanted to
spend more time with his family” ​(Fusaro & Miller What went wrong at Enron, 2002).​ The people
who really knew him knew this was not completely true; it had been two weeks after they announced their
earnings and Baxter was not comfortable with it. If there was someone who knew what Enron, or
specifically Skilling was doing, it was Baxter, but he wouldn’t live to testify. He had agreed to testify,
however, a couple of months before he committed suicide, or at least that is what it looked like. He left a
note to his wife Carol, Certainly, there were many people afraid of what he would say when he testified so
the mystery remains if he really committed suicide or someone made it look that way.

Interview: Do you think that Cliff Baxter was killed or was it a suicide?
I knew him personally. He was my first boss when joining the company. He was very smart and
hardworking person that cared a lot about his reputation and ethics. He quit Enron a couple of years
before the crash. I guess he was the first high-level executive concerned and worried about the ethics and
business behavior within the company. Some say that watching the whole Enron crash effect drove him
into a clinical depression and personally associated or compared the Enron crash to his reputation or
legacy may even turn him to being accused of child molesting regardless that he left long before to avoid
staining his image, and all this drove him to suicide. Other people say that considering his military and
executive career, his being publicly outspoken about not agreeing with the ethics and business behavior of
Enron and then leaving the company with such a deep knowledge of what was really going on, led him to
his assassination. I honestly believe he was murdered. He had a lot of first-hand information and evidence
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of dealings and decision making that went on. He could have been the best witness the DOJ could have
had in the case. ​(Murillo, 2018)

Andy Fastow marked the beginning of Enron’s downfall. He was the Senior Director of the
Continental Bank in Chicago before becoming the CFO of Enron in 1998. He was a very low key guy,
most of the company employees never know who their CFO was. He was hired because Enron needed
cash and many financial institutions, including banks, needed gas, so some alliances were made that were
perfectly legitimate. He was the one who created SPEs where they would receive the money Enron
needed in exchange for gas deliveries in the future. “This would be the same SPEs that would put $40
million directly into his pockets and would later set the stage for Enron’s downfall”​ (Fusaro & Miller
What went wrong at Enron 2002)​. Bethany McLean investigated Enron's financial condition, she asked
How Enron made its money. Skilling evaded her question and got really agitated and said it was very
unethical. Fastow once said to Bethany McLean, the reporter, “I don’t care what you write about the
company just don’t make me look bad”​ (Alex Gibney, "Smartest guy in the room ", 2005)​. Fastow was
seen as the man behind the “creative accounting and the shady deals with partnerships.” According to
him, Fastow acted with the full knowledge and approval of Enron’s Board of Directors. “In the beginning
of 1993, Fastow created hundreds of special- purpose entities (SPEs) that were designed to transfer
Enron’s debt to an outside company and get it off the books” ​(Alex Gibney, "Smartest guy in the room
", 2005)​. SPE after SPE was created, each one trying to cover the losses of the deal before, but it got to a
point where the losses were too big. They needed their stocks to keep rising to cover the losses or they
could ask the Andersen Accounting Firm to mask stock prices. Andersen didn’t agree to this and Fastow
knew they would have to report losses, but by that time it didn’t matter much to him because he had
already gotten his money out and into his personal accounts​ (McLean & Elkind The smartest guys in
the room: the amazing rise and scandalous fall of Enron, 2013).

