Enron: The Smartest Guys in the Room
Encyclopedia
Enron: The Smartest Guys in the Room is a 2005
documentary film
based on the best-selling 2003
book of the same name by Fortune
reporters Bethany McLean
and Peter Elkind, a study of one of the largest business scandals in American history. McLean and Elkind are credited as writers of the film alongside the director, Alex Gibney
.
The film examines the 2001 collapse of the Enron Corporation, which resulted in criminal trials for several of the company's top executives; it also shows the involvement of the Enron traders in the California electricity crisis
. The film features interviews with McLean and Elkind, as well as former Enron executives and employees, stock analysts, reporters and the former Governor of California Gray Davis
.
The film won the Independent Spirit Award for Best Documentary Feature
and was nominated for Best Documentary Feature at the 78th Academy Awards
in 2006.
, who founded Enron in 1985. Two years later, Enron became embroiled in scandal after two traders began betting on the oil markets, resulting in suspiciously consistent profits for the company. Enron's CEO
, Louis Borget, was also discovered to be diverting company money to offshore accounts. After auditors uncovered their schemes, Lay encouraged them to "keep making us millions". However, the traders were fired after it was revealed that they gambled away Enron's reserves, nearly destroying the company. After these facts were brought to light, Lay denied having any knowledge of such wrongdoing.
Lay hired new CEO Jeffrey Skilling
, a visionary who joined Enron on the condition that they utilize mark-to-market accounting, allowing the company to book potential profits on certain projects immediately after the deals were signed, whether or not those projects turned out to be successful. Therefore, Enron could subjectively give the appearance of being a profitable company even if it wasn't. Skilling imposed his Darwinian worldview on Enron by establishing a review committee that graded employees and annually fired the bottom fifteen percent, who were deemed unsuitable for the company's objectives. This created a highly competitive and brutal working environment.
Skilling hired lieutenants who enforced his directives inside Enron, known as the "guys with spikes." They included J. Clifford Baxter
, an intelligent but manic-depressive executive; and Lou Pai
, the CEO of Enron Energy Services
. Pai was notorious for using shareholder money to feed his obsessive habit of visiting strip clubs, and for allegedly inviting strippers into his office and the Enron trading floor. Pai abruptly resigned from EES with $250 million, soon after selling his stock. Despite the amount of money Pai had made, the divisions he formerly ran lost $1 billion, a fact covered up by Enron. Pai used his money to buy a large ranch in Colorado
, becoming the second-largest landowner in the state.
With its success in the bull market brought on by the dot-com bubble
, Enron sought to beguile stock market analysts by meeting their projections. Executives pushed up their stock prices and then cashed in their multi-million dollar options in a process called "pump and dump
." Enron also mounted a PR
campaign to portray itself as profitable and stable, even though its worldwide operations were performing poorly. One major failure was the Dabhol Power Plant
in India
, which Enron built to defy an industry fear of investing in that country. However, Enron abandoned the plant when India couldn't afford the power it was producing, losing $1 billion. Elsewhere, Enron attempted to use broadband
technology to deliver movies on demand, and "trade weather" like a commodity; these initiatives also failed. However, using mark-to-market accounting, Enron recorded non-existent profits for these ventures.
Enron's successes continued as it became one of the few Internet
-related companies to survive the dot-com bubble burst in 2000, and was named as the "most admired" corporation by Fortune
magazine for the sixth year running. However, Jim Chanos, an Enron investor, and Bethany McLean
, a Fortune reporter, questioned irregularities about the company's financial statements and stock value. Skilling responded by calling McLean "unethical", and accusing Fortune of publishing her reporting to counteract a positive BusinessWeek
piece on Enron. Three Enron executives, including CFO
Andrew Fastow
, met with McLean and her Fortune editor to explain the company's finances.
