The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron (80 page)

Durst, Robert, 419

Dynegy, 105, 220–23, 241, 267, 268, 277, 280, 283, 319, 409, 410

  Enron’s proposed acquisition by, 391–405

  stock of, 395, 397, 401, 402

Dynegy Direct, 223

earnings-per-share numbers, 232

Eassey, Donato, xvi, 235, 244, 313, 348

Eavis, Peter, xvii, 331

eBay, 222

EBS,
see
Enron Broadband Services

EBS Content Systems, 293–94

Economist,
240, 256

EC Outlook, 343–44

ECT,
see
Enron Capital and Trade Resources

Ecuador, 252

Edison Electric Institute, 230

EES,
see
Enron Energy Services

EES Structured Finance Group, 182

electricity, 49, 177, 178, 221, 248, 280, 300

electricity trading, 64, 106, 110, 223, 260, 264–83, 284

electric utilities, 166, 230

Elektro Eletricidade, 259, 366

Eli Lilly, 86, 304

Ellison, Larry, 293

El Paso, 105, 192, 220, 241, 319

El Paso Electric, 271

emerging markets, 73–74, 75, 77–83, 88–89

Emshwiller, John, xvii, 349, 360, 364

energy bubble, 36

energy crisis, 6, 33

Energy Department, 82

energy-derivatives trading, 96

energy efficiency, 177–78, 183–84

Energy Market Report,
269

energy markets, 264, 413

  global, 385

energy traders, energy trading, 109, 133, 226, 264, 266, 267–79, 282–83, 299–304, 393, 413

  deals of,
see
Death Star; Fat Boy; Get Shorty; Ricochet; Silverpeak

England, 22, 44, 48, 49, 52, 111, 113, 246, 346

“Enron: Managing Off-Balance-Sheet Financing,” 237

Enron Broadband Services (EBS), 64, 184–91, 225–26, 228, 263, 318, 344, 353, 354, 355, 366, 369, 396, 399, 415–16, 419–20

  bandwidth trading at, 110, 188, 243–44, 284, 286–87, 290

  Christmas party of, 296–97

  content delivery by, 188, 284, 287–88, 290–99, 315

  firings and layoffs at, 331–32, 334–35

  indictments against executives of, 411–12

  investment vehicles of, 293

  mergers-and-acquisitions team at, 288

  performance of, 289–90, 295–96, 297, 315–16, 320, 331–32, 335, 338, 345, 369, 387

  Project Backbone at, 289

  Project Braveheart at, 293–98, 317–18, 368, 412

  Rice at, 61, 171, 186, 213, 243, 287–92, 294, 298–99, 301, 332–33, 334–35

  as Skilling’s pet project, 172, 184–88, 255–56, 262, 284–86, 288, 314, 315–16, 331–32, 338, 340, 349

  valuations of, 299

  venture capital at, 288

Enron Building, 377

Enron Capital and Trade Resources (ECT), 56–69, 85, 100, 101, 103, 118, 120–22, 124, 126, 131, 133, 138, 187, 241, 390

  bonuses at, 64

  financial-services industry as model for, 27, 33, 67

Enron Capital and Trade Resources (ECT) (
cont.
)

  income statements of, 60

  profits of, 56, 59–60, 61, 62, 67–68, 93

  renaming of, 186

  risk-control group at, 111, 115

  as Skilling’s model for Enron, 105

“Enron CFO’s Partnership Had Millions in Profit,” 371

Enron Cogeneration, 73

Enron Communications, 188, 243

Enron Corporation, xxii, 1–2, 3, 8, 19, 79–83

  accounting scandals of,
see
accounting; Arthur Andersen

  all-employee meetings at, 229, 323, 352–53, 356

  analyst-associate program at, 120, 122, 214–15, 334

  analyst meetings of, 176, 179–80, 242–44, 284, 314, 320–21, 323, 345

  Andersen’s risk assessment of, 147–48

  annual reports of, xix, 19, 168, 238

  assets of, 409

  Audit and Compliance Committee at, 130, 407

  balance sheet of, 77, 94–95, 150, 156, 157–58, 165, 310, 321, 325–26, 346, 363, 368, 384

  bank loans of, 18–19

  bankruptcy of, xxiv, xxv, 79, 91, 112, 129, 153, 158, 160, 172, 205, 241, 306, 401, 403–5, 406, 408–10, 413–14

