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.

In the years before Enron’s collapse, a great many people in Houston had their suspicions, just as many people within Enron knew there was something not quite right about the company. But that’s all they were: distant early warnings that few were in the mood to heed. You would go to a dinner party or stop for a chat with a neighbor and someone might shake his head and describe Enron as “a house of cards.” But the complaining was usually chalked up to envy, because if you weren’t a part of Enron, you might find yourself feeling inferior—poorer, dumber, and lower class at a time when the divide between rich and poor was ever widening. If Lay and Skilling had anything in common, it was their belief that perception was reality, and they were, for a time, masters at shaping Enron’s exalted place in the world. (This was a company that paid an image consultant to gussy up its secretaries.) When things started looking grim, no one wanted to tell them—or could tell them—that reality could come back to bite you and change perceptions in the most meteoric and calamitous way.

Anyway, by 2000 or so, the city was an Enron captive, utterly taken in by ages-old (for Houston) promises of progress, wealth, and grandeur. The big law firms were sharing in the bounty, as were the banks that made the loans that kept the company afloat. And, of course, there was Arthur Andersen, which billed Enron somewhere around $1 million a week. But there were also the real estate brokers who settled the young executives in Southampton, the plush, understated neighborhood Andy Fastow named a deal after. There were the tony private schools—St. John’s and Episcopal—that gladly took the promising Enron progeny and the hospitals and museums that named nifty spaces in honor of Enron donors. The meta-ironic Art Guys tweaked the interior of Skilling’s guesthouse, creating a trash-filled fish tank designed to evoke Buffalo Bayou on a bad day; the local Porsche and BMW dealers lusted for the day the traders got their bonuses and went trawling for new wheels. (“They knew exactly what they wanted,” an executive at one dealership told the Washington Post. “And it was fun, because it took about two minutes to do a deal.”)

If Enron was, in Skilling’s mind, a company of ideas—of intellectual capital—it was also a company of consumption, and the rest of Houston was happy to feed its nearly insatiable demands. And while Enron made Houston rich, it also made Houston modern and hip in the way it had always wanted to be. The city thrummed with loft living, sushi bars, BlackBerrys, and art by the most cutting-edge creators—from places like Sweden! Who could resist?

AND THEN, depending on your catastrophic verb choice, it collapsed, exploded, imploded, or evaporated during the unseasonably cold and rainy days of December 2001, when Enron was forced to file for bankruptcy. The weeping was carried live on all three local networks, as the employees—given only $4,000 in severance—permanently exited the building, using their $700-plus Aeron chairs to carry their belongings. The Enron Bubble had burst, but the residue was a sticky, gooey, roiling mass of resentment that was just as compelling as the good old days of greed. Now Lay and Skilling and those who had been paid enormous retention bonuses to stay on weren’t heroes but villains.

Which really shouldn’t have surprised anyone. Enron was, just about from the beginning, a company of carnivores. It was every man for himself; these were people who took as gospel the work of Ayn Rand. Even in the depths of despair, many of the former employees were nothing if not resourceful: One created an anti-Enron T-shirt company overnight (“I Got Lay’d Off”), and another immediately rented a hotel room and began conducting interviews for the first of many Enron books. The classic Texas nightmare—outsiders arriving and passing judgment on our intelligence—was made real, as reporters from the Post, the Wall Street Journal, and the New York Times, as well as from England, Scotland, and India, descended on Houston like an invading army, along with the Justice Department’s Enron Task Force, whose members—hint, hint—were fresh from investigations of mobsters and major drug traffickers. With this Texas-size collapse—I’m sure someone called it that—Houston, twenty years after the insidious oil bust, was staring into the abyss once more.

