Guilty Pleasure
When the Enron verdict came down, a collective giddiness swept over Houston—much of it, anyway. Can we move on now?
Illustration by Jason Holley
DURING A BREAK IN THE CLOSING ARGUMENTS at the Enron trial, in one of those awkward coincidences that private people who become unwilling public figures probably detest, I found myself in the restroom of the federal courthouse with Linda Lay. I was waiting to wash my hands behind her, and she caught sight of me in the mirror, bowed her head, and hurried to finish her task. By then she had lost any resemblance to the perky, chic combatant who had defended her husband on the Today show more than four years earlier. That flawlessly highlighted flip hung limply, and the lines in her face all headed in one direction: southward. She had the anxious, furtive air of a hunted animal. “Sorry,” she said, meeting my eyes briefly as she scrubbed. “So sorry.” She wasn’t the rich wife of a corporate mogul anymore but instead a former secretary who had lost everything she had worked for and wasn’t sure of her place in the world. In other words, she too had joined the ranks of those dispossessed by Enron’s collapse. I supposed this was what it meant to see justice done, but I took no joy from it.
In the end—the ostensible end being May 25—the Enron verdict was like the death of a close relative who had long ago been diagnosed as terminal: inevitable but still shocking in its power and finality. On the ninth floor of the courthouse, in a cavernous, paneled, fluorescently lit courtroom that had become home to so many for nearly four months, the five-year drama starring Jeff Skilling, Ken Lay, their defunct company, and the city of Houston came to a close, with guilty verdicts that were surprising only in their swiftness (the jury came back on this supposedly impossible case in five days) and scorched-earth completeness (Skilling was found guilty on nineteen counts of conspiracy, securities fraud, and insider trading; Lay was convicted on all six counts of conspiracy, wire fraud, and securities fraud).
Just after the jury delivered its verdict, U.S. District judge Sim Lake, pale, thin, and scrupulous throughout the trial, delivered his judgment on the separate, four-day bank fraud trial that had begun for Lay immediately after the jury retired to deliberate. Impervious to Lay’s ashen hue and his wife’s wrenching sobs, Lake closed up shop like a judiciously polite man who was finally unable to contain the disgust he had concealed since the proceedings began on January 30. “As to charges 38, and 39 through 41—guilty,” he said dismissively, as if he couldn’t wait to get Lay and what was left of Enron out of his sight.
The same could have been said of Houston. No matter what happened—say, the redemptive rescue of Katrina evacuees—the shame and humiliation surrounding the implosion of the city’s most powerful, glamorous business remained an open wound, the healing of which was both deeply desired and, considering various outcomes, deeply dreaded. But when the verdicts were finally handed down on what was, serendipitously, the last day of school, a collective giddiness swept over Houston—though it was hard to tell whether it was born of the guilty findings themselves or the exoneration of the city in which the drama had been set. Now we had permission to move on.
In fact, by the next day, the bustling media city that had tented itself in front of the courthouse for months was gone, as were the TV stations’ satellite trucks, with their thick black cables snaking up the sidewalks. It was almost as if the whole thing had never been, which is exactly the way a lot of people in Houston would prefer to think about Enron from here on out.
OF COURSE, THIS was not always the case. The seductiveness of the Enron Bubble dates back to the good old Enron, the one that was described by just about everyone as a sleepy pipeline company that transformed itself, in about a decade and a half, into a global colossus—the one that Fortune would probably love to forget it touted as the country’s most innovative for six straight years. Enron’s mirrored office towers still shimmer in the sunlight, and the clever halo connecting the two buildings still cries out for some novel application. But no one looks purposeful striding out of the Smith Street skyscraper anymore; there aren’t even bankruptcy lawyers racing to their limos to make their flights back to New York.