  BBB+ rating of, 238

  as “black box,” 322, 323

  capital investments in, 320

  cash crisis at, 378–405

  cash flow of, 108, 112, 133, 150, 157, 158–61, 230, 232, 237, 321, 323, 326, 331, 340, 349, 373, 378, 388, 400, 408

  charitable donations of, 48, 96, 164, 165

  Come to Jesus meeting at, 25–26, 27

  corporate culture of, xxv, 25–26, 40, 116, 120–23, 140, 152, 187, 235, 240–41, 300, 332–33, 335, 372, 396–97, 401, 403

  credit rating of, 154, 161

  deal making prioritized at, 121–22

  debt of, 150, 154, 156–57, 161, 232, 237, 321, 323, 379–80, 395, 399, 403, 408

  deferred-compensation program at, 401

  Dominion Energy joint venture of, 47–48

  downfall of, 71, 91–92, 113, 132, 147, 277, 295

  downgrading of, 102, 235, 348, 374–75, 394–95, 400, 401, 403

  as dysfunctional workplace, 56, 63

  earnings of, 91, 92, 93–94, 102, 109, 125–28, 132, 133, 134, 141–42,
229–30, 232, 321, 324–25, 331,
339–40, 342–43, 346, 349, 369, 382, 400

  environmentally friendly image of, 174, 225

  ethics and values of, 193, 269, 275, 310, 353

  Finance Committee of, 199, 366

  financial filings of, 41, 304, 320, 330–31, 371

  financial reports and statements of, 15, 42, 155, 189, 230, 231, 321, 324, 329, 357, 368, 370

  focus groups at, 372

  fundamentals group at, 221

  Gas Bank at, 35–37

  growth of, 150–51, 179, 232

  HNG-InterNorth as origin of, 10, 13–14,
33

  Industrial Group at, 130

  internal audit department at, 17, 19, 21,
41

  investment banking fees of, 234

  investor confidence destroyed in, 346

  investor relations department of, 231, 322, 345, 360

  jets of, xxii, 3, 4, 51, 53, 86, 90, 96, 122–23, 175, 251, 302, 338, 346, 353, 367, 401, 405

  junk credit rating of, 14, 403

  lawsuits against, xxi, 380, 382, 396, 410–11

  legal department of, 18, 20, 276, 328,
405

  liquid-fuels division of, 21

  liquidity of, 391

  lobbying by, 172, 173, 265

  as logistics company, 322

  London office of, 239

  losses of, 306, 309, 410

  market value of, 240

  mottoes of, 326

  myths and legends about, 35, 52, 172, 222

  nepotism in, 4, 90

  off-balance-sheet vehicles at,
see
off-balance-sheet vehicles

  as overleveraged, 165

  P&L at, 138

  performance reviews at, 117–18, 123, 138, 152–53, 154, 224

  Policy Committee at, 328

  political contributions by, 87, 88

  postbankruptcy, 155, 218, 409

  PRC at, 63–64, 91, 121, 154, 215, 279, 335, 345, 372

  preferred stock of, 156

  profits of, 27, 44–45, 47, 60–61, 85, 92–94, 104–5, 108, 130–31, 133, 176, 179, 204, 230, 282, 295, 313, 384, 388,
403

  proxy statements of, 237–38, 322, 328

  public relations at, 262, 322, 326, 332, 339, 346, 352, 364, 371, 377, 384, 417

  reputation of, 76

  Research Group of, 192, 193

  retirement accounts and employee stock holdings, 241–42, 401, 414

  Risk Assessment and Control (RAC) at, 115–18, 129–30, 132, 141, 158, 181, 192–93, 195, 218, 220, 227, 246, 346, 373, 399

  risk-management manual of, 132, 133

  salaries and bonuses at, 138, 240–41,
397–98, 414;
see also
specific
individuals

  SEC filings of, 324, 354, 357, 394, 399–400, 401–2

  share buyback program at, 105

  shareholders in, 53, 380, 407, 409–10, 414

  skepticism toward, 321

  skyscraper built by, 239, 367, 378

  start-up mentality of, 372

  stock of, xxv, 85, 92–94, 98, 99, 102, 105, 109, 125–27, 150, 154, 156, 176, 187, 191, 192, 195, 220, 223, 229–45, 263, 288, 302, 306, 309, 313–14, 318, 320, 322–27, 329, 334, 336–38, 340, 342–56, 363–64, 366–67, 370, 371–72, 374–75, 378, 380, 385, 389, 391, 394, 395, 397, 401–3, 407, 409–10, 412, 415, 416, 420–21

  structured finance at, 149, 151

  tax-avoidance schemes of, 128–29, 289

  tax department at, 327

  tilted E logo of, 174

  trading at, 42, 43, 85, 125–26, 324,
330–31

  transaction support at, 142

  unkept promises of, 183

  Washington public-affairs office of, 86

  water business of,
see
Azurix

Enron Corporation board of directors, 68, 73, 124, 151, 220, 239, 277, 326, 366, 367

  audit committee of, 41, 115

  compensation committee of, 370

  Fastow’s finance vehicles and, 168, 169, 197–99, 200–201, 305, 306–7, 324, 376, 380, 393

  finance committee of, 198

  Lay and, 96–99, 314, 344–45, 349–50, 402–4, 415–16

  Mark and, 247, 253, 260–61

  Skilling’s resignation and, 342–43, 347

Enron Corporation Bonus Plan, 404

Enron Development, 70, 73–76, 80

Enron Economic Development Corporation, 202

Enron Energy Services (EES), 171–72, 175–84, 189, 213, 228, 255, 262, 263, 265, 299–304, 314, 321, 339, 346, 359, 364, 388, 396, 398, 404, 414, 417, 430

