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Documentary Film Review: Enron, the Smartest Guys in the Room

Harlan D. Whatley

Based on a book co-authored by Fortune magazine writers Bethany McLean and Peter Elkind, Enron, the Smartest Guys in the Room exposes the corporate corruption behind the rise and fall of the former Houston, Texas based energy corporation, Enron. Founded in 1985 by Kenneth Lay, formerly one of the highest-paid executives in corporate America, the company rose to seven on the Fortune 500 list with its border-to-border and coast-to-coast gas pipeline. Enron’s real muscle, however, was its energy trading business, which was driven by both greed and testosterone. As just one example, the film features tape recordings of Enron traders, elated with how rich they were getting during the rolling blackouts in the state of California in 2000.

Another key player in the Enron scandal is former CEO and President Jeffrey Skilling, a slick sales- and confidence man who was a believer in “big new ideas” and was quite capable of selling them to Wall Street investment bankers and securities analysts. While on a conference call with market analysts and reporters, a financier asks Skilling why Enron is the only institution that can’t come up with a cash-flow statement or balance sheet after earnings are reported. Skilling thanks the man and then calls him an asshole. The incident made news in all of the financial trade publications and caused many to question Skilling’s ability to run Enron. Skilling, who was CEO for only six months, resigned unexpectedly in August of 2001, assuring employees and investors that Enron was in excellent financial shape and that his reason for leaving was strictly personal. In December of 2001, Enron filed for federal bankruptcy protection.

The third key player in the downfall of Enron, and perhaps the most devious, was former Chief Financial Officer, Andrew Fastow. As a young banker in Chicago, Fastow developed dynamic strategies for reducing company debt via public stock offerings and other securities. Essentially, Fastow created an elaborate labyrinth of shell companies and investment vehicles that allowed Enron’s quarterly earnings and stock price to constantly increase; this amounted to borrowing from Peter to pay Paul, or in the case of Enron, to pay Ken Lay, Jeff Skilling, and Andrew Fastow. Each of these men sold hundreds of millions of shares of Enron stock for their own personal gain, knowing that the revenues and profits of the company were nothing more than financial phantoms. Thousands of Enron employees lost their jobs and were left with pensions built atop worthless shares of Enron stock.

One of the good guys in this story is former Enron Vice President, Sherron Watkins, whose infamous “smoking gun” memo to Ken Lay outlines her concerns about internal accounting scandals that, she argued, could implode the company. Her testimony in the Enron congressional hearings were most damaging to Skilling and Lay, who will both stand trial in 2006. Ms. Watkins tells her story in a book appropriately titled Power Failure.

The documentary is directed and produced by Alex Gibney, whose previous non-fiction films include the blues doc, Lightning in a Bottle and The Trials of Henry Kissinger. Producers for the film include HDNet, a company that specializes in projects shot on high-definition video with budgets up to $2 million, and Magnolia Pictures, a division of Todd Wagner’s and Mark Cuban’s 2929 Entertainment, whose previous documentaries include Capturing the Friedmans and Control Room. The film premiered in Houston and New York City on Friday, April 24.

Harlan Whatley is an adjunct lecturer in the department of English and an MFA student in the Integrated Media Arts program at Hunter College.

James Trimarco
Editor-in-Chief