Fastow created a network of shell companies that were designed to solely do business with Enron, for the ostensible dual purposes sending Enron money and hiding its increasing debt. However, unbeknownst to Lay and Skilling, Fastow had a vested financial stake in these ventures, using them to defraud Enron of tens of millions of dollars. Fastow also took advantage of the greed of Wall Street
investment banks such as CitiBank
and Merrill Lynch
, pressuring them into investing in his shell entities and, in effect, conduct business deals with himself.
, based on 115 reviews; on Metacritic
, it has a "Universal Acclaim" rating of 82%, based on 37 reviews. Film critic Roger Ebert
, writing in the Chicago Sun-Times
, gave the documentary three-and-a-half out of four stars, commenting that, "This is not a political documentary. It is a crime story. No matter what your politics, Enron: The Smartest Guys in the Room will make you mad". Ebert's co-host on the television program Ebert & Roeper
, Chicago Tribune
critic Richard Roeper
, said that the documentary was "a brilliantly executed, brutally entertaining dissection of what one observer called the greatest corporate fraud in American history." A. O. Scott
of The New York Times
called the film a "sober, informative chronicle of the biggest business scandal of the decade is almost indecently entertaining."
An edited version of the film aired on the PBS
documentary series Independent Lens
. It was nominated for an Academy Award for Best Documentary Feature at the 78th Academy Awards
in 2006, but lost to March of the Penguins
.
2005 in film
- Highest-grossing films :Please note that following the tradition of the English-language film industry, these are the top-grossing films that were first released in the United States in 2005...
documentary film
Documentary film
Documentary films constitute a broad category of nonfictional motion pictures intended to document some aspect of reality, primarily for the purposes of instruction or maintaining a historical record...
based on the best-selling 2003
2003 in literature
The year 2003 in literature involved some significant events and new books.-New books:*Peter Ackroyd - The Clerkenwell Tales*Atsuko Asano - No...
book of the same name by Fortune
Fortune (magazine)
Fortune is a global business magazine published by Time Inc. Founded by Henry Luce in 1930, the publishing business, consisting of Time, Life, Fortune, and Sports Illustrated, grew to become Time Warner. In turn, AOL grew as it acquired Time Warner in 2000 when Time Warner was the world's largest...
reporters Bethany McLean
Bethany McLean
Bethany McLean is a contributing editor to Vanity Fair magazine, and known for her work on the Enron scandal and the 2008 financial crisis...
and Peter Elkind, a study of one of the largest business scandals in American history. McLean and Elkind are credited as writers of the film alongside the director, Alex Gibney
Alex Gibney
Alex Gibney is an American documentary film director and producer. In 2010, Esquire magazine said Gibney "is becoming the most important documentarian of our time."...
.
The film examines the 2001 collapse of the Enron Corporation, which resulted in criminal trials for several of the company's top executives; it also shows the involvement of the Enron traders in the California electricity crisis
California electricity crisis
The California electricity crisis, also known as the Western U.S. Energy Crisis of 2000 and 2001 was a situation in which California had a shortage of electricity caused by market manipulations and illegal shutdowns of pipelines by Texas energy consortiums...
. The film features interviews with McLean and Elkind, as well as former Enron executives and employees, stock analysts, reporters and the former Governor of California Gray Davis
Gray Davis
Joseph Graham "Gray" Davis, Jr. is an American Democratic politician who served as California's 37th Governor from 1999 until being recalled in 2003...
.
The film won the Independent Spirit Award for Best Documentary Feature
Independent Spirit Award for Best Documentary Feature
The Independent Spirit Award for Best Documentary Feature is one of the annual Independent Spirit Awards.-2000s:*2000: Dark Days**The Eyes of Tammy Faye**Long Night's Journey into Day**Paragraph 175**Sound and Fury...
and was nominated for Best Documentary Feature at the 78th Academy Awards
78th Academy Awards
The 78th Academy Awards honored the best films of 2005 and were held on March 5, 2006, at the Kodak Theatre in Hollywood, California. They were hosted by The Daily Show host Jon Stewart, with Tom Kane making his first appearance as the show's announcer...
in 2006.