In 1993 Enron was partnered with the California Public Employees’ Retirement System
(CalPERS) in a $500 million dollar joint venture investment that was called Joint Energy Development
Investment (JEDI) ​(Barreveld, The ENRON collapse: creative accounting, wrong economics or
criminal acts?: a look into the root causes of the largest bankruptcy of U.S. history, 2002).​ Since it
was a joint venture Enron did not consolidate JEDI into its financial statements. They would in fact only
report the gains and losses but they would not report their debt on the balance sheet. In 1997 Enron
wanted CalPERS to invest in another company so it needed to redeems CalPERS´interest investment. In
order to do that, Enron needed a new partner or else it would need to consolidate JEDI into its financial
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statements and they did not want to report their debt. That is when they got together with Michael Kopper
to form Chewco, which would be the company that would buy CalPERS´interest. They still needed a third
investor who had to be owner of at least 3% of equity; they did not find anyone and ignored the rule. They
rushed the formalities and paperwork to get it done before CalPERS would demand more money. Enron
got away with not consolidating Chewco or JEDI for that matter. All of this did not comply with the
non-consolidation rules of the SPEs, but it is still unknown whether it was because of a mistake of an
Enron employee or an Andersen employee. Later in 2001 when Enron and Andersen reviewed the
operations in this transaction they realized it did not comply with the rules so this is when in November
2001 Enron declares it would consolidate Chewco and JEDI’s retroactive to 1997, causing a massive
reduction in Enron's reported net income and sending its debt through the roofs​ (Barreveld, The ENRON
collapse: creative accounting, wrong economics or criminal acts?: a look into the root causes of the
largest bankruptcy of U.S. history, 2002). ​“Over the course of three years, Kopper received between
$1.5 and $2 million in management fees from Chewco, some of which was kicked back to Fastow in the
form of checks written to members of his family.” Andy Fastow was the one who pushed very hard not to
consolidate because he was cashing in from Chewco. “Kopper also received around $2 million in what he
reported as ‘management fees’ which he never described what they were related to” ​(Barreveld, The
ENRON collapse: creative accounting, wrong economics or criminal acts?: a look into the root
causes of the largest bankruptcy of U.S. history, 2002)
In March 2001 Enron bought Chewco out of JEDI. Kopper had negotiated some terms of the sale
with Andy Fastow. In this time Kopper had some interests in both LJM1 and LJM2. Kopper had invested
$125,000 in Chewco back in 1997 for which he received over $10 million from Enron ​(Barreveld, The
ENRON collapse: creative accounting, wrong economics or criminal acts?: a look into the root
causes of the largest bankruptcy of U.S. history, 2002)​. In 1999 Enron, with the Board on board, had to
partnerships which Andy Fastow was the manager and the investor. This allowed Enron to increase its
financial results by more than a billion dollars, and thus making Andy Fastow richer in his investment by
the tens of millions. LJM was also used by Enron to get rid of assets it wanted to keep off the books, they
would sell it to LJM. These transactions were flawed. Someway LJM always had a profit on every
transaction, even when the asset’s market price had declined in market value. Even though Andersen had
to approve all these transactions these were accounted incorrectly ​(Barreveld, The ENRON collapse:
creative accounting, wrong economics or criminal acts?: a look into the root causes of the largest
bankruptcy of U.S. history, 2002).​ “Fastow had created hundreds of companies to perform a magic
trick: they would prop up Enron’s stock my making its debt disappear”​ (Alex Gibney, "Smartest guy in
the room ", 2005).​ Fastow would be able to conjure $45 million for himself with these magic-trick
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companies. Jeff Skilling met in 2000 with Jeffrey McMahon, who was Enron’s treasurer. He reported
directly to Fastow. McMahon approached Skilling with some concerns about the dealings with LJM
partnerships and Skilling disagreed because he and the Board had reviewed the business plan over and
over and signed off on it since it looked very legitimate and honest ​(Barreveld, The ENRON collapse:
creative accounting, wrong economics or criminal acts?: a look into the root causes of the largest
bankruptcy of U.S. history, 2002). ​“Andy Fastow had gone rogue somewhere” and Jeff Skilling, the
Board, and Andersen had not realized it ​(Alex Gibney, "Smartest guy in the room ", 2005).
In 1999 Enron announced that they would be offering the services of trading bandwidth. This
seemed like a pot of gold at the time when everyone was demanding speedy internet connections
(Glasner, 2017)​. Everyone was hoping and assuming that broadband would be traded like energy and
natural gas, allowing Enron to make millions. The second part of the business plan was delivering content
for home viewing, like what we know today as “pay-per-view” or “on demand”. They would transmit and
offer these videos, movies, channels or sports games through their broadband. It was the perfect idea.
Sales were going over the roof making $500 million a year from Enron Broadband Services (EBS). Jeff
Skilling made sure this made the news and that there was publicity about it so it would attract more clients
and more sales in stock. However, EBS started presenting problems. The technology required was still not
around in the market, engineers were struggling to with video streaming and with programming the code.
Another big problem was that Enron was not the only one in the market trying to develop this type of
technology that would allow millions of users to stream and build a network of high-speed broadband.
“The broadband business was a complete meltdown” ​(Alex Gibney, "Smartest guy in the room ",
2005)​. “Two-and-a-half years later, with bandwidth prices at a fraction of their former highs, and Enron's
energy and other trading business in near-ruins, bandwidth traders have lost their optimistic fervor”
(Glasner, 2017)​. The business was on its knees because of the lack of time. Skilling had declared that
EBS would not lose more than $60 million in 2000. They were running out of time, and even though they
were very close to cracking the code and having the perfect technology to deliver the service, Enron was
close to having lost $59 million. “On Thursday, shares of Enron (ENE) nose-dived 41 percent to 36 cents
a share, after rival Dynegy ditched plans to acquire the ailing firm.” This rejection affected Enron
enormously deteriorating its stock price, which caused speculations that Enron would be forced to file for
bankruptcy​ (Glasner, 2017)​.