Though the fall of Enron was billed as a complicated story, largely because Enron had created its own vocabulary to put ever more distance between its executives and ordinary folk, the company failed for fairly simple reasons. Once Enron faltered and began systematically obscuring its true financial condition, the investor community, aided by journalists and short sellers, took note; that actual crimes were being committed within the company took a little longer to sort out and to absorb. It was hard to believe that the corporate executive whose kids carpooled with your kids or who coached your neighborhood Little League or sat just a few pews away in church was a felon-to-be. But throughout 2003 and 2004 the drama of the bankruptcy morphed into a story of crime and punishment, as a West University dad or someone from your prayer group was led off in handcuffs. First it was lower-level types, but soon it was Fastow, and then Skilling, and then, finally, Lay, who, awaiting bond, cheerfully demurred when other prisoners asked him for investment advice.

At least partly in self-defense, Houston became a city of I-told-you-so’s, with the social order rearranged accordingly. Lay, who celebrated his wife’s January 2001 birthday with a group of friends aboard a rented yacht called the Amnesia, spent New Year’s Eve 2002 handing out canapés at his sister’s condo. Meanwhile, blue-chip investment counselor Fayez Sarofim, previously dismissed as a dinosaur for refusing to put his clients’ money in Enron because he couldn’t understand its balance sheets, was once again elevated to godlike status. Ditto Rich and Nancy Kinder, who took over the Lays’ former role as major fund-raisers for George W. Bush during his reelection campaign.

Like the inhabitants of the most industrious, self-preserving anthill, Houston rallied and, as it had during the bust, diversified. The legal community—from bankruptcy lawyers to our august criminal bar—shifted into high gear, representing those who might or might not be prosecuted. As the trial of Lay and Skilling approached, the question of the hour became “Are you on the witness list?” The thrill did not last long, as former executives racked up tens of thousands of dollars—in some cases, hundreds of thousands—in legal fees while answering questions from various and sundry investigators. The fear that they could suffer the fate of Jamie Olis—the Dynegy executive sentenced to 24 years in prison for relatively minor infractions while higher-ups took deals—was a major incentive to those who agreed to plea bargains or willingly stayed silent instead of speaking up for Lay or Skilling. The bullies were now the bullied and, like most bullies, folded in the face of a larger threat.

For observers, the bad Enron could be just as enticing and lucrative as the good Enron. It was during this time, in fact, that, like a horde of others, I began researching a book on Enron (with company whistle-blower Sherron Watkins), and there were never more engaging, intelligent interview subjects than those who had worked for the company and were trying to make sense of what had happened there. Even so, two things struck me early on: No one could ever give me an example of Skilling’s much-touted brilliance, and almost no one—maybe a couple of people out of several hundred—ever offered to pick up a check. As it turned out, both were telling.

THE TRIAL WAS ONE of those galvanizing civic events, like the Rockets winning the championship or, well, the bust. “I’m on pins and needles,” my dermatologist said to me. As drama, even the previews were pretty thrilling, particularly when Richard Causey, Enron’s doughy former chief accounting officer, pleaded guilty at the last minute rather than face trial with Lay and Skilling. This move promised that the trial would be significantly shorter and far more interesting—easier to follow, that is—because it wouldn’t hinge on accounting. (Causey’s plea also had the effect of removing Reid Weingarten, arguably the best cross-examiner, from the pack of defense attorneys—no small thing as it turned out.)

In anticipation, a lot of Houstonians seemed to forget the part in high school civics about trials being open to the public. “You can just . . . walk in?” I was asked myriad times. Stopping in became part of the social fabric of a certain stratum of Houstonians; people made dates to have lunch and visit the trial and, as the months wore on, became pickier about whom they saw, as in, “I’m waiting for Fastow,” or “I’m going to the Skilling cross but not the direct.” There was much handicapping of lawyers among the famously competitive local trial bar. Prosecutors criticized the task force; defense lawyers dumped on Lay’s choice of Mike Ramsey, noting that he had little or no experience with white-collar criminals.

