We bring you an excerpt from the documentary "Enron–The Smartest Guys in the Room"–based on the book of the same name by Bethany McLean and Peter Elkind. [includes rush transcript]
We bring you an excerpt from the documentary "Enron–The Smartest Guys in the Room." It is based on the book of the same name by Bethany McLean and Peter Elkind. In this excerpt, Enron founder Kenneth Lay talks about the state of Enron to a roomful of employees. The date was October 22, 2001 — a week after the Securities and Exchange Commission sent a letter to Enron asking for information on the company’s third-quarter losses.
- Enron–The Smartest Guys in the Room, excerpt of documentary.
- See website: * EnronMovie.com*
This is a rush transcript. Copy may not be in its final form.
AMY GOODMAN: I want to turn now to an excerpt of the documentary, Enron: The Smartest Guys in the Room. It’s based on the book by the same name by Bethany McLean and Peter Elkind. In this excerpt, Enron founder Ken Lay talks about the state of Enron to a room full of Enron employees. The date was October 22, 2001, a week after the Securities and Exchange Commission sent a letter to Enron asking for information on the company’s third quarter losses.
KEN LAY: As you can, of course, see the underlying fundamentals of our businesses are very strong, indeed the strongest they’ve ever been. But regrettably, that’s not what Wall Street is focusing on, and I doubt that’s what you’re focusing on. This inquiry will take a lot of time on the part of our accountants and lawyers and others, but it will finally put these issues to rest.
NARRATOR: At the very moment Ken Lay was talking to employees, only a few blocks away, Enron’s accounting firm, Arthur Andersen, had begun destroying its Enron files. On October 23, Andersen shredded more than one ton of paper.
KEN LAY: Despite the rumors, despite the speculation, the company is doing well, both financially and operationally.
SHERRON WATKINS: He was making all kinds of statements, reassuring employees, and not just employees, reassuring investors we have no accounting irregularities, the company is in the best shape it’s ever been in.
KEN LAY: From the standpoint of Enron stock, we’re going to bring it back. We’re going to bring it back. All right, we’re down to questions, and I’ve got a few up here. "I would like to know if you are on crack. If so, that would explain a lot. If not, you may want to start, because it’s going to be a long time before we trust you again."
UNIDENTIFIED MAN 1: It certainly wasn’t clear to anyone at Enron, much less anyone outside of Enron. It wasn’t really clear what was going on or what was going to happen.
KEN LAY: I know this is a lot — there’s a lot of speculation about Andy’s involvement. I and the board are also sure that Andy has operated in the most ethical and appropriate manner possible.
NARRATOR: The next day, Andy Fastow was fired, when the Enron board discovered that he had made more than $45 million from his LJM partnerships.
REP. JIM GREENWOOD: The question, Mr. Fastow, is how could you believe that your actions were in any way consistent with your fiduciary duties to Enron and its shareholders or with common sense notions of corporate ethics and propriety? How do you answer, sir?
ANDREW FASTOW: Mr. Chairman, on the advice of my counsel, I respectfully decline to answer the questions, based on the protection afforded me under the United States Constitution.
SHERRON WATKINS: Andy, in many ways, I think he was set up as the fall guy. All of the Enron executives were saying, "There’s your man, Andy Fastow. He’s the crook. You know, he’s the one that stole from Enron, stole from LJM> He’s the one that cooked the books. Go after him."
MAX EBERTS: I’ve thought about this and thought about this, and it couldn’t have just been a few executives at Enron that made this happen. If you think of the banks involved — Chase, Morgan, Citibank — the billions in loans, Arthur Andersen. What about Vinson & Elkins, the lawyers that represented us? There had to have been complicity across the board, because it was all too easy.
AMY GOODMAN: Enron: The Smartest Guys in the Room, an excerpt. It was produced and directed by Alex Gibney. Our guests are Robert Bryce, Pipe Dreams, and Greg Palast, Armed Madhouse. Greg, this is the point you were making about it being larger than Enron.
GREG PALAST: Yeah. I mean, basically the co-conspirators, the rest of the mob, was breaking out champagne yesterday, because they said, "We’re off the hook." This should have been the beginning of new indictments, and like I say, the only new indictment are the guys that went after Enron, the law firm that sued Enron for its shenanigans. Milberg Weiss was put up. It was clearly political prosecution to say "We’re going to go after the guys who went after Enron," and yet you heard the list. You had the law firm Vinson & Elkins, you had Arthur Andersen, you had a whole crew of characters who got off scot-free here.
And what’s even worse is that the game continues. See, the last Ken Lay — and this is important to understand — was a guy named Sam Insull. In 1930, all those companies called Edison were actually started by Sam, who was the Ken Lay of his time, watered the stock, played games with the books, overcharged customers. F.D.R. came into office, had the guy busted, but even more, he says, "I’m not just going after the criminal. I’m going after the crime." And F.D.R. changed the law to say we’re going to prohibit price gouging by these power pirates. We are going to prohibit them from flickering the light switches. They keep those lights on. No more freezing Grandma Millie, okay? And third — this is the big one — the law under Franklin Roosevelt said you cannot make political donations if you’re a big power company.