Interview: What was like to be on the Bandwidth Hog?

It was very exciting to be a part of creating a completely new business model that did not exist
anywhere else. Back then, it was something difficult to understand since there were no apps and content
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that required more than the 24kps bandwidth. Nowadays, 18 years after, we expect at the very minimum
5Mps anywhere. This is 250 times the expected speed back then.​ (Murillo, 2018)

Interview: Did you feel guilty when you realized that what you were doing was wrong?
I suspected something was wrong, but we never knew for fact neither the extent of the damaged
this behavior would cause. I exchanged my views with colleagues, including Sherron Watkins, a
colleagues o mine in the Corporate Development Group of Enron International and who ended up being
the whistleblowers; Ken Rice who headed Enron Broadband Services and at one time my boss; and Bruce
Stram, one of the heads of Enron Energy Services and Energy Policy Advisor to George W. Bush.
(Murillo, 2018).

Why did the traders do what they did, was it their multimillion-dollar bonuses or had Enron found
a way to exploit a darker side of human behavior? “The Milgram Experiment has a lot to say about Enron.
I think people lost their sense of morality like Milgrim once you accepted the idea that behaving
inhumanly was OK you could do anything.” Milgram’s discovery was disturbing: 50% of the subjects
were willing to get shocked to their death as long as the commands came from a seemingly legitimate
source” ​(Alex Gibney, "Smartest guy in the room ", 2005).

On December 2000 Jeff Skilling takes over as CEO of Enron, he was the one who was really
running the show. By this time Enron’s profits were reaching the hundred billion ​(Alex Gibney,
"Smartest guy in the room ", 2005).
Enron ripped off California, selling energy to the state’s strapped utilities at over-inflated rates.
At the end of the Enron scandal 67 billion dollars investment were lost, 20,000 employees lost their jobs
and their medical insurance. Employees lost 1.2 billion dollars in retirement funds. Retirees lost 2 billion
in pension funds, Enron top executives cashed in 116 million dollars in stock. Enron was taking risks that
no sane person would be willing to take, something seemed off yet nobody really took the time to
question it ​(Alex Gibney, "Smartest guy in the room ", 2005).​ Enron was giving their executives
millions in bonuses, everything seemed to be going exceptionally good, except the bonuses were being
paid in company stocks. No employee had a problem with this since stocks appeared on the rise when in
reality Enron was struggling financially ​(Alex Gibney, "Smartest guy in the room ", 2005)​. This was
when Enron cynically and knowingly created the California electricity crisis of 2000 and 2001. Basically,
they realized they controlled the offer and demand of electricity in California and they used it to their
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benefit creating two massive blackouts that made electricity prices spike up. Between 30% and 50% of
California's energy industry was shut down by Enron for a great deal of the time, and up to 76% at one
point. The company drove the price of electricity higher by nine times (Corporate Narc, nd) making
electricity inaccessible to the average Californian​ (Alex Gibney, "Smartest guy in the room ", 2005).

