The Enron Chronicles

Enron Corporation filed for bankruptcy ten years ago today. Books attempting to explain the sudden and spectacular collapse of the Houston-based energy company have a lot of ground to cover. In his Pipe Dreams: Ego, Greed and the Death of Enron, Robert Bryce examines not only the specific crooks but the corporate culture behind them — executives addicted to big-wheeling and risky dealing, to playing hanky-panky with more than the books, to being systematically overpaid…. Bryce also notes that the Wheel of Fortune has always spun wildly in Texas:

Every decade or so, the Lone Star State produces an energy baron who willingly pulls his own pants down. And for the next couple of years or so, that former Big Shot becomes the laughingstock of the entire country.… Texas has never had — and never will have — a shortage of colorful, ever-eager Big Shots willing to risk it all.

Among those individuals higher up on the culprit list is Andy Fastow, who gets out of jail in two weeks. As portrayed in Kurt Eichenwald’s Conspiracy of Fools, Fastow was both a snake and a simpleton. In the following excerpt, Fastow has sought advice on one of his shell-game deals from Vince Kaminski, Enron’s “resident genius” on the topic of hedge management. Kaminski eventually became one of the loudest whistle-blowers against Fastow and his practices; at this point, he just wants to close his ears:

“…So, we offer consumers long-term contracts, below current rates. Then deregulation happens, prices drop, and our contract price will be above the market price. We’ll make profits on the spread.”

Kaminski folded his arms. Fastow hadn’t disappointed; the idea was ridiculous…. Before Kaminski could respond, a Fastow deputy spoke.

“There is one problem with the idea,” the executive said. “We’re guaranteeing ourselves some pretty big losses in the first few years.”

“That’s right,” Fastow nodded.

He glanced at Kaminski. “Vince, can you come up with a hedge that would offset losses in the initial years?”

Kaminski smiled to himself. How could a man like this be in charge of a business? A hedge could only offset declines in an asset’s value, not operating losses from a failing business. The only hedge for a money-losing business was a moneymaking business — and one of those certainly wasn’t going to be coming out of this meeting.

“If I could come up with such a hedge,” Kaminski said patiently, “I would say forget about having customers. We can all just make money by hedging.”

Daybook is contributed by Steve King, who teaches in the English Department of Memorial University in St. John’s, Newfoundland. His literary daybook began as a radio series syndicated nationally in Canada. He can be found online at