We all know in general terms what happened to Enron, but Kurt Eichenwald somehow manages to make this oft-told tale into a page turner in Conspiracy of Fools: A True Story. Although Eichenwald’s expansive use of dialog makes me wonder how closely the book adheres to its aspirational subtitle, his description of the research underlying the book and his attention to detail throughout give the book an air of believability. Still, if you want details about Enron’s accounting shenanigans, read The Smartest Guys in the Room or Power Failure (or one of the many academic papers out there describing Enron’s wild accounting), but if you love a great story, this is the Enron book for you.
Eichenwald’s ability to make the story compelling and suspenseful, even when we know the outcome, is enviable. He creates tension by unfolding the story slowly through thousands of vignettes, each recounting a conversation, an email, a recollection, an encounter, or a development that reveals Enron’s mounting troubles from the perspective of an omniscient insider. It is almost like a collection of polished research notes, and knowing the story in advance actually enhances understanding. (Indeed, if someone were coming to the Enron story for the first time through this book, they might justifiably complain that the book is disjointed.)
With Ken Lay, Jeff Skilling, and Richard Causey still awaiting trial, this book may shed light and the possible course of prosecution. In Eichenwald’s telling, the primary engineer of Enron’s demise was CFO Andy Fastow, who is portrayed as simultaneously incompetent and venal. He had plenty of help from other Enron employees like his wife Lea Fastow, "head of special projects" Michael Kopper, and treasurer-turned-lapdog Ben Glisan, all of whom are in prison or on their way. And then there are the outsiders, like David Duncan, Arthur Andersen’s sycophantic partner in charge of the Enron audit team. And the investment banks, which recently have been settling claims by Enron shareholders for billions of dollars.
But can we really lay primary blame for Enron at Andy Fastow’s feet? In Eichenwald’s version of the story, Ken Lay comes off as genial and willfully distant from the details of management. (Nelsonian blindness? Hardly!) But not criminal. Similarly, Jeff Skilling is portrayed as a person with enormous emotional baggage, but not criminal. Perhaps that’s why the indictment of Lay and Skilling (along with chief accountant Richard Causey) was so long in coming and so limited in reach.
In the end, you might come away from this book thinking that Enron is a perfect storm. A scheming deal guy (Fastow) wins the trust of an unwitting superior (Skilling), who is anointed for great things by the distant leader (Lay). Fastow follows Skilling up the management hierarchy, along the way assembling a team of minions whose gullibility and/or unscrupulousness enable him to pursue his strange and illogical accounting inventions and fleece the company of millions of dollars. Enron’s market power keeps outside monitors (most notably, the auditors and banks) at bay, and the company’s apparent success creates lax controls at the board and senior officer levels.
The only problem is that Enron wasn’t a perfect storm. Just think WorldCom, Tyco, Adelphia, etc. If Enron had been a solo scandal, Paul Sarbanes would be best remembered as the representative who introduced the first Article of Impeachment, for obstruction of justice, against President Richard Nixon, and Michael Oxley could be best remembered for … what? I have no idea. What makes this book so engrossing is that Enron has already happened many times over and, despite the work of Messrs. Sarbanes and Oxley, it will happen again. Probably sooner rather than later.Powered by Sidelines