The courtroom itself was a far more sobering scene. Lay was almost always gray and stiff, while the young cadre of prosecutors had the ruthless, focused miens of contract killers—the kind of people Lay or Skilling might have recruited in happier times. Skilling’s swaggering, sharp- tongued attorney Daniel Petrocelli provided the only comic relief, though his loyalty to his client—the two were so close that people began making Brokeback Mountain jokes—was a constant reminder of what was at stake. (He, not the Houston police officers and their sable-hued mounts, often seemed to be Skilling’s real bodyguard during the crushing morning and afternoon forays to and from the courthouse.)

On the right side, behind the defense table, sat various members of the prosecution team, including FBI agents, while on the left, behind the prosecution table and closer to the jury, sat members of Lay’s and Skilling’s families. Lay’s loyalists often included a cluster of blondes—his wife, his publicist—who sat on Tush Cushes placed there by an assistant before their arrival. Behind them sat the press: representatives of the Times (columnist Joe Nocera came only once, for Skilling’s testimony, as did Kurt Eichenwald, the author of Conspiracy of Fools, who declared of Skilling, “He’s toast,” and exited after only a few hours); Fortune’s Peter Elkind and Bethany McLean, the authors of The Smartest Guys in the Room (the latter, with her Botticelli face and an assortment of glamorous heels, inevitably left a trail of poleaxed men in her wake); and John Emshwiller, of the Journal, who, with Rebecca Smith, wrote 24 Days. The Chronicle—which missed the story in the early years, when its management was more dazzled by Enron—was there in force, led by the indomitable, flame-haired Mary Flood, who brought her own plaid cushion, and Loren Steffy, whose acrid anti-defense blog became required reading for everyone involved.

Some days, I also caught sight of Carrin Patman, the wife of former Enron general counsel Jim Derrick, looking as lonely and anxious as a child. Other times I’d spy Linwood Olson, whose husband, John, now a successful hedge fund manager, was the analyst driven out of Merrill Lynch years ago by Lay because he raised questions about the company. The cool, blond Linwood had almost perfect attendance, causing Lay to remark that she “knew more about this trial than anybody.” Maybe Lay should have recalled Stephen Vincent Benet’s instruction to “make war on the men. The women have too long memories.”

For most of the trial, it was virtually impossible to tell how things were going. The prosecution would score a few points off the “Skilling ordered me to fudge the numbers” backboard or the “Lay knew the stock was tanking but pumped it up anyway” jump shot. The defense just as often came back with claims that the prosecution’s witnesses had made deals to save their own skins, but the jury was united enough in its understanding of Enron to prevent Petrocelli from making much headway when he tried to impeach the CEO of Enron Energy Services, for instance, for being ambitious.

Andy Fastow—like Garbo, he didn’t talk until he had to—was bracing in his honesty. In 2003 he had issued a firm and forthright “not guilty” plea to the court when he was indicted; three years later, thinner, grayer, and tearier, his sibilance betraying his nervousness, he now robotically recited phrases like “I pled guilty because I am guilty, and I thought that decision would be in the best interest of my family.” He also introduced the jury to some wonderful locutions—the “bear hug” he supposedly received from Skilling that guaranteed his side deals would never lose money and the phrase “open the kimono,” a  slightly sexual term for business transparency. Recapitulating the transactions that made him famous—“I was just trying to cheat my limited partners,” he said, when quizzed about the questionable value of a particular deal—he was that rarest of beings: an honest crook.

You had to wonder how Skilling felt, watching the march of betrayers—men he’d mentored and made very rich—testifying against him, but he was seen to call only one of them “an asshole” outside of court, and that was in a whisper. Mostly, he held his own on the stand, splitting about a zillion hairs and rarely answering a question directly. Yes, he lost his temper when the prosecutors tried to elicit conflict-of-interest testimony about his and Enron’s investment in the photography business of his then girlfriend—the absence in the courtroom the next day of the woman he subsequently married, Rebecca Carter, suggested Skilling hadn’t told her about the fling—but the more important howlers were about Skilling’s passion for Enron’s foreign assets. If you were employed at Enron, or you studied the company, you knew he spent an enormous amount of time plotting to bury alive his interoffice competitor Rebecca Mark and her foreign businesses. (Still, he got sympathy votes from the peanut gallery when it was learned that his attorney intended to call his barkeep as a character witness. Cooler heads later prevailed, and Steve Zimmerman, owner of Zimm’s, did not appear.)