Cast
- Peter CoyotePeter CoyotePeter Coyote is an American actor, author, director, screenwriter and narrator of films, theatre, television and audio books. His voice work includes narrating the opening ceremony of the 2002 Winter Olympics and Apple's iPad campaign. He has also served as on-camera co-host of the 2000 Oscar...
(narrator) - Bethany McLeanBethany McLeanBethany McLean is a contributing editor to Vanity Fair magazine, and known for her work on the Enron scandal and the 2008 financial crisis...
– FortuneFortune (magazine)Fortune is a global business magazine published by Time Inc. Founded by Henry Luce in 1930, the publishing business, consisting of Time, Life, Fortune, and Sports Illustrated, grew to become Time Warner. In turn, AOL grew as it acquired Time Warner in 2000 when Time Warner was the world's largest...
reporter; co-author, The Smartest Guys in the Room - Peter Elkind—co-author, The Smartest Guys in the Room
- Sherron WatkinsSherron WatkinsSherron Watkins was Vice President of Corporate Development at the Enron Corporation. She is considered by many to be the whistleblower who helped to uncover the Enron scandal in 2001....
– Enron whistleblowerWhistleblowerA whistleblower is a person who tells the public or someone in authority about alleged dishonest or illegal activities occurring in a government department, a public or private organization, or a company...
; co-author, Power Failure - Mimi Swartz—co-author, Power Failure
- Mike Muckleroy—former Enron executive
- Amanda Martin—former Enron executive
- Charles Wickman—former Enron trader
- Colin Whitehead—former Enron trader
- John Beard—former Enron accountant
- Max Eberts—former spokesman, Enron Energy ServicesEnron Energy ServicesEnron Energy Services was a business unit of Enron Corporation, whose purpose was to provide gas, electricity, and energy management directly to businesses and homes. Enron compared the service to choosing a telecommunications company to provide your house with a phone line. Consumers would be...
- Bill Lerach – attorney for Enron stockholders
- Gray DavisGray DavisJoseph Graham "Gray" Davis, Jr. is an American Democratic politician who served as California's 37th Governor from 1999 until being recalled in 2003...
– former governor of CaliforniaCaliforniaCalifornia is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...
Synopsis
The film begins with a profile of Kenneth LayKenneth Lay
Kenneth Lee "Ken" Lay was an American businessman, best known for his role in the widely reported corruption scandal that led to the downfall of Enron Corporation. Lay and Enron became synonymous with corporate abuse and accounting fraud when the scandal broke in 2001...
, who founded Enron in 1985. Two years later, Enron became embroiled in scandal after two traders began betting on the oil markets, resulting in suspiciously consistent profits for the company. Enron's CEO
Chief executive officer
A chief executive officer , managing director , Executive Director for non-profit organizations, or chief executive is the highest-ranking corporate officer or administrator in charge of total management of an organization...
, Louis Borget, was also discovered to be diverting company money to offshore accounts. After auditors uncovered their schemes, Lay encouraged them to "keep making us millions". However, the traders were fired after it was revealed that they gambled away Enron's reserves, nearly destroying the company. After these facts were brought to light, Lay denied having any knowledge of such wrongdoing.
Lay hired new CEO Jeffrey Skilling
Jeffrey Skilling
Jeffrey Keith "Jeff" Skilling is the former president of Enron Corporation, headquartered in Houston, Texas. In 2006 he was convicted of multiple federal felony charges relating to Enron's financial collapse, and is currently serving a 24-year, four-month prison sentence at the Federal...
, a visionary who joined Enron on the condition that they utilize mark-to-market accounting, allowing the company to book potential profits on certain projects immediately after the deals were signed, whether or not those projects turned out to be successful. Therefore, Enron could subjectively give the appearance of being a profitable company even if it wasn't. Skilling imposed his Darwinian worldview on Enron by establishing a review committee that graded employees and annually fired the bottom fifteen percent, who were deemed unsuitable for the company's objectives. This created a highly competitive and brutal working environment.
