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Film / Enron: The Smartest Guys in the Room

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"Oh I can't help myself. You know what the difference between the state of California and Titanic? And this is being webcast, and I know I'm going to regret this - at least when the Titanic went down, the lights were on."
Jeffrey Skilling

Enron: The Smartest Guys in the Room is a 2005 Oscar-nominated documentary co-written produced and directed by Alex Gibney which charts the rise, peak, and fall of the energy corporation Enron; it is based on the 2003 book of the same name by Fortune reporters Bethany MacLean and Peter Elkind.

The film simplifies some of the convoluted financial details of the White-Collar Crime at Enron, comes out with some surprisingly sympathetic (though not excusing) appraisals of the criminals; and explores the little-acknowledged role that Wall Street firms played in perpetuating — and in some cases participating in — the company's fraud.

The smartest tropes in the room:

  • Adaptation Distillation: The documentary focuses mostly on the core trio of Lay, Skilling, Fastow and their trading business. Major figures described in the book like Rebecca Mark (responsible for international deals, bitter rival of Skilling, later ousted by him) and Richard Kinder (COO before Skilling, bought Enron's pipeline business before leaving and turned it into the multi-billion company Kinder-Morgan) are skipped over.
  • Affably Evil: A lot of clips are seen of videotaped sketches in which Skilling and other Enron executives engage in goofy behavior and self-deprecating humor.
  • Alas, Poor Villain: The film shows how much brightness and potential each of the "captains" of Enron had, and shows how their greedy impulses ultimately led them to squander all that brightness and potential and ruin the lives of everyone around them. On a certain level, they were victims of their own shortcomings along with their former employees and investors.
  • Arc Words: "Ask why," Enron's slogan at its peak as well as a reflection on the internal corruption that plagued the company.
  • Armor-Piercing Question: Bethany MacLean's article: "Is Enron Overpriced?"
    • Richard Grubman of the hedge fund Highfield Capital asking for a cash flow statement and balance sheet for Enron's Q1 2001 earnings, prompting the famous "asshole" response.
  • Backup Bluff: The book explains that this is how Mike Muckleroy dug Enron out of the enormous hole created by the 1987 Valhalla scandal. Thanks to crooked traders, Enron found itself on the hook for billions of dollars of hydrocarbons it couldn't possibly deliver. If other firms found out how desperate Enron was, they would surely demand Enron post collateral it didn't have to cover its positions, bankrupting the company. Muckleroy therefore bought eight million barrels of oil and called round the big oil trading houses offering to sell them. This created the impression that Enron had lots of supply, giving Muckleroy and his team time to unwind Enron's position and limit their exposure from $1bn+ to a manageable $200m.
  • Bad Boss: Despite their benevolent images, the heads of Enron ultimately would screw over their employees and bilk them out of their life savings, while only telling them at the last minute that the company was going to collapse.
  • Berserk Button: Do not remind Skilling that Enron does not provide a balance sheet or cash flow statement. He will not react well.
  • Big Bad: Ken Lay was essentially the founder of Enron, and he established the risk-taking corporate culture which would escalate into full blown fraud. While there was a long list of bad actors at Enron, Lay was ultimately the leader who could have put a stop to it, but decided to encourage and enable the fraud instead.
  • Big Red Devil: Trader Tim Belden dressed as one at a Halloween party.
  • Bitch in Sheep's Clothing: Jeff Skilling and Ken Lay presented themselves as brilliant innovators, even conning their employees out of their retirement funds.
  • Blatant Lies:
    • On the part of Lay, when he insists the company is in good financial condition.
    • The entirety of Skilling's trading business was based on the accounting version of this from the beginning.
  • Con Man: Jeff Skilling and Andy Fastow became this since they were blatantly lying about their actual profits.
  • Corporate Samurai: Pai was this to Skilling and Enron, and not because of his Asian ethnicity.
  • Corrupt Corporate Executive: Everyone. Although the film does portray them somewhat sympathetically by showing the pressures and temptations which led them to that point, it still blames them for harming the public and their employees in the pursuit of profit.
  • The Corrupter: The heads of Enron were not only corrupt but even projected their corrupt culture onto their employees.
  • Crapsaccharine World: Underneath Enron's glossy image and cheerful advertising was a whole lot of fraud and deception.
