"They're still trying to hide the weenie," thought Sherron Watkins as she read a newspaper clipping about Enron two weeks before Christmas, 2001. . . It quoted [CFO] Jeff McMahon addressing the company's creditors and cautioning them against a rash judgment. "Don't assume that there is a smoking gun."
Sherron knew Enron well enough to know that the company was in extreme spin mode...
Power Failure is the electrifying behind-the-scenes story of the collapse of Enron, the high-flying gas and energy company touted as the poster child of the New Economy that, in its hubris, had aspired to be "The World's Leading Company," and had briefly been the seventh largest corporation in America.
Written by prizewinning journalist Mimi Swartz, and substantially based on the never-before-published revelations of former Enron vice-president Sherron Watkins, as well as hundreds of other interviews, Power Failure shows the human face beyond the greed, arrogance, and raw ambition that fueled the company's meteoric rise in the late 1990s. At the dawn of the new century, Ken Lay's and Jeff Skilling's faces graced the covers of business magazines, and Enron's money oiled the political machinery behind George W. Bush's election campaign. But as Wall Street analysts sang Enron's praises, and its stock spiraled dizzyingly into the stratosphere, the company's leaders were madly scrambling to manufacture illusory profits, hide its ballooning debt, and bully Wall Street into buying its fictional accounting and off-balance-sheet investment vehicles. The story of Enron's fall is a morality tale writ large, performed on a stage with an unforgettable array of props and side plots, from parking lots overflowing with Boxsters and BMWs to hot-house office affairs and executive tantrums.
Among the cast of characters Mimi Swartz and Sherron Watkins observe with shrewd Texas eyes and an insider's perspective are: CEO Ken Lay, Enron's "outside face," who was more interested in playing diplomat and paving the road to a political career than in managing Enron's high-testosterone, anything-goes culture; Jeff Skilling, the mastermind behind Enron's mercenary trading culture, who transformed himself from a nerdy executive into the personification of millennial cool; Rebecca Mark, the savvy and seductive head of Enron's international division, who was Skilling's sole rival to take over the company; and Andy Fastow, whose childish pranks early in his career gave way to something far more destructive. Desperate to be a player in Enron's deal-making, trader-oriented culture, Fastow transformed Enron's finance department into a "profit center," creating a honeycomb of financial entities to bolster Enron's "profits," while diverting tens of millions of dollars into his own pockets
An unprecedented chronicle of Enron's shocking collapse, Power Failure should take its place alongside the classics of previous decades - Barbarians at the Gate and Liar's Poker - as one of the cautionary tales of our times.
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March 25, 2003
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Excerpt from Power Failure by Mimi Swartz
1 Winners and Losers SHERRON Watkins went to the Enron Corporation’s November management conference for the year 2000 determined she wouldn’t be taken for a loser. The year before, at her first such meeting after being promoted to vice president, she had blown it. Booked into the Hill Country Hyatt and Resort for three days of corporate team building, she had opted, in the recreational hours, for the company-sponsored salsa-making class. At affairs such as these, where Enron took over the entire hotel and offered an array of afternoon networking and socializing activities, it was important to pick one that advanced your career. A smart, ambitious employee would never sign up for the afternoon of fly-fishing, for instance, because you couldn’t lose the smell of fish in time for the evening cocktail party, and because you could wind up wasting your afternoon with guys who worked in the once crucial but now irrelevant pipeline division. That left, as career-building activities, skeet shooting, the Road Rally, tennis, golf, facials, pedicures, outlet shopping, and antiquing in a nearby Hill Country town. To understand the loaded nature of the choices, you had to understand the loaded nature of life at Enron. Salsa making, for instance, had turned out to be a disaster. One of the small hotel conference rooms had been converted into a kitchen for the occasion; Sherron had entered straight from her facial, without makeup, without combing her hair, and she was chopping jalapenos with three pipeline guys—middle-aged men shaped like bumpy Bosc pears—when the then COO, soon to be CEO, Jeff Skilling, had walked in. Or, rather, he’d poked his head into the room, narrowed his eyes, and raised his peaked nose, as if to test the air. It had not pleased him. At just that moment, he’d caught sight of her. “Uh, hi, Sherron,” Skilling had said, and then,whoosh, he was gone. In his wake, Sherron found herself enveloped in that uniquely Enronian sense of dread: She knew she’d been caught with a bunch of losers, far, far away from Skilling’s winning team. Once, the pipeline guys had mattered, but that was long ago. In the 1980s, Enron was one of the largest pipeline companies in North America, moving natural gas from the Gulf Coast to the East Coast, the West Coast, the Midwest, and beyond. But as Jeff Skilling’s influence over CEO Ken Lay grew, Enron changed identities several times. It always positioned itself as the company of Vision, but it supplemented its base. In the late eighties and early nineties, Enron revolutionized the way natural gas was bought and sold by operating more like a finance company than a gas company. In the mid-nineties, Enron started selling and trading power, battling across the country to deregulate entrenched electric utilities. Lately, with the boom in dot-com and high-tech companies, Enron was vigorously morphing into an Internet/telecommunications conglomerate. Enron Online, the company’s online trading platform, was already the largest e-commerce site in the world, and now “Broadband” was the new buzzword inside the company. Enron was gearing up to trade space available on high-speed telephone lines in order to deliver movies and more into private homes over its Enron Intelligent Network, a new and improved Internet. It was poised to dominate AT&T and all the other behemoths. This corporate shape shifting made Enron seem, to Wall Street, less like an IBM or an Exxon and more like the poster child for the New Economy, a business so fast-paced, so protean, and so forward-looking that it could change its stripes, virtually overnight, to suit the zeitgeist. So if you wanted to get ahead at Enron, you had to be able to change, too. Sherron, for instance, had successfully engineered herself into the hottest sector of the comp