Skilling hired lieutenants who enforced his directives inside Enron, known as the "guys with spikes." They included J. Clifford Baxter
J. Clifford Baxter
John Clifford "Cliff" Baxter was a former Enron Corporation executive who resigned in May 2001. He sold $30 million worth of Enron stock during the months prior to Enron's bankruptcy. Reportedly, Baxter clashed with CEO Jeffrey Skilling over questionable Enron business practices...
, an intelligent but manic-depressive executive; and Lou Pai
Lou Pai
Lou Lung Pai born Nanjing China 1946, is a Chinese-American businessman and former Enron executive. He was CEO of Enron Energy Services and Enron Xcelerator, a venture capital division of Enron. He left Enron with over $250 million...
, the CEO of Enron Energy Services
Enron Energy Services
Enron Energy Services was a business unit of Enron Corporation, whose purpose was to provide gas, electricity, and energy management directly to businesses and homes. Enron compared the service to choosing a telecommunications company to provide your house with a phone line. Consumers would be...
. Pai was notorious for using shareholder money to feed his obsessive habit of visiting strip clubs, and for allegedly inviting strippers into his office and the Enron trading floor. Pai abruptly resigned from EES with $250 million, soon after selling his stock. Despite the amount of money Pai had made, the divisions he formerly ran lost $1 billion, a fact covered up by Enron. Pai used his money to buy a large ranch in Colorado
Colorado
Colorado is a U.S. state that encompasses much of the Rocky Mountains as well as the northeastern portion of the Colorado Plateau and the western edge of the Great Plains...
, becoming the second-largest landowner in the state.
With its success in the bull market brought on by the dot-com bubble
Dot-com bubble
The dot-com bubble was a speculative bubble covering roughly 1995–2000 during which stock markets in industrialized nations saw their equity value rise rapidly from growth in the more...
, Enron sought to beguile stock market analysts by meeting their projections. Executives pushed up their stock prices and then cashed in their multi-million dollar options in a process called "pump and dump
Pump and dump
"Pump and dump" is a form of microcap stock fraud that involves artificially inflating the price of an owned stock through false and misleading positive statements, in order to sell the cheaply purchased stock at a higher price....
." Enron also mounted a PR
Public relations
Public relations is the actions of a corporation, store, government, individual, etc., in promoting goodwill between itself and the public, the community, employees, customers, etc....
campaign to portray itself as profitable and stable, even though its worldwide operations were performing poorly. One major failure was the Dabhol Power Plant
Dabhol Power Company
The Dabhol Power Company was a company based in India, formed to manage and operate the Dabhol Power Plant. The Dabhol plant was built through the combined effort of Enron, GE, and Bechtel...
in India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
, which Enron built to defy an industry fear of investing in that country. However, Enron abandoned the plant when India couldn't afford the power it was producing, losing $1 billion. Elsewhere, Enron attempted to use broadband
Broadband
The term broadband refers to a telecommunications signal or device of greater bandwidth, in some sense, than another standard or usual signal or device . Different criteria for "broad" have been applied in different contexts and at different times...
technology to deliver movies on demand, and "trade weather" like a commodity; these initiatives also failed. However, using mark-to-market accounting, Enron recorded non-existent profits for these ventures.
Enron's successes continued as it became one of the few Internet
Internet
The Internet is a global system of interconnected computer networks that use the standard Internet protocol suite to serve billions of users worldwide...
-related companies to survive the dot-com bubble burst in 2000, and was named as the "most admired" corporation by Fortune
Fortune (magazine)
Fortune is a global business magazine published by Time Inc. Founded by Henry Luce in 1930, the publishing business, consisting of Time, Life, Fortune, and Sports Illustrated, grew to become Time Warner. In turn, AOL grew as it acquired Time Warner in 2000 when Time Warner was the world's largest...
magazine for the sixth year running. However, Jim Chanos, an Enron investor, and Bethany McLean
Bethany McLean
Bethany McLean is a contributing editor to Vanity Fair magazine, and known for her work on the Enron scandal and the 2008 financial crisis...
