Enroncore!

Almost ten years after its collapse, Enron is back as a morality play on Broadway. Just in time for Jeff Skilling’s bid for a new trial.

A little over halfway through the new play Enron, the character based on Jeff Skilling declares, “I hate government because I know these guys . . . and let me tell you, the weakest, most ignorant, most drunken f—ing incompetents went to work for the U.S. government. Because they weren’t smart enough for the private sector.” The government hacks who make the rules for the energy market are not deserving of his respect. “Why should we look at the lazy regulations they’ve put in place by committee and go, ‘Yeah, you’re bad at your jobs, fine, we’ll ignore that and just be bad at ours too.’ Who do you think is gonna win in the end?! The greedy or the inept?!”

Since the whole world is hungry to lay the blame for the financial meltdown at the feet of any convenient target, it’s not surprising that the play was a smash hit in London last season and is now opening to great fanfare on Broadway. Back in 2002, when I was working on an Enron book with Sherron “Whistle-blower” Watkins, I used to ask everyone the same question: Was Enron an anomaly in or a paradigm for the corporate world? Now, of course, we have the answer, and it is one that the play’s producers are eagerly selling. “There was a warning,” their publicity materials intone. “And its name was Enron.”

The play, which the Times of London cheered with uncharacteristic gusto as “nimble, funny, clear-eyed, inventive, informative, exhilarating and then sobering,” adheres to the now accepted narrative: A company run by geniuses gets big, then bigger, then too big for its britches, then collapses, devastating everyone involved. Bravo! Playwright Lucy Prebble focuses on four major players—Ken Lay, the company’s founder and CEO; Skilling, Lay’s successor, who envisioned and executed Enron’s transition from a pipeline company to a virtual company; CFO Andy Fastow; and executive Rebecca Mark, who managed the company’s massive foreign construction projects and was lucky enough to get pushed aside by Skilling before the fall. (Maybe because lawmakers never accused her of any chicanery, Mark is not named in the play, but a character named Claudia Roe bears some obvious similarities to her.) Except for some heavily thickened Texas accents, the show does not deviate from conventional wisdom: Lay was willfully blind, Skilling was a megalomaniac, Mark was outfoxed, and Fastow was a simple, garden-variety crook.

Houstonians will undoubtedly find more surprises in the staging than the script, but the play nicely evokes the Enron executives’ contempt for ordinary folk, a quality that was viewed as unique at the time. “In business, you buy something at one price, you sell it at a higher one, and what’s in between, that’s your advantage. Which you take. That’s how the world works,” the Skilling character says toward the end of the play. “So when you ask, did we take advantage of that . . . You know what I hear? I hear, ‘do you make a living,’ ‘do you breathe in and out,’ ‘are you a man?’ So yes, we took advantage of that. And I know that the only difference between me and the people judging me is that they weren’t smart enough to do what we did.”

Alas, some people were. The fall of Lehman Brothers, seven years later, was nothing if not an Enron rerun. And just as at Enron, the rating agencies (e.g., Moody’s) and the government regulators (the Securities and Exchange Commission)—the economy’s supposed watchdogs—had rubber-stamped anything the titans of finance wanted to do. And far too many people on Wall Street were smart enough—or rather stupid enough or greedy enough—to do exactly the kinds of things Skilling and his cohorts did.

Enron collapsed in December 2001 and was followed by a wave of public outrage, congressional hearings, criminal prosecutions, and class-action suits. Congress passed the Sarbanes-Oxley Act in 2002, a law that was supposed to bring more accountability to boards and corporate executives. Among other things, it was designed to do away with the so-called Ken Lay excuse (how can a CEO possibly be expected to know what’s happening in his own company?); senior executives were now to be held responsible for the contents of their financial statements.

But over time the outrage dissipated. The economy was good, people were buying houses they didn’t realize they couldn’t afford, and lawyers who once helped companies package edgy deals held seminars on living with what was coming to be known, far less menacingly, as SOX. No one questioned whether the shady practices had stopped with Enron and its accounting firm, Arthur Andersen, and not spread to the investment banks, which helped Enron structure many of its shaky deals. They would never be investigated, one of my sources told me, because of the threat such actions could pose to the markets here and abroad. They were, he said back in 2002, too big to fail.

Booms and bubbles have a way of inducing not just hysteria but amnesia. The people at Enron mistook arrogance for intelligence—or tried to convince everyone else that those qualities were identical. If you didn’t understand Enron’s numbers—or the way it did business or the way it made money or hid its mounting debt—you just weren’t smart enough or inventive enough. As pretty much every account of the financial crisis has revealed, the same sort of self-deception was widespread within the housing bubble: No one understood exactly how bundles of terrible loans would continue to pay off in perpetuity, but they kept putting them into larger and larger investment vehicles.

How could people keep doing deals that were incomprehensible at best? In Enron’s case it was partly because the company was constantly worried about its perception and value on Wall Street—job one was keeping the stock price high—but also because everyone got paid when a deal was signed, as opposed to when something actually got produced. The unsurprising result was that people came to care far more about lining their

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