But it was Lay’s testimony, just weeks before the verdict, that turned the trial in the prosecution’s favor. The man who was previously a master of PR seemed incapable of donning his familiar, friendly game face during the most crucial contest of his life. He was, instead, downright dyspeptic, bickering not just with the defense but with his own attorneys. He embodied the imperial CEO, asserting, for instance, that he sold Enron stock only as a last resort. Alas, prosecutor John Hueston showed that Lay sold millions of dollars in company stock to meet margin calls amounting to only hundreds of thousands of dollars. Hueston further showed that Lay could have liquidated other funds or sold real estate to cover those calls—or, like ordinary people, he could have cut his lavish spending to reduce the amount of Enron stock he was “forced” to sell. After Lay complained that his expensive lifestyle “was difficult to turn on and off like a spigot,” Hueston countered that while the company was sinking into serious trouble, Lay shelled out $20,000 for antiques in Majorca (“It could be my wife found something she liked”) and spent $4,700 for two nights in France and $32,000 to reserve six nights in Deer Valley, Utah, for a ski vacation the following year.

It was in the evenings, after days of testy exchanges and damning financial revelations, that it dawned on various Houstonians that the conventional wisdom—Skilling would go to prison but Lay would skate—might be all wrong. Indeed, you could sense a different outcome in the desperation of Lay’s defense team during closing arguments, when a dispirited Mike Ramsey told the jury that a vote of “not guilty” did not necessarily mean “innocent” but instead “not proven,” and his high-strung colleague Chip Lewis—looking for one rogue juror—tried to play the carpetbagger card. “Don’t come to Houston, Texas, and lie to us,” he screeched at the prosecutors, oblivious to the fact that a great many people in Houston, inside and outside the courtroom, believed the real liars were at the defense table.

THE MONDAY MORNING quarterbacking began the Friday after the verdict was handed down. Some lawyers believed the case was decided when Judge Lake allowed the prosecutors to pursue a “willful blindness” charge, alleging that Skilling and Lay knew about but chose to ignore wrongdoing within the company. Others believed the defense lost when they abandoned their earlier stance of hiding behind the skirts of the lawyers and accountants (i.e., Vinson and Elkins and Arthur Andersen signed off on all of Enron’s moves, so they had to be okay). “Their case was doomed when they locked themselves in the position that it was a good company that failed because of bad publicity, short sellers, and Andy Fastow,” lawyer Philip Hilder told me. “Lay should have admitted he was an idiot?” I asked. “Yes,” he said.

A few days before the verdict was announced, I met Sherron Watkins for lunch, and I was struck by how much she reminded me of some of the no-nonsense women—eight of them in all—on the jury. Like Watkins, many of those chosen to serve were of a certain age, and though they displayed a terrific compassion toward the defendants, they had lived long enough to know when they were being played. But there was something else: On the whole, the ordinariness of these people was striking. No one was dressed to the nines or looked as if she cared about hobnobbing with world leaders or blowing the minds of Fortune 500 executives. They just wanted to do a good job and had the right to hope for as much from people far richer and more powerful than they. To paraphrase Carl Jung, what we deny will come back to us as fate; Lay and Skilling were so frightened of being ordinary men that they drove themselves headlong toward destruction, and they took a lot of well-intentioned people with them. If that wasn’t really illegal, well, they got their just desserts in the form of global humiliation, their personal bankruptcies—spiritual if not yet literal—on display for all to see.