, a Fortune reporter, questioned irregularities about the company's financial statements and stock value. Skilling responded by calling McLean "unethical", and accusing Fortune of publishing her reporting to counteract a positive BusinessWeek
BusinessWeek
Bloomberg Businessweek, commonly and formerly known as BusinessWeek, is a weekly business magazine published by Bloomberg L.P. It is currently headquartered in New York City.- History :...
piece on Enron. Three Enron executives, including CFO
Chief financial officer
The chief financial officer or Chief financial and operating officer is a corporate officer primarily responsible for managing the financial risks of the corporation. This officer is also responsible for financial planning and record-keeping, as well as financial reporting to higher management...
Andrew Fastow
Andrew Fastow
Andrew Stuart Fastow was the chief financial officer of Enron Corporation that was based in Houston, Texas until the U.S. Securities and Exchange Commission opened an investigation into his and the company's conduct in 2001...
, met with McLean and her Fortune editor to explain the company's finances.
Fastow created a network of shell companies that were designed to solely do business with Enron, for the ostensible dual purposes sending Enron money and hiding its increasing debt. However, unbeknownst to Lay and Skilling, Fastow had a vested financial stake in these ventures, using them to defraud Enron of tens of millions of dollars. Fastow also took advantage of the greed of Wall Street
Wall Street
Wall Street refers to the financial district of New York City, named after and centered on the eight-block-long street running from Broadway to South Street on the East River in Lower Manhattan. Over time, the term has become a metonym for the financial markets of the United States as a whole, or...
investment banks such as CitiBank
Citibank
Citibank, a major international bank, is the consumer banking arm of financial services giant Citigroup. Citibank was founded in 1812 as the City Bank of New York, later First National City Bank of New York...
and Merrill Lynch
Merrill Lynch
Merrill Lynch is the wealth management division of Bank of America. With over 15,000 financial advisors and $2.2 trillion in client assets it is the world's largest brokerage. Formerly known as Merrill Lynch & Co., Inc., prior to 2009 the firm was publicly owned and traded on the New York...
, pressuring them into investing in his shell entities and, in effect, conduct business deals with himself.
Reception
Upon release, Enron: The Smartest Guys in the Room was met with strongly positive reviews. The film has a "Certified Fresh" rating of 97% on Rotten TomatoesRotten Tomatoes
Rotten Tomatoes is a website devoted to reviews, information, and news of films—widely known as a film review aggregator. Its name derives from the cliché of audiences throwing tomatoes and other vegetables at a poor stage performance...
, based on 115 reviews; on Metacritic
Metacritic
Metacritic.com is a website that collates reviews of music albums, games, movies, TV shows and DVDs. For each product, a numerical score from each review is obtained and the total is averaged. An excerpt of each review is provided along with a hyperlink to the source. Three colour codes of Green,...
, it has a "Universal Acclaim" rating of 82%, based on 37 reviews. Film critic Roger Ebert
Roger Ebert
Roger Joseph Ebert is an American film critic and screenwriter. He is the first film critic to win a Pulitzer Prize for Criticism.Ebert is known for his film review column and for the television programs Sneak Previews, At the Movies with Gene Siskel and Roger Ebert, and Siskel and Ebert and The...
, writing in the Chicago Sun-Times
Chicago Sun-Times
The Chicago Sun-Times is an American daily newspaper published in Chicago, Illinois. It is the flagship paper of the Sun-Times Media Group.-History:The Chicago Sun-Times is the oldest continuously published daily newspaper in the city...
, gave the documentary three-and-a-half out of four stars, commenting that, "This is not a political documentary. It is a crime story. No matter what your politics, Enron: The Smartest Guys in the Room will make you mad". Ebert's co-host on the television program Ebert & Roeper
Ebert & Roeper
At the Movies was a movie review television program produced by Disney-ABC Domestic Television in which two film critics shared their opinions of newly released films. The program aired under various names...
