An Insider's Tale of Enron's Toxic Culture

By Wendy Zellner


The Inside Story of

the Collapse of Enron

By Mimi Swartz with Sherron Watkins

Doubleday -- 386pp -- $26

Anyone who has been following the Enron story probably grasps the major elements behind the energy trader's spectacular collapse in 2001 -- the unbridled greed, the byzantine financial deals, and the toothless watchdogs at Arthur Andersen. The latest book on Enron's fall, Power Failure: The Inside Story of the Collapse of Enron, doesn't add much to the big picture. But with the help of former insider and Enron Corp. whistle-blower Sherron Watkins, author and Texas Monthly Executive Editor Mimi Swartz paints the most detailed portrait yet of the company's ambitious executives and toxic culture.

Surprisingly, perhaps, Watkins -- who appeared on Time's cover as one of its "2002 Persons of the Year" -- is not portrayed as an indisputable hero in the book that carries her name. Indeed, she's a good example of how Enron co-opted and silenced so many people for so long. Time after time, Watkins witnesses questionable accounting and business ethics -- long before she wrote her now-famous letter to Enron Chairman Kenneth Lay in 2001 warning him of the impending scandal. Despite her discomfort, she stays at the company, desperately trying to climb the ladder to bigger perks and bonuses. Her efforts are sometimes clumsy and even humiliating, such as the time she attempts to bond with her boss during a nighttime cross-country ski trip. Fumbling with her light, she finds herself abandoned on the trail as he and another Enron exec rush on ahead.

While the book goes far beyond Watkins' personal experience, her firsthand view of events provides its freshest material. And as Watkins moves through the finance, international, and broadband units, she's exposed to most of Enron's now-infamous characters. These include Rebecca Mark, the sexy, globe-trotting empire builder who becomes Jeffrey Skilling's archenemy as he climbs to the post of CEO; Cliff Baxter, a moody dealmaker who commits suicide after Enron's collapse; and Chief Accounting Officer Rick Causey, a feckless, baby-faced "Pillsbury Doughboy" who seems incapable of saying no to any harebrained accounting scheme.

Swartz's portrait of the messianic Skilling is particularly rich. His ambition and smarts are evident from his boyhood days, when he creates a radio station in the family's basement, to his acceptance at Harvard business school after he bluntly tells an admissions officer that "I'm f---ing smart." At Enron, he inspires an "almost cultlike" loyalty among followers by giving talented but sometimes eccentric employees free rein to chase new ideas and megabonuses for their successes. After his marriage collapses in 1995, Skilling transforms himself from a paunchy, middle-aged nerd to a buff, New Economy business jock.

There's no smoking gun here that ties Skilling directly to Enron's alleged fraud. Paradoxically, he's often obsessed with creating controls and managing risk, while at the same time pressing for lofty earnings growth and deriding employees who aren't "creative" enough to give him what he wants. The ruthless review process that he champions creates a company of greedy back-stabbers. And his constant reorganizations and undisciplined spending leave the company in a state of perpetual chaos.

The picture of former Chief Financial Officer Andrew Fastow is even more damning, owing to Watkins' personal experience with the man who was twice her boss. Fastow has been indicted on a multitude of charges in the Enron case and accused of enriching himself and his family at the company's expense. Handsome and boyish, he's also a bully who aims most of his expletive-laced tantrums at the company's outside bankers. At one point, he orders Watkins to dummy up financing to fool an adviser to the California Public Employees' Retirement System, the pension fund that invested in some Enron deals. She and others resist, and Fastow apparently forgets about the idea. In another instance, when Andersen approves what Watkins deems to be crazy accounting to help Enron fill a $190 million earnings gap, she asks the accounting team: "When are you guys gonna grow some balls?" The next day, she's berated by Fastow for her disloyalty.

In hitting the highlights of the sprawling Enron saga, the book sometimes seems disjointed. And it occasionally gets bogged down in explanations of the complex accounting. There also are big gaps in the tale, leaving plenty of fodder for future Enron books. The company's manipulation of the California energy markets, for instance, gets short shrift, as does its wheeling and dealing in Washington.

But unlike several other Enron accounts published so far, this one has a true Enron insider in Watkins, an eight-year veteran, and it takes full advantage. (Brian Cruver, author of Anatomy of Greed, was with the company for only eight months.) As Enron enters its death throes in late 2001, Watkins has a front-row seat to the denial and timidity in Enron's executive suite.

After Skilling suddenly leaves the company in August, 2001, Watkins takes her concerns about Enron's financial shenanigans to Lay. She is warned repeatedly by others to rethink that move. The company's chief risk officer doesn't even want to see her materials. When she finally meets with Lay, he doesn't meet her gaze or ask many questions. Oddly, he queries her: "Andy's a good CFO, right?" With such willful blindness at the top, it's doubtful that Watkins or anyone else could have saved Enron.

Zellner is Dallas bureau chief.

    Before it's here, it's on the Bloomberg Terminal.