  • Diabolical Mastermind: Each of the major Enron figures, in his own way, could be considered one. In the commentary, Gibney said that the Tom Waits song "What's He Building In There?" from Mule Variations which plays at the start of the film could equally apply to Ken Lay, Jeffrey Skilling, or Andy Fastow. The "mastermind" part was gradually subverted as Enron's heads built their brand on little more than hype and invented profits until it was impossible for them to maintain the facade.
  • Disproportionate Retribution: Corporate legend attests Pai once banished an executive to Calgary, Alberta, Canada for making a joke at his expense.
  • Downer Ending:
    • Made obvious from the tagline: "Come see where all your money went."
    • To add insult to injury, on-screen text at the close of the film tells us how regular Enron employees lost thousands in savings while the people responsible for their predicament walked away with millions in bonuses.
  • The Dragon: Jeff Skilling is brought in by Ken Lay to serve as a highly active and aggressive CEO for the company, and also ends up being one of the chief perpetrators of the company's fraud.
  • Driven to Suicide: The film begins with a dramatic reenactment of the suicide of Enron executive Cliff Baxter.
  • Evil Genius: Andrew Fastow, who used labyrinthine "partnerships" to conceal the extent of Enron's liabilities from the public.
  • Evil, Inc.: Enron is portrayed in the film as a criminal enterprise since its inception in The '80s. This is slightly at odds with the book, which notes that plenty of Enron businesses did make real profits - pipelines and wholesale trading for example - and that Enron until 1996 was a fairly ordinary energy firm, albeit one that contained the seeds of its future destruction.
  • Evil Tower of Ominousness: Enron's former highrise in Houston is certainly shot as if it were one.
  • Executive Excess: The Enron executives splurged their ill-gotten wealth on things like mansions and strippers.
  • Fanservice Extra: A bunch of naked strippers in the scene where people talk about Lou Pai's fondness for strip clubs.
  • Film of the Book: The film is based on the book of the same name by Fortune reporters Bethany McLean and Peter Elkind. The book contains even more details of the criminality and dysfunction at Enron, most notably the ridiculous compensation system that the International division's originators had, where they were paid bonuses based on the claimed value of the deals they landed, rather than whether they actually made Enron any money. This led to the International division signing hundreds of dogshit deals to build power plants worldwide, most of which lost money.
  • From a Certain Point of View: Skilling’s rationale for claiming that he “thought the company was in good financial standing when he left” is believed to be that, while he definitely knew upon resignation that the company would eventually collapse, he figured it would be at least one or two years before this happenednote . So, in the meantime, he could say that he thought the company was TECHNICALLY in “good” financial standing when he left, because its inevitable downfall was at least a year down the road.
  • Idea Bulb: A stock image of one is shown before we see Skilling's face.
  • Implausible Deniability: When Lou Pai fell under scrutiny for having sold off all his Enron stock right before the big collapse, he claimed to have had no foreknowledge of the company’s ruin and that he did it purely as part of his divorce proceedings. Although his claim of ignorance is hard to believe, this excuse allowed him to escape legal consequences.
  • Implied Death Threat: In an astonishing interview, Mike Muckleroy claims to have got the real trading books from the crooked Enron traders in the 1987 Valhalla scandal by telling one of them that he had, during his time in the US Navy, had to kill people and wouldn't mind doing it again.
  • Ironic Echo: As Enron's stock is plummeting and is about to go bankrupt amid allegations of fraud and corruption, one of the people at the Government hearing replays a recording that boasted of how safe an investment Enron is.
  • Ironic Episode Title: The self-styled "smartest guys in the room" brought down a multi-billion dollar company; claimed to run an energy company, yet delivered record numbers of rolling blackouts; destroyed one of the world's most respected accounting firms as collateral damage (to be fair, Arthur Andersen had it coming to them), and the two former CEOs ultimately responsible for it all got sentenced to decades in prison between them. Played straight, then.
    • Enron's slogan at its peak: Ask Why?
  • Karma Houdini:
    • Lou Pai, who was one of the most ruthless Enron honchos and took out more money than the other executives, yet was never criminally charged and became the second-largest landowner in Colorado.
    • The major Wall Street firms — including Citibank, Merrill Lynch, JPMorgan Chase, and Credit Suisse, among others — who actively participated in some of Enron's criminal dealings, but were mostly allowed to walk away from any consequences.
    • Ken Lay, in a sense. Before he was sentenced following a successful trial, he died of a heart attack while on vacation in Colorado, preventing him from serving any time in jail.
