Alex Gibney told PBS’s Travis Smiley that his film Enron: The Smartest Guys in the Room isn’t a story about numbers but a story about people, and from that perspective he accomplishes what he set out to do. But Gibney also manages to make an interesting film focused on economics, not generally the liveliest of subjects, with particular attention paid to a rejection of the supposed benefits of deregulation. The great accomplishment of Enron is that it addresses both its spoken and its unspoken issues in a way that draws the audience in.
It turns Kenneth Lay and Jeffrey Skilling — the two Enron magicians who made thousands of people’s retirement accounts disappear — into people with whom we’re able to empathize even as we become angrier about the disaster than most of us ever would have been. But more than that, the film reaches beyond history’s most confounding and destructive bankruptcy to address the environment that allowed a company to soar so high and fall so fast.
In laying out the background of the corporation, Gibney uses a speech by President Reagan to propel the story into motion while subtly criticizing what Reagan referred to as “the magic of the marketplace.” It follows through with proof of the unique relationship that Enron’s founder, Kenneth Lay, formed with the Bush family, casting blame on both Dubya and H.W. for cultivating an environment that allowed the “safeguards” of our economy to feed the “innovation” of a company that floated on a sea of fantasy funds.
There’s plenty of blame to go around, though; it’s shared among the corporation’s legal representation, its accounting firm, numerous financial institutions, and the U.S. government, making clear that the fall of Enron was not simply the fault of Lay and Skilling but a failure of the entire financial mechanism that maintains U.S. economic primacy. In short, it is a critique of the deregulation that Republican politicians consistently endorse as the most productive, efficient, and beneficial way to “grow” the U.S. economy.
The film shows that it took Enron, once the world’s seventh largest corporation, 16 years to grow from assets of $10 billion to $65 billion (with the help of billions in subsidies secured for the corporation by Bush Sr.) and only 24 days for its bogus accounting to unravel and send its stock price plummeting, and it points out that just as 20,000 employees lost their jobs so did they lose billions in pension and retirement funds. Surprisingly for a film whose politics are so transparent, Enron takes pains to make us understand the potential greatness of the company Lay founded in 1985. Enron was a place where risk and innovation were embraced and ambition was encouraged, where being the best wasn’t as important as recreating what being the best meant. But Gibney’s unspoken topic is always at equal pace with the story of Enron’s rise: Lay’s persistent push for deregulation, and his political clout that made that push successful, is threaded throughout as the crucial element of Enron’s fall.
The film’s first indictment is of Lay, who throughout this ordeal has portrayed himself as the dupe of rogue employees eager to make a buck; however, in a 1987 event known as the Vahalla Scandal, Lay oversaw a near-fall of his oil-money brainchild when two New York traders engaged in unethical and indecipherable accounting practices that netted massive revenue for the corporation. Though Lay would later claim to have been unaware what was going on, ex-Enron executive Mike Mickleroy offers that while he can’t speak of Lay’s knowledge of the corporate maneuverings of Skilling and CFO Andrew Fastow, who has forfeited $20 million to the government and been sentenced to 10 years in prison for having created hundreds of subsidiary companies into which he dumped Enron’s debt in order to prop up its stock, he’s absolutely certain of Lay’s knowledge of the Vahalla, N.Y., operations because he had informed the self-described naïf of the shady dealings himself.
It is the story of Skilling, however, that makes for the more compelling narrative. After Vahalla, Lay brought Skilling in to help lead the corporation into the future, and he did: He created the notion of trading natural gas, and he later led Enron’s effort to create a market to trade bandwidth, and with him at the helm Enron even began weather trading operations, something so bizarre it sounds like a joke. “Weather derivatives” “reduce the impact that adverse weather may have on your company’s bottom line” and were created in 1996 when Koch Energy and Enron swapped (I swear to God) Milwaukee, Wisconsin’s 1997 winter. (No, I don’t understand, either.) One of the first executives hired by Skilling, and a member of his inner-circle, was Amanda Martin-Brock, whose interview is worked into several sections of the film. She says that for Skilling, it is all about the idea: Once there’s an idea it should be exploited immediately before someone beats you to the punch.
This was accomplished using “mark-to-market” accounting, perhaps the most ludicrous possible way of running a business; Enron made a spoof of the accounting method it had recently adopted in which Skilling plays himself introducing a new sort of accounting to a superior: “hypothetical future value” accounting. This would be amusing had Enron not devastated so many.
Mark-to-market accounting allows estimated profits for deals to be recorded as such before they’re ever actually made. This allowed Enron to lose billions on deals that their books showed as being profitable and for which executives were given multi-million dollar bonuses. Perhaps the economists in the audience will take away something different from the film, but it seems like Enron wasn’t really anything but an idea — a place where money just seems to have appeared because Enron wrote a figure down in its books. Would that we all could apply mark-to-market accounting to our own lives: When I’m 45, I plan to be a multi-millionaire, so I’m going to go ahead and write that down as money I currently have. Unfortunately, if I did this the bank wouldn’t honor my checks because the money wouldn’t actually be there. But with Enron, analysts heaped praise upon them while banks kept giving them cash.
Though the explanations regarding Enron’s brilliantly flimsy accounting were fascinating, if astoundingly silly, the most compelling part of the film deals with the California blackouts of 2000 and 2001. Enron’s most pointed rebuttal of deregulation shows Skilling testifying that it would lower the cost of energy, followed by footage of crashes caused by failed traffic signals, of firemen rescuing people from the elevators of blacked-out buildings, and of businesses shuttered due to lack of electricity. Then the case is made against Enron — mostly with the words of its own employees. Tapes recently discovered feature Enron traders excitedly talking about how the California crisis was going to make Enron billions. There are conversations in which traders call electrical plants and have them shut down in order to create shortages and others in which the traders discuss exporting energy out of the state before a blackout and re-importing it afterward when its price had increased. The one-year energy crisis that Enron manufactured cost the state of California approximately $30 billion and disrupted the lives of millions of residents. My favorite moment in the film occurs in footage of a Senate hearing in which California Senator Barbara Boxer plays for Skilling a tape of “two traders — T-R-A-D-E-R-S” discussing some of Enron’s methods. It was purely for show, but were I a Senator from California, I might be inclined to label them traitors, as well.
Though many people will already be familiar with much of the Enron saga — the $1.2 billion in retirement funds and the $2 billion in pension funds that disappeared in a matter of weeks; the 20,000 employees who lost their jobs from Enron and the 29,000 others who lost their jobs when Enron’s accounting firm, Arthur Anderson, collapsed due to its role in the fraud; and the hundreds of millions of dollars that top executives stashed away for themselves during all this chaos — there is much here that was never reported in the mainstream media. The fall of Enron is a story about people, and a fascinating one, but above all else it is a cautionary tale of what happens when business is left completely to its own devices.
Ryan Lindsey previously wrote political commentary and the occasional movie review for Pajiba.
Film Reviews | May 13, 2006 | Comments ()