Enron: The Smartest Guys in the Room (STAR)(STAR)(STAR){
Featuring: Kenneth Lay, Jeff Skilling, Lou Pai, Mike Muckleroy,Sherron Watkins, Red. James Nuter, Bethany McLean and Peter Elkindand others. Narrated by Peter Coyote.
Magnolia Pictures presents a documentary directed and written byAlex Gibney. Based on the book, The Smartest Guys in the Room: TheAmazing Rise and Scandalous Fall of Enron, by Bethany McLean andPeter Elkind. Running time: 110 minutes. No MPAA rating. Openingtoday at Landmark Century.
This is not a political documentary. It is a crime story. Nomatter what your politics, "Enron: The Smartest Guys in the Room"will make you mad. It tells the story of how Enron rose to become theseventh largest corporation in America with what was essentially aPonzi scheme, and in its last days looted the retirement funds of itsemployees to buy a little more time.
There is a general impression that Enron was a good corporationthat went bad. The movie argues that it was a con game almost fromthe start. It was "the best energy company in the world," accordingto its top executives Kenneth Lay and Jeffrey Skilling. At the timethey made that claim, they must have known that the company wasbankrupt, had been worthless for years, had inflated its profits andconcealed its losses through bookkeeping practices so corrupt thatthe venerable Arthur Anderson accounting firm was destroyed in theaftermath.
The film shows how it happened. To keep its stock price climbing,Enron created good quarterly returns out of thin air. One accountingtactic was called "mark to market," which meant if Enron began aventure that might make $50 million 10 years from now, it could claimthe $50 million as current income. In an astonishing in-house videomade for employees, Skilling stars in a skit that satirizes "HFV"accounting, which he explains stands for "Hypothetical Future Value."Little did employees suspect that was more or less what the companywas counting on.
Skilling and Lay were less than circumspect at times. When a NewYork market analyst questions Enron's profit and loss statementsduring a conference call, Skilling can't answer and calls him an "a-hole;" that causes bad buzz on the street. During a Q&A session withemployees, Lay actually reads this question from the floor: "Are youon crack? If you are that might explain a lot of things. If youaren't, maybe you should be."
One Enron tactic was to create phony offshore corporate shells andmove their losses to those companies, which were off the books. We'reshown a schematic diagram tracing the movement of debt to such Enronentities. Two of the companies are named "M. Smart" and "M. Yass."These "companies" were named with a reckless hubris: One stood for"Maxwell Smart" and the other one ... well, take out the period andput a space between "y" and "a."
What did Enron buy and sell, actually? Electricity? Natural gas?It was hard to say. The corporation basically created a market inenergy, gambled in it and manipulated it. It moved on into otherfutures markets, even seriously considering "trading weather." At onepoint, we learn, its gambling traders lost the entire company in badtrades, and covered their losses by hiding the news and producingphony profit reports that drove the share price even higher. Inhindsight, Enron was a corporation devoted to maintaining a highshare price at any cost. That was its real product.
The documentary is based on the best-selling book of the sametitle, co-written by Fortune magazine's Bethany McLean and PeterElkind. It is assembled out of a wealth of documentary and videofootage, narrated by Peter Coyote, from testimony at congressionalhearings, and from interviews with such figures as disillusionedEnron exec Mike Muckleroy and whistle-blower Sherron Watkins. It isbest when it sticks to fact, shakier when it goes for visual effectsand heavy irony.
It was McLean who started the house of cards tumbling down with aninnocent question about Enron's quarterly statements, which did notever seem to add up. The movie uses in-house video made by Enronitself to show Lay and Skilling optimistically addressing employeesand shareholders at a time when Skilling in particular was comingapart at the seams. Toward the end, he sells $200 million in his ownEnron stock while encouraging Enron employees to invest their 401Kretirement plans in the company. Then he suddenly resigns, but notquickly enough to escape Enron's collapse not long after. Televisedtaking the perp walk in handcuffs, both he and Lay face criminaltrials in Texas.
The most shocking material in the film involves the fact thatEnron cynically and knowingly created the phony California energycrisis. There was never a shortage of power in California. Using taperecordings of Enron traders on the phone with California powerplants, the film chillingly overhears them asking plant managers to"get a little creative" in shutting down plants for "repairs."Between 30 percent and 50 percent of California's energy industry wasshut down by Enron a great deal of the time, and up to 76 percent atone point, as the company drove the price of electricity higher bynine times.
We hear Enron traders laughing about "Grandma Millie," ahypothetical victim of the rolling blackouts, and boasting about themillions they made for Enron. As the company goes belly up, 20,000employees are fired. Their pensions are gone, their stock worthless.The usual widows and orphans are victimized. A power company linemanin Portland, who worked for the same utility all his life, observesthat his retirement fund was worth $248,000 before Enron bought theutility and looted it, investing its retirement funds in Enron stock.Now, he says, his retirement fund is worth about $1,200.
Strange, that there has not been more anger over the Enronscandals. The cost was incalculable, not only in lives lost duringthe power crisis, but in treasure: The state of California is suingfor $6 billion in refunds for energy overcharges collected during thephony crisis. If the crisis had been created by Al Qaeda, ifterrorists had shut down half of California's power plants, considerhow we would regard these same events. Yet the crisis, made possiblebecause of deregulation engineered by Enron's lobbyists, is stillbeing blamed on "too much regulation." If there was ever acorporation that needed more regulation, that corporation was Enron.
Early in the film, there's a striking image. We see a vast emptyroom, with rows of what look like abandoned lunchroom tables. Then wesee the room when it was Enron's main trading floor, with countlesscomputer monitors on the tables and hundreds of traders on thephones. Two vast staircases sweep up from either side of the tradingfloor to the aeries of Lay and Skilling, whose palatial officesoverlook the traders. They look like the Stairway to Heaven in thatold David Niven movie, but at the end they only led down, down, down.
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