After the first four months, Skilling was CEO he was ready to resign. He wrote a letter with his
resignation addressed to the Board with the date of April 30, 2001; he never sent it. As the months went
by the stock prices were going down, and not even because he said so, would they recover. On August 14,
2001, Jeff Skilling announced that he was leaving the company, after only serving for 6 months as CEO.
He said that he was leaving voluntary for personal reasons that involved his family that required his full
attention. When Skilling left he forfeited $20 million dollars and he had to pay a 2 million loan that Enron
had made to him ​(Barreveld, The ENRON collapse: creative accounting, wrong economics or
criminal acts?: a look into the root causes of the largest bankruptcy of U.S. history, 2002).​ A
resignation of a CEO in a company as big as Enron was never this sudden. This made everyone nervous
and it made many people suspicious of Enron. Was it because the stock price was sinking, or where there
other reasons for his leaving so abruptly? Skilling wisely started selling all his stocks recovering over $70
million dollars​ (McLean & Elkind The smartest guys in the room: the amazing rise and scandalous
fall of Enron, 2013)​. Today the company is linked to several illegal schemes, including instigating the
California energy crisis as a way to drive up utility prices at the expense of the American citizen. It was
Tim Belden who was the mastermind of Enron’s scheme to rise prices in electricity California. He was
sentenced for to 2 years of court-supervised release and paid 2.1 million dollars since he helped convict
senior Enron executives ​(Alex Gibney, "Smartest guy in the room ", 2005)​. They had built power
plants all over the world that had cost millions but profits were not going up, they were going down, so
power plants were deteriorating everywhere.
By this time the telecom industry was basically on life support,” this was when Jim Chanos, a
connoisseur who had researched the topic countless hours, started questioning the fact that Enron’s
telecom profits were blooming. Jim Chanos knew that something wasn’t right, how was Enron making its
money? He got more people asking questions, but they thought they were going crazy because all
directors and The President and Directors were all saying things were ok, so they thought they must be
crazy; even Chanos thought so. The more Chanos poked around, the more he realized Enron’s story didn’t
add up and that this was probably a company that was printing money​ (McLean & Elkind The smartest
guys in the room: the amazing rise and scandalous fall of Enron, 2013).​ Enron’s return on the
invested capital was as low as 7%. Their earnings were consistently growing however the business didn’t
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seem to generate much cash, which a company definitely needs to operate. The more he looked he
realized Enron didn’t have any balance sheets or cash-flow statements. They only filed the SEC reports a
month later, and this was the only opportunity to review Enron’s numbers. By this time Ken Lay and Jeff
Skilling were selling large parts of their shares daily. Enron’s debt was growing exponentially and almost
40% of its earnings were coming from selling assets and not from doing business​ (McLean & Elkind
The smartest guys in the room: the amazing rise and scandalous fall of Enron, 2013).

While the world was busy watching the television spectacle of 9/11, preparations were being
made to use 9/11 as an opportunity to shield Enron’s situation from the public. A company that overstated
its earnings by the billions would have many skeletons in its closet, and it was time to get rid of them
before they came to light. Executive Directors and the President of the company were taking company
funds and putting them in personal accounts.

Ken Lay went to Richard Kinder to ask for money to try to get out of the mess; he said no. After
that Lay went to Warren Buffet and did the same thing but he too said no. He said it was way too much
money and that there was not must hope to save the company ​(Murillo, 2018).