The early Enron story always seemed to me more Midwestern than Houstonian, an account of a company’s migration from Omaha, Nebraska, to Texas and the value shifts that ensued. Ken Lay, the CEO and chairman; his old college chum Rich Kinder, the president; Jeff Skilling, who succeeded Kinder; Skilling’s nemesis Rebecca Mark, the CEO of Enron International; Ken Rice, the infamous ladies’ man who headed Enron Broadband Services—they all came from modest backgrounds in the heartland, and for a while they looked like a great alternative to the careless wildcatters who had driven the city’s economy into the ground during the oil bust. Enron people were modest, serious, and hardworking. They preferred the quiet neighborhoods around Rice University to the flashiness of River Oaks. They gave generously to charity; well-heeled executives were required to give a minimum of 1.2 percent of their base pay to the United Way. They didn’t smoke inside their building, and they got a lot of exercise; in the early days, Lay posed for business magazines in his jogging clothes. In that progressive, understated way, he made the bourbon-and-branch-water-drinking oil and gas executives on Louisiana Street—Don Jordan, who ran what eventually became Reliant Energy, for instance—look antediluvian. Enron was the company, the only company, that could possibly lead Houston out of the ashes of the bust.
But Lay was also a man of grave ambition who hired people in his image, and it wasn’t long before the grousing started about just how much Enron expected for its savior status. Anyone who recalls the “Star Wars: The Magic of Myth” show at the Museum of Fine Arts, Houston in 2001 might recall that the sponsor got almost as much, if not more, billing than George Lucas. Enronians—pronounced like “Etonians”—were not just the bullies of the gas market (one-sided contracts tended to be of the take-it-or-leave-it variety) but the bullies of the political scene in Austin, Washington, and wherever else the company chose to expand its influence, pushing so hard to get their way that George W. Bush, then governor of Texas, once referred to Lay in a private meeting as “the turd in the punch bowl.” Enron executives had the bad habit of lording their brilliance over lesser men: “I hope someday the [Houston] Chronicle is as good in its field as we are in ours,” Skilling told the paper’s then editor, Jack Loftis. The modest Midwestern visionaries, it seemed, adapted quickly to old-fashioned Texas braggadocio.
As Houston recovered, and the eighties turned into the nineties and the millennium approached, everyone in town, and beyond town, wanted to work at Enron. Who cared if you were toiling 24/7 when you were building the future, getting incredibly rich, and anointed as working for the smartest company on the planet?
“A PERSON HAS A limited number of bad decisions he can make in his life,” a local businessman told me at a dinner party early in the trial, and he was speaking of Lay, whom he had considered a friend. What he was referring to was the moment in 1996 when Lay let Rich Kinder leave the company. This event has been much chronicled in books and articles: Lay’s former secretary was romantically involved with Kinder; Kinder was tired of running the company while Lay got all the glory; Lay felt betrayed by his former friend’s attempt to undermine his power. Now, with hindsight, it is very clear that the company was doomed the day Kinder left to form his own pipeline company, known today as Kinder Morgan. (In what has to be the best revenge scenario since the defeat of the Mexican army at San Jacinto, Kinder’s company, which, coincidentally or not, he announced he planned to take private three days after the Enron verdict, was number 243 on the 2006 Fortune 500 list; its revenues are up 23 percent since 2004.)
Kinder was—strange but true—one of the few people at Enron who really cared about running a business day-to-day, about converting ideas into reality and producing real profits for investors. Everyone else was enthralled with the trappings of corporate life: meeting with presidents, for instance, or being profiled in fawning business books like Gary Hamel’s vapid Leading the Revolution (chapter 4: “Be Your Own Seer”). Kinder’s departure coincided with the beginning of chief financial officer Andy Fastow’s shenanigans; Rebecca Mark’s unchecked spending on foreign plants and pipelines, which would add to the company’s debt load; and Skilling’s even more costly investment in “intellectual capital”—a.k.a., the virtual businesses that never made a dime, like Enron Energy Services and Enron Broadband Services. As the prosecutors would point out during the trial, Enron was really a trading business disguised as a diversified corporation, and it was the traders who routinely saved the company from the brink of disaster at the expense of the state of California, among others. That is, until Wall Street got suspicious.
FACEBOOK
RSS
TUMBLR
TM
Read Later