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Book Review: The Smartest Guys in the Room by Bethany McLean and Peter Elkind

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The Enron Headcount:

Kenneth Lay, Enron Founder – died of an acute myocardial infarction while on vacation in Colorado on July 6, 2006 while awaiting his sentencing for his convictions on six counts of conspiracy and fraud.

Jeffery Skilling, Enron CEO – scheduled to be sentenced on October 23, 2006 for his convictions on 19 counts of conspiracy, fraud, false statements and insider trading.

Andrew Fastow, Enron CFO – pled guilty to two counts of wire and securities fraud, and agreed to serve a ten-year prison sentence in exchange for his cooperation with federal authorities in the prosecutions of other former Enron executives. Fastow remains out of jail pending the investigation conclusion.

Richard Causey, Enron CAO – pled guilty to securities fraud. Causey is serving 7 years in prison and was forced pay $1.25 million to the U.S. Government.

Ben Glisan Jr., Enron Treasurer – pled guilty to one count of conspiracy to commit security and wire fraud. Glisan was the first Enron executive to go to prison.

J. Clifford Baxter, Fastow Capo – committed suicide, January 25, 2002, in Sugar Land, Texas.

Arthur Anderson, Accounting Firm – Driven out of Business by the U.S. government and the SEC.

This is just a short list, but it will do. Before the Enron debacle, the only public disgrace that could possible compare was Watergate. Enron is almost Biblical in its scale and loss. The rise and fall of this Enron is capably documented in The Smartest Guys in the Room by Fortune journalists Bethany McLean and Peter Elkind.

A leader in a field of books that include Kurt Eichenwald’s Conspiracy of Fools: A True Story, Loren Fox’s Enron: The Rise and Fall, and Mimi Swartz and whistle-blower Sherron Watkins’ Power Failure: The Inside Story of the Collapse of Enron, The Smartest Guys in the Room claims Jeffery Skilling as its overall sacrificial goat, Andrew Fastow as its brain-damaged Macbeth and Kenneth Lay as its impotent Lear.

The Smartest Guys in the Room shines its light on Jeff Skilling and Andrew Fastow and the endless (and mind-numbing) series of finance deals that propelled Enron toward business perdition. For the Harvard MBA (as most of the Enron upper Escalon were) this book is a long wet dream of business acronyms. In absence are specifics on the decadently flamboyant personalities and behaviors of the Enron leaders.

But no matter. McLean and Elkind do spin a compelling story of the intellectual hubris of Jeff Skilling, who is patently blamed for surrounding himself with highly individualistic (and highly flawed) people who basically made up the rules as they went along. The second personality fingered for responsibility is Andrew Fastow, whose finance architectures were as complex as felonious. Lay is presented as an out-of-touch shaman who presented himself as a charity circuit savior while his own world went to hell in a hand basket.

The Smartest Guys in the Room is not unlike the movie Titanic. The viewer must sit through two hours of movie before reaching the reason he or she went in the first place… to see the boat take on water. So with The Smartest Guys in the Room and Enron: the final third of the book takes a quarter of the time to read. When you finally get there, it is worth the wait.

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About C. Michael Bailey

I am sanctified and Southern fried, My mama tried and daddy cried; I tell the truth 'cept when I've lied And I like my huevos on the side...