“On the day I left, August 14, 2001, I believed the company was in a strong financial position,”
said Jeff Skilling ​(Alex Gibney, "Smartest guy in the room ", 2005)​. He had seen documents and
discussed with others, and he was smart enough to predict the future. He probably thought he could get
out now and the company wouldn’t collapse for another year and a half, so he wouldn’t get the blame. His
resignal made so many employees very angry. After Skilling resigned Ken Lay took over as CEO. Many
employees had their entire pensions vested in Enron stock, Kenneth Lay advised employees keep their
Enron stock when the firm was crashing, and he was selling his own. While the employees were unable to
sell their stock, Lay and other executives were quickly selling off many of their shares. Andersen
Accounting Firm started getting rid of all of their Enron files. “The average severance was 4500 dollars”
and top executives were paid bonuses totaling of 55 billion dollars ​(Alex Gibney, "Smartest guy in the
room ", 2005).

They were not being ethical, not just because of stealing, but they were affecting millions of
people and consumers who depended on electricity and they were making millions of dollars at the
expense of the people. They were behaving inhumanely. Enron had a very poor ethical business culture,
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they were not serving right by their stakeholders, business partners, customers, and employees. Enron’s
bankruptcy affected many people all around the United States. In at the Enron scandal from the
retrospective viewpoint of history, essentially most of the problems faced by Enron derive from the
immoral and unethical actions taken on by the board of directors in their attempt to achieve personal
profits. In the end 15 guilty pleas, 6 convictions, 1 acquittal.

Interview: Do you think the Kenneth Lay was murdered, died of natural causes or was it a
coverup?
I think Ken Lay was very close to the White House, the Bush family and administration, the CIA,
and Dick Cheney. I think there were many domestic and international transaction in which Enron acted
with the support of the white house. It is hard to believe that he died of a heart attack since he was in very
good physical shape. The run marathons, did a lot of exercises, had at least one complete annual checkup,
and had a very healthy lifestyle. I think he was whether murdered or disappeared or got a new identity,
leaving in some other country. ​(Murillo, 2018)

Interview: How many people were in on the fraud?

I think that Jeff Skilling, Ken Rice, Lou Pai, and Andrew Fastow knew that they were taking on
very high debt leverage while maneuvering around accounting rules. I cannot say that this is a fraud but I
think that ethically all of them and maybe more had a fiduciary duty to preserve the value of the share or
the company along what it represented for the industry, employees and other shareholders. However,
greed pushes them to play within a very thin line between what is ethically and not that it is difficult to
see when all parties involved including banks, legal and accounting firms, and government were vested on
further taking a risk. It is like doubling down in Las Vegas roulette while losing. ​(Murillo, 2018)
 Murillo

Sources
Glasner, Joanna. “Enron: A Bandwidth Bloodbath.” ​Wired​, Conde Nast, 5 June 2017,
www.wired.com/2001/11/enron-a-bandwidth-bloodbath/​.
(Glasner, 2017).

Motion picture. (2005). United States: Magnolia Pictures. Retrieved May 21, 2018, from
https://www.youtube.com/watch?v=H2f7FunDuTU
(Alex Gibney, "Smartest guy in the room ", 2005)

Fusaro, Peter C., and Ross M. Miller. What Went Wrong at Enron. J. Wiley & Sons, 2002.
(Fusaro & Miller What went wrong at Enron 2002)

McLean, Bethany, and Peter Elkind. The Smartest Guys in the Room: the Amazing Rise and Scandalous
Fall of Enron. Portfolio/Penguin, 2013.
(McLean & Elkind The smartest guys in the room: the amazing rise and scandalous fall of Enron, 2013)

(Murillo, 2018)

Barreveld, D. J. (2002). ​The ENRON collapse: Creative accounting, wrong economics or

criminal acts?: A look into the root causes of the largest bankruptcy of U.S. history​. San Jose,
USA: Writers Club Press.
(Barreveld, The ENRON collapse: creative accounting, wrong economics or criminal acts?: a
look into the root causes of the largest bankruptcy of U.S. history, 2002)