Conspiracy of Fools
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The collapse of Enron's house of cards
REVIEW BY EDWARD MORRIS Surely at some time in its tawdry history, Enron or one of its myriad corporate affiliates must have produced, developed or delivered some product or service to someone who wanted it and otherwise would have gone without. But from reading Conspiracy of Fools, Kurt Eichenwald's microscopic account of the rise and fall of the Houston-based energy company, one is likely to conclude that the sole mission of its top executives was to find quasi-legal ways of collecting money through stock sales and loans and keeping as much as possible for themselves. The chief players in this boardroom (and bedroom) drama are by now legendary: company founder Kenneth Lay, former CEO Jeffrey Skilling and ex-CFO Andrew Fastow. Fastow and his wife have by now been sentenced to prison. Lay and Skilling are indicted and awaiting trial. Although Enron's story is more convoluted that a Medici revenge plot, Eichenwald, who covered the company's downfall for the New York Times, spins out the essential facts of the story—both business and personal—in quick, colorful scenes. He recreates the dialogue of the principal characters as deftly and convincingly as if he had been at their elbows taking notes. However, some of the scams Fastow devised to enrich himself as he hustled money for Enron's shaky ventures are almost beyond understanding, a factor that helps explain why it took so long for this house of cards to tumble. Eichenwald, author of the 2000 bestseller The Informant, describes Enron as a triumph of concept over principle. Once an executive got an idea for a business deal—no matter how far-fetched it was—the next step was to bend the law, industry regulations and accounting principles to that vision. By 1998, Eichenwald writes, "Enron was becoming a virtual cult of creativity . . . . New ideas were celebrated for their newness, for their potential; tried-and-true businesses like the pipelines [Enron's original work] were almost derided. This was a company where a thousand flowers bloomed, where the only impediment to pursuing a new business was initiative. The usual controls—expense limits, financing constraints—vanished." Apart from chronicling Enron's institutional hubris, the author also details how the SEC was responding to America's corporate excesses at the time, first under its chairman, Arthur Levitt, and subsequently under Bush appointee Harvey Pitt. Eichenwald outlines Lay's cozy relationship with the Bush family but doesn't suggest that it gained him any special protection. Of the many vivid scenes in Eichenwald's 750-page account, these two linger: on the afternoon of April 7, 1999, Lay poses for photos with Drayton McLane, owner of the Houston Astros, and announces that his company has just pledged $100 million to name the new Astros ballpark "Enron Field." In the very early morning of Dec. 2, 2001, a paralegal in a nearly deserted Houston law office clicks the "submit" button to file papers that declare Enron is officially bankrupt.
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