  bonus system at, 180

  commodity contracts at, 178

  energy management acquisitions of, 183

  layoffs at, 346, 353, 358–59

  losses at, 179, 300, 304, 333, 388, 416,
421

  Potemkin Village of, 179–80, 242

  RAC task force at, 301

  risk management staff at, 181

  total energy outsource contracts at, 178

  trading desk at, 181, 300, 304

Enron Europe, 73, 75, 103, 209, 216, 239, 388

Enron Field, 86, 367

Enron Finance, 35, 55–56

Enron Gas Marketing, 34, 56, 60

Enron Gas Services, 354

Enron Global Finance, 133–34, 148, 150–52, 156, 158, 161, 163, 164, 166, 168, 170, 196, 198, 212, 229, 237, 239, 249, 304–5, 308–9, 316, 327, 330, 335, 355, 413

Enron Global Power and Pipelines (EPP), 94–95, 132, 138

Enron Industrial Markets, 355, 377

Enron Intelligent Network, 187–88, 242, 286, 290

Enron International (EI), 44, 76–84, 158, 246, 247, 248, 251, 258–63, 290, 315, 322, 326, 333, 354, 387, 396

  balance sheet of, 77, 94–95

  compensation and bonuses at, 78–79, 95, 111, 180

  Dabhol project of, 79–83, 94, 102, 260, 315, 340, 342, 353, 366, 373, 399, 409

  end of, 260–61

  government financing for, 88–89

  Shell’s negotiations with, 112

  “snowballing” at, 77, 95

Enron Liquids Pipeline, 98

Enron Media Services, 226

Enron NetWorks, 211

Enron North America, 186, 193, 207, 213, 274, 275, 309, 333, 388, 413

Enron Oil, 15–25, 220

  bonuses at, 16, 17, 19

  corporate tax returns of, 24

  fake companies set up by,
see
Ilsa; Petropol; Southwest

  fraudulent accounting practices at, 21, 23

  profit shifting at, 18, 19, 21, 24

  scandal surrounding, 15, 47, 375

Enron Oil and Gas (EOG), 93–94, 101, 108, 109, 126, 245

  public offering of, 94

  spinoff of, 109–10

  stock of, 219

Enron Online (EOL), 221–24, 244, 379–80, 398, 403

Enron Power, 52, 53, 73, 96

“Enron Prepares to Become Easier to Read” (Smith and Emshwiller), 360

Enron Prize for Distinguished Public Service, xxiv, 240

Enron Services Handbook, 271

Enron West Power trading desk, 266, 269, 271–76, 278–79, 282–83, 300, 309, 339

Enron Wholesale, 276, 299, 300, 303, 334–35, 339, 387–88, 405

Enron Xcelerator, 302, 334

EOG,
see
Enron Oil and Gas

EPP,
see
Enron Global Power and Pipelines

equity analysts, 237, 340

equity investors, 189–90, 365

equity markets, 150, 154

equity offerings, 235

ERNB (Enron’s Rhythms Net Bet), 194

Ernst & Young, 148

EterniTV, 343, 344

Euromoney,
140

Evans, Donald, 385

Everglades, 254

Export-Import Bank, 74, 88–89

Exxon, 1, 5, 6, 7, 241

ExxonMobil, xxv, 241

fair market values, 205

Fallon, Jim, xiv, 334–35, 337, 404

FAS 125, 293

FAS 140, 157

Fastow, Andrew, xiii, xxiii, xxiv, 122, 131, 133–41, 143, 152, 156, 214, 227, 237, 264, 334, 335, 343, 347, 355, 357–58, 390, 425, 428

  Azurix deal of,
see
Marlin

  background and education of, 134

  Baxter’s concerns about, 152, 163, 333, 356, 408

  children of, 139, 170

  complex deals of, 133, 151, 155–56, 192, 383

  COO aspirations of, 353, 359

  deals of, 230, 251

  early career of, 136

  earnings and wealth of, 138, 165, 169–70, 201, 212, 313, 328, 362, 365–66, 376, 381, 414

  on EES board, 184

  EES financing and, 175–76, 182

  as Enron CFO, 136, 140–41, 143, 150–56, 189–90, 198, 200, 209, 311, 322–23, 329–30, 345, 353, 357, 360–62, 373–74, 379, 384–85

  Enron’s dependence on, 189

  equity offering proposed by, 150

  financial structures and deals created by, 141, 229

  firing as CFO of, 377–78, 380–81, 387,
391

 
Fortune
interview with, 322

  as head of corporate development, 328–29, 354

  homes of, 294, 354, 365

  indictments of, 411–12

  insecurity of, 139

  interpersonal skills of, 138

  investment banks and, 163–64, 165

  JEDI and, 67

  LJM consequences for, 371–77

  LJM sale of, 329–30, 353, 360

  performance reviews of, 138

  personal investments of, 165–70

  personality of, 139–40

  private equity funds of,
see
LJM

  Project Raptor and,
see
Project Raptor

  in retail-energy business, 138–39, 172