, Chicago Tribune
Chicago Tribune
The Chicago Tribune is a major daily newspaper based in Chicago, Illinois, and the flagship publication of the Tribune Company. Formerly self-styled as the "World's Greatest Newspaper" , it remains the most read daily newspaper of the Chicago metropolitan area and the Great Lakes region and is...
critic Richard Roeper
Richard Roeper
Richard E. Roeper is an American columnist and film critic for The Chicago Sun-Times and now a co-host on The Roe Conn Show on WLS-AM...
, said that the documentary was "a brilliantly executed, brutally entertaining dissection of what one observer called the greatest corporate fraud in American history." A. O. Scott
A. O. Scott
Anthony Oliver Scott, known as A. O. Scott , is an American journalist and critic. He is a chief film critic for The New York Times, along with Manohla Dargis.-Background and education:...
of The New York Times
The New York Times
The New York Times is an American daily newspaper founded and continuously published in New York City since 1851. The New York Times has won 106 Pulitzer Prizes, the most of any news organization...
called the film a "sober, informative chronicle of the biggest business scandal of the decade is almost indecently entertaining."
An edited version of the film aired on the PBS
Public Broadcasting Service
The Public Broadcasting Service is an American non-profit public broadcasting television network with 354 member TV stations in the United States which hold collective ownership. Its headquarters is in Arlington, Virginia....
documentary series Independent Lens
Independent Lens
Airing weekly on PBS through ITVS, the Emmy Award-winning series Independent Lens introduces new drama and documentary films made by independent filmmakers. Past seasons of Independent Lens have been presented by hosts Angela Bassett, Don Cheadle, Susan Sarandon, Edie Falco, Terrence Howard, Maggie...
. It was nominated for an Academy Award for Best Documentary Feature at the 78th Academy Awards
78th Academy Awards
The 78th Academy Awards honored the best films of 2005 and were held on March 5, 2006, at the Kodak Theatre in Hollywood, California. They were hosted by The Daily Show host Jon Stewart, with Tom Kane making his first appearance as the show's announcer...
in 2006, but lost to March of the Penguins
March of the Penguins
March of the Penguins is a 2005 French nature documentary film. It was directed and co-written by Luc Jacquet, and co-produced by Bonne Pioche and the National Geographic Society. The film depicts the yearly journey of the emperor penguins of Antarctica...
.
See also
- Enron scandalEnron scandalThe Enron scandal, revealed in October 2001, eventually led to the bankruptcy of the Enron Corporation, an American energy company based in Houston, Texas, and the dissolution of Arthur Andersen, which was one of the five largest audit and accountancy partnerships in the world...
- Timeline of the Enron scandalTimeline of the Enron scandal-1985:Kenneth Lay seized control in 1985 of HNG/Internorth created by the merger of Houston Natural Gas and the much larger and more diversified InterNorth, which combined four natural gas pipeline companies, Northern Natural Gas, Transwestern Pipeline, Florida Gas Transmission, and Houston...
- The Corporation
- Conspiracy of FoolsConspiracy of FoolsConspiracy of Fools is a book by Kurt Eichenwald detailing the Enron scandal. It was published in 2005 when Eichenwald was a business journalist with The New York Times.- Synopsis :...
- List of documentaries
External links
- ENRON: The Smartest Guys in the Room site for Independent LensIndependent LensAiring weekly on PBS through ITVS, the Emmy Award-winning series Independent Lens introduces new drama and documentary films made by independent filmmakers. Past seasons of Independent Lens have been presented by hosts Angela Bassett, Don Cheadle, Susan Sarandon, Edie Falco, Terrence Howard, Maggie...
on PBSPublic Broadcasting ServiceThe Public Broadcasting Service is an American non-profit public broadcasting television network with 354 member TV stations in the United States which hold collective ownership. Its headquarters is in Arlington, Virginia.... - Rotten Tomatoes
- Geneon Japan's Official Enron: The Smartest Guys in the Room sales site (Japanese)
- Magna Pacific/Dendy's Official Enron: The Smartest Guys in the Room Australia/New Zealand sales site
- Synopsis