  • The Ken Burns Effect: Used several times, like in a zoom onto a photograph of Ken Lay as a child sitting on a tractor.
  • Kick the Dog: The film contains disturbing audiotapes of Enron personnel who mock and laugh at the long-suffering people of California while they purposefully mess with the state's power grid to jack up electricity prices. The film actually spends a good deal exploring how the corrupt corporate culture at Enron warped the morality of its employees (especially the traders), citing the infamous Milgram experiment. They play clips of the Milgram experiment alongside news about California's suffering.
  • Mad Scientist Laboratory: Stock footage clips of mad scientist labs (Jacob's ladder, bubbling beakers) are used to accompany the scene that talks about one of Enron's loonier ideas: a weather trading market.
  • Manipulative Editing: Although the majority of the documentary is free from this, and the allegations it makes are substantially true, the section on Enron's venture into weather derivatives is deliberately designed to suggest Enron claimed it could control the weather and that weather trading was a typical Enron sham. In fact, Enron was neither the first nor the last company to trade weather derivatives, which are perfectly legitimate, if high risk, financial instruments that continue to be traded today.
  • MegaCorp: Subverted. Enron liked to give the impression that it was this, trying to caress the financial press into running positive stories; wildly inflating its stock price; and using rotten accounting tricks to hide the fact that the company was mired in debt and not turning a profit. Played straight in the fact Enron was so massive that there was serious talk of its failure bringing down the United States. It didn't but the consequences were huge.
  • Metaphorically True: Enron's accounting methods. Mark-to-market accounting is supposed to permit more accurate accounting of assets that fluctuate in value, such as actively-traded stocks and bonds. Enron, however, used mark-to-market to account for assets that had no market to mark to, effectively allowing themselves to estimate their profits on the basis of their own (usually wildly over-optimistic) models. In addition, Enron booked the entire potential value of a contract as soon as it was signed, and then refused to modify those estimates when the deals fell through. So even though Enron's Indian power plant and its broadband deal with Blockbuster made zero money, Enron would still put them down as profits and portray itself as a great investment.
  • Minor Crime Reveals Major Plot:
    • The first time anyone began seriously taking a second look at Enron came when Skilling, who the film hints was approaching a nervous breakdown due to his knowledge of the company's imminent collapse, abruptly called one of his investors an "asshole" after being asked an Armor-Piercing Question during a conference call.
    • Likewise, the investment community started sensing that there might be trouble at Enron when Skilling abruptly resigned as CEO, hoping to avoid culpability for what he knew to be the company's inevitable failure.
  • Narrator: Peter Coyote narrates the documentary.
  • Nightmare Face: Tim Belden, a trader at Enron, is briefly shown making a Slasher Smile while dressed as a devil.
  • Paper Tiger: Enron was a house of cards built on lies. It was never as successful as it appeared and the best parts of the company were either built by others, purchased by Enron, and then run into the ground, or dismissed as losers by Enron, sold to others, and launched into the stratosphere by their new owners (former COO Rich Kinder bought a small section of Enron pipelines and turned it into the largest energy infrastructure company in North America). As soon as anyone challenged the company, it fell apart.
  • Politician Guest-Star: Disgraced former Governor of California Gray Davis is interviewed in a segment about the California energy crisis. The film also explores the strong ties Ken Lay and Enron itself had to the Bush family and to the administrations of George H. W. Bush and George W. Bush. It suggests that Enron's actions in California may have been partially intended as a political hit-job on Davis, who was then a rising star in the Democratic Party and was seen as a potential strong challenger to Dubya in the 2004 election, and also suggests that the Bush administration's refusal to intervene during the crisis was due to Enron's influence. Indeed, Dubya's ties to Enron became a brief political controversy after the company's collapse, while Davis would be recalled in 2003, which ended his presidential ambitions and political career as a whole. While Davis blames Enron for his downfall and became somewhat Vindicated by History when it was proven that Enron created the crisis through illegal market manipulation, Californians had numerous other criticisms of Davis and there were other significant factors in his downfall beyond Enron.
  • Ponzi:
    • A variation. Enron became primarily concerned about keeping its stock value high without having actual profits to back it up. In the end it kept reporting false profits and encouraging people to invest in their stock, even as its actual value was plummeting.
    • Enron wanted to report increasing profits. However, under mark-to-market accounting the value of an entire multi-year deal was reported as profit only in the quarter the deal was signed. In order to report more profits, Enron needed to strike more and bigger deals. This was, like a Ponzi scheme, unsustainable in the long term.
