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After the shocking collapse of Enron in fall, 2001 came an equally shocking series of disclosures about how America's seventh-largest company had destroyed itself. There were unethical deals, offshore accounts, and accounting irregularities. There were Wall Street analysts who seemed to have been asleep on the job. There were the lies top executives told so that they could line their own pockets while workers and shareholders lost billions.
But after all these disclosures, the question remains: Why? Why did a thriving, innovative company with rock-solid cash flow and reliable earnings suddenly flame out in a maelstrom of corruption, fraud and skulduggery? The answer, Texas business journalist Robert Bryce reveals in this incisive and entertaining book, is that bad business practices begin with human beings. Pipe Dreams traces Enron's astounding transformation from a small regional gas pipeline company into an energy Goliath...and then tracks step-by-step, business decision by business decision, extra-marital affair by extra-marital affair, how, when and why the culture of Enron began to go rotten, and who was responsible.
The story of Enron's fall isn't just a story about accounting procedures; it's a story about people. Bryce tells that story with all the personality, passion, humor, and inside dope you'd hope for, and the result is an un-putdownable read in the tradition of Barbarians at the Gate and The Predators' Ball.
The Scandal Breaks
Enron's claims to fame are numerous. American stockholders lost more than $70 billion in equity value in Enron, but a handful of executives made tens, even hundreds of millions of dollars by selling their stock while Enron was being driven into the ground. Bryce explains that between 1998 and 2001, 24 Enron executives and board members sold company stock worth more than $1.1 billion. He also points out that this number does not include the "huge salaries, bonuses and other cash payments made to Enron executives during their reign of plunder."
Fortune magazine had named Enron America's Most Innovative Company six years in a row. When Enron went bust, it was the biggest scandal to ever hit accounting, costing "Big Five" accounting firm Arthur Andersen a conviction on June 15, 2002 for obstructing justice in the Enron investigation, and virtually eliminating the company from the accounting radar screen.
The $30,000 Office Decoration
Bryce explores the unethical business moves of top executives along with the people side of the story, which includes extra-marital affairs, greed and excess at the top levels of a company that destroyed itself by ignoring basic rules of business management, and spending too much. When looking at the audacious expenses Enron executives put on the company tab, Bryce uncovers a brand new Gulfstream jet that cost the company $41.6 million less than nine months before the company went bankrupt, as well as a $30,000 motorcycle that one executive bought to decorate his new office.
More Sordid Details
Along with a moment-by-moment account of all the decisions, wrong moves and scandals that led to the company's demise over a period of just a few years, Bryce offers sordid details of the outrageous hubris of top players and devastating insight into the toll on the lives and retirement funds of employees who were burned by internal financial shenanigans. By the end of the book, he has revealed very personal stories, punctuated by high crimes and moral bankruptcy, which makes Pipe Dreams a dramatic look at the kind of corruption that can take place when politicians and big corporations become entangled in shady business deals.
Bryce rounds out Pipe Dreams with a look at the post-Enron lives of some of its top executives. By painting a gaudy portrait of the people who walked away with millions while thousands of families lost most of their life savings, Bryce points out the injustice of a system that he writes "is seriously broken and in need of reform." He finishes his book with a look at the work being done on Wall Street to make that reform a reality before other companies suffer the devastating consequences seen by the employees of Enron. One of his suggestions to improve the auditing process is to increase the budget of the Securities and Exchange Commission, an agency he explains has "long been undermanned and underfunded."
Bryce did some extensive research to get to the bottom of the Enron debacle. Since the many top executives who had the most access to the information surrounding the failure of Enron are keeping quiet due to lawsuits and indictments, he interviewed 200 people and collected more than 1,800 electronic documents, two dozen books and dozens of newspaper stories to get to the heart of what happened inside this Houston company over the past few years.