Now, Ken Lay slithered around that to give the big bucks to the Bush family. I mean, the law says they can’t do that, you have to understand. He was the number one giver, when the law says you can’t give. And in 2005, Bush made it official by repealing the F.D.R. Public Utility Holding Company Act, which barred these contributions by power companies to politicians. In other words, basically they just opened up the game, they threw Lay and Skilling to the dogs, to the crowd, and the game continues on.
AMY GOODMAN: Robert Bryce, you talk extensively about the similarities between the Bush administration and Enron.
ROBERT BRYCE: Sure. Let me make one point I think that we’ve missed here. It’s not just the Bush administration, as well. I mean, Congress had a hand in allowing Enron to do what it did. Let’s look at the case of Phil Gramm. Phil Gramm was the one who carried legislation that allowed Enron to do a lot of the things it did and avoid federal oversight at the same time that his wife, Wendy, was on Enron’s board.
AMY GOODMAN: Phil Gramm, the former Texas senator.
ROBERT BRYCE: Former senator from Texas. So Enron had tremendous power in Congress, as well, that allowed it to operate with a free hand in the energy trading business and to operate really as an unregulated commodities broker, an unregulated commodities exchange.
AMY GOODMAN: Just one second, because I spoke over you. I spoke over you. The former Texas senator Phil Gramm’s wife, Wendy, say again her role.
ROBERT BRYCE: She was on the board at Enron at the same time that Gramm was in the Senate sponsoring legislation that benefited Enron. Not only did Gramm not recuse himself, he sponsored legislation that effectively allowed Enron to operate as an unregulated commodities exchange. So, I mean, there’s plenty of — Enron’s money corrupted a lot of elements of government, and it wasn’t just the Bush administration. I’m not saying that to excuse the Bush administration, because, I mean, when you look at Enron and you look at the Bush administration, you see the similarities. Both operated with this clear idea that they were going to change the world, that the world was going to follow their new business model and that that was going to change the world forever.
What else? Well, they launched brutal attacks on anybody who doubted any of their programs. They had huge surges in debt that they covered up with creative accounting. We see that now with the Bush administration, creating some of the largest deficits in American history of any presidency in American history, and also just this idea that they were on a religious mission. This was — their business model was going to change the world. No one could doubt them. Anyone who did was immediately cast aside. And in a word, it’s the same commodity, the same trait that brought down Enron is the defining trait of the Bush administration, and that’s hubris. It’s the Greeks’ fatal flaw. And I think that that clearly came home to roost with Lay and Skilling, and I think eventually it’s going to come home to roost with the Bush administration.
AMY GOODMAN: Greg Palast.
GREG PALAST: Well, what you have here is economic political gangsterism, which has now seized control of the government. You can’t look at it any other way. We have a system in which basically, instead of — that basically, just like the mob, is able the rewrite the laws, pick the judges. They have decriminalized what we call deregulation, Ken lay’s great gift to America, deregulation of industry. And it’s not just electricity, okay, it’s deregulation of industry. His great gift is really decriminalization of price gouging, of monopoly abuse, of economic abuse. These guys still have California by the light bulbs, and as deregulation disease is spreading across the nation, still 24 states have deregulated their power markets. The march continues on.
And you have to understand the other problems that have occurred here. It used to be that these guys had to keep the lights on and keep track of the money that they took from you to keep your lights on. Well, that game is over now. We had a blackout, if you remember, a couple years ago, and that was because these companies had literally sucked the cash out of these firms and fired all their workers to keep the money that you pay to keep your lights on. And Bush’s response and Dick Cheney’s response and Congress’s response was further deregulation; that is, further decriminalization of sucking the money and lifeblood out of these power companies. So, this is just — you have to understand, is that basically what we’ve done is we’ve decriminalized the rip-off of the consumer.
AMY GOODMAN: And finally, in the last few seconds we have, Robert Bryce, author of Pipe Dreams, the workers, what do they gain by all of this?
ROBERT BRYCE: Well, the workers at Enron gain nothing. I mean, you know, they gained a little bit of satisfaction, but I know a lot of these people who are former Enron employees, some of them I know still haven’t been able to find work after losing not only their jobs, their life savings, and in many cases their reputations. Just having worked at Enron became a blot on their resume. So I think in Houston and here in Texas, I think there’s a lot of satisfaction to see Lay and Skilling convicted. But if I can just add one other thing, this game isn’t over yet. There’s certain to be an appeal, and there’s a possibility of an overturn here, because of the judge’s jury instructions, which were fairly open-ended and were similar to the instructions given in the Arthur Andersen trial, which was then overturned at the Supreme Court, so while I’m pleased —
AMY GOODMAN: We’re going to have to leave it there, Robert Bryce. We’re going to have to leave it there. Robert Bryce, author of Pipe Dreams, Greg Palast, author of Armed Madhouse. Skilling and Lay will be sentenced on September 11th.
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