  • Precision F-Strike:
    • "I'm fucking smart."
    • During a conference call, Skilling uttered the word "asshole" when he was asked to produce a balance sheet. This of course, resulted in more uncomfortable questions for Enron.
  • Reassigned to Antarctica: "Enron legend" has it that Lou Pai explained to subordinate executives at a strip club that he would drive to the gas station and pour gasoline on himself so that his wife wouldn't smell the strippers' perfume. One executive jokingly asked if Lou's wife would think that he was "fucking the gas station attendant." Lou retaliated by sending the executive to a remote dead-end post in Canada.
  • Refuge in Audacity: Enron's cons were so successful because nobody could imagine a corporation managing to lie itself into success. Of course, this wasn't sustainable in the long run: once people saw through the boasts, Enron was revealed for the sham that it was.
  • Revealing Cover Up: It was Skilling's attempt to jump ship and dump all his stock that revealed to the investment company how fragile and broken Enron really was.
  • Smart People Wear Glasses: Defied en masse. Skilling used to wear glasses, but gave himself LASIK surgery while embarking on a macho image makeover. Soon, everyone else at Enron got LASIK surgery.
  • Smug Snake: When Jeffrey Skilling's instructor at Harvard Business School asked him if he was smart, Skilling replied, "I'm fucking smart."
  • The Social Darwinist: Jeffrey Skilling read Richard Dawkins' The Selfish Gene and used this to shape his cutthroat managerial process, punishing low-performing employees and rewarding those who brought in the most money. In Real Life, Dawkins denounced Enron and its managers for using his work to justify their corruption.
  • Soundtrack Dissonance: Phantom Planet's "California" and the Rivieras' "California Sun" are played throughout scenes of chaos and misery caused by Enron's shenanigans during the California energy crisis.
  • Standard Evil Empire Hierarchy
    • The Emperor: Ken Lay
    • The Right Hand: Jeffrey Skilling
    • The General: Cliff Baxter
    • The Oddball: Andy Fastow
  • The Starscream: Fastow was just as concerned with enriching himself, if not more so, then advancing Enron's fraud. In the end, his murky and labyrinthine schemes became a major contributing factor to the speed of Enron's collapse.
  • Starts with a Suicide: The film opens with a reenactment of Cliff Baxter's death.
  • Stealing from the Till: A 1987 mini-scandal occurred when two energy traders were caught embezzling profits. Ken Lay chose to not only not turn them in, but to actually keep them at the company, because they were making the company money.
  • Stock Footage: Gibney is fond of using stock footage in his documentaries, and the ones he uses here are surprisingly fitting for a lot of the situations and issues discussed.
  • Talking Heads: Interviewees include the two authors of the book the movie is based on, two Enron traders, and a pretty bitter Gov. Gray Davis, who blames his recall on Enron manufacturing the California energy crisis.
  • Title Drop: The title comes from the book the documentary was based on, and Peter Coyote drops it in his opening narration when he says of Lay and Skilling that "they were called 'the smartest guys in the room'".
  • Too Good to Be True: Bethany McLean smelled a rat when she wondered how Enron could post such high profits.
  • Tragic Villain: The film portrays the Enron executives as this, suggesting that they truly were inspired visionaries who were ultimately destroyed by their own greed and hubris.
  • Token Good Teammate: Mike Muckleroy, the Texas oil trader who fixed the Valhalla scandal for Enron, effectively saving the company.
  • Villain with Good Publicity: Enron embarked on a massive public relations campaign portraying itself as one of the most radical, cutting-edge and prosperous corporations in the country, beguiling investors, stock market analysts and financial journalists alike. By the time it collapsed, Enron had been named "America's Most Innovative Company" by Fortune magazine for six consecutive years. They also ranked the company #1 on their list of "100 Best Companies To Work For" in 2000note , a mere months before everything went downnote .
  • Villainous BSoD: Skilling was increasingly anxious and despairing in the months leading up to his abrupt resignation as CEO.
  • White-Collar Crime: One of the most infamous examples pre-Great Recession.
  • You Have Outlived Your Usefulness: Happened to Enron. The book details how the Bush White House ignored Ken Lay's pleas for a federal bailout, judging that the political stink would be more trouble than Enron's contribution to Bush's election was worth.

"Ask why, asshole."