Why Soundview Likes This Book
Bryce illuminates a dark and tricky road of corporate greed, sex and scandal with his urbane humor and well-developed research. By looking closely at the people and events, he is able to shed more light on the fate of Enron than any number of newspaper articles and television news stories. His personal sense of justice and outrage provides a human perspective into the facts of the story, and allows his research to come to life in a book that is as exciting as it is muckraking. Copyright (c) 2003 Soundview Executive Book Summaries
As astonishing as the damage done by Enron to the American economy is the impunity with which the company operated when it was riding high in the go-go 1990s. Bryce, who understands the flamboyance built into Texas business culture, clarifies Enron’s muddled and deceptive accounting practices, deconstructs the bone-headed and perpetually hyped ventures (Enron as water giant! Enron as broadband marketeer!) while lacing his account with the sexual foibles that played a tacit part in creating the company’s anything-goes executive culture. Ken Lay set the tone by having a semi-public affair with his secretary while married to his first wife, whom Lay eventually divorced to marry the secretary. Other good-time guys at Enron included Rich Kinder, president of the company until 1996, ousted partly because Lay found out about Kinder's affair with Lay's executive assistant; Ken Rice, head of Enron's broadband division (though he knew nothing, and cared to know nothing, about broadband), who conducted public groping matches with his light of love; and Lou Pai, head of Enron Energy Services, whose taste for striptease joints was put on the company bill. Kinder's successor, the infamous Jeff Skillings, emerges in Bryce's account as the ultimate in CEO arrogance. Skillings was responsible for the two linked factors that did Enron in: accounting shenanigans and out-of-control costs. The off-the-records partnerships designed by CFO Andy Fastow hid Enron's mounting cash crisis and thus made sensible cost-control measures unlikely, especially given the executive team’s taste for sybaritic pleasures. Skillingscreated a system that rewarded revenue generation with huge bonuses, regardless of the earnings derived from the revenue-generating ventures. Enron's dealers and managers had no incentive to cut costs and could be rewarded generously for flops.
There are sure to be many accounts of Enron's collapse, but Bryce's gossipy version will be hard to beat for sheer readability.
|1||The Job Fair||1|
|2||John Henry Kirby and the Roots of Enron||13|
|3||Buy or Be Bought||24|
|5||The Lays Move to River Oaks||34|
|6||The Valhalla Fiasco||37|
|7||"The Smartest Son of a Bitch I've Ever Met"||44|
|8||Banking on the Gas Bank||52|
|10||Enron Goes International: Teesside||69|
|11||The Big Shot Buying Binge||76|
|13||The Dabhol Debacle||93|
|14||OPIC: Sweet Subsidies||104|
|15||A Kinder, Gentler Enron||111|
|16||The Reign of Skilling||120|
|17||"A Pit of Vipers"||126|
|18||Cash Flow Problems, Part I||132|
|19||Chewco: The 3-Percent Solution||137|
|21||The Family Lay||149|
|23||Buying Off the Board||161|
|24||The Deal Diva||169|
|26||Hyping the Bandwidth Bubble||190|
|27||Andy Fastow Arrives...in River Oaks||199|
|28||Strippers and Stock Options||205|
|29||Casino Enron: Cash Flow Problems, Part 2||215|
|31||The Big Five Versus the SEC||232|
|33||Ken Rice: Missing in Action||245|
|34||Analysts Who Think||249|
|36||Skilling Says a Bad Word||267|
|37||George W. to the Rescue, Part 1||270|
|39||Sleepless in Houston: Cash Flow Problems, Part 3||284|
|40||Sherron Watkins Saves Her Own Ass||293|
|41||George W. to the Rescue, Part 2||300|
|42||You Gotta Have Art||305|
|43||Revenge of the Raptors||309|
|44||"An Outstanding Job as CFO"||313|
|45||Fastow Goes Bye-Bye||318|
|47||Greenspan Gets the Enron Prize||323|
|48||One Restatement Too Many||328|
|51||Epilogue: "Salvation Armani"||343|