The illogic and conflicts of interest which came out in the fall of 2001 were the spark. The balance sheet was soaked in gasoline and [the revelation of the fraudulent, self-serving deals Enron executives made with each other] was the spark. The fact that there was a manipulation of the income statement didn’t come out until Enron was gone. All we knew ahead of time was that the CFO had been the general partner of a partnership that did business with Enron. That there had been at least $7 million in profits [to him]. That Enron had announced [an inexplicable] write-down …. Just from that, the company starts going into a tailspin. Then, November 8 of 2001 comes along, and they announce the restatement of five years of financials, and they announce that two other people in the company had been profiting out of the partnerships. That was the end.


Again, these are not the kinds of things that should drive a financially stable company under. Was the press a precipitator in 2001? Yes. But if you have a room full of gasoline, something is going to set it off. If it’s not the press, it’s something else. Enron would not have survived and … when presented with evidence of how bad things were, people inside just ignored it. They didn’t believe it. They didn’t want to believe it. They were too wrapped up in their own sense of brilliance. … It was terrible. Worst company I’ve ever looked at.


TL: Which brings us to the next question. Your book contains plenty of “Omigod!” moments when one various high-level Enron executive or another finally realizes for the first time that the whole thing is a fabrication, a house of cards about to implode. In all your research, what single incident in the debacle stuck out the most? Shocked you the most?


KE: Those are two different questions. What shocked me the most is the scene immediately after Andy Fastow is removed as Chief Financial Officer and he is replaced by Jeff McMahon, and there is a meeting where they attempt to gather basic financial information to get a sense of what’s going on with the company. And they find out that Enron doesn’t track its cash. They find out that Enron doesn’t have a schedule of debt maturities. They find out that Enron has accidentally gone short about one-third of a public company. They find out that Enron has put together financing where their obligations are in direct proportion to the stock price falling. They find out that ultimately this place was … horribly mismanaged and set up as a disaster.


It’s so funny because people who are not in finance will talk about one scene or another that they find amazing. Every person in finance, I will know who they are, because they will walk up to me and say, without introducing themselves, “They didn’t have a schedule of debt maturities?” Which sounds really boring, but it’s like building a house without a foundation. … [T]here are people inside the company who when I told them this, they were insisting I was wrong. They said “That’s not possible. … That can’t possibly happen. … We had to have had that.” I was like, “No, you didn’t …”


To me, the true understanding of Enron comes on the morning of October 24. It doesn’t have anything to do with accounting, anything to do with fraud, anything to do with anything. It’s when Jeff McMahon [the new CFO] walks into a room and says, “How do we save the company?” and he walks out some time later and calls Ken Lay and says, “We need to get the bankruptcy lawyers in here.” What happened in that hour? What happened is that they found out that the company was not managed like a real financial company. It was managed like a lemonade stand. There was no way in a crisis to fix all those problems.


That was the most shocking. There are two that tie for [most memorable]. One is the scene where Ken Lay learns about [an off-the-books partnership called] Chewco. The whole story of everybody finding out about Chewco and that Michael Kopper [head of special projects in the finance division] has an interest through his domestic partner, and the bizarre efforts to keep Chewco as a valid special purpose entity, which would require 3 percent independent investment. It wouldn’t be independent if it was a spouse, and they start arguing that Texas has anti-sodomy laws so this is not a legal relationship. They are actually trying to make a huge financial decision on the basis of Texas anti-sodomy laws. It’s just surreal.


The other one is when Enron and Dynergy reach their agreement on a merger and everybody is finalizing everything and backslapping each other. Somebody looks at the press release and laughs, “Ha, ha, Dynergy you have the wrong price in the press release.” And it ends up the two companies have approved two different deals. To me, that just underscores the recklessness of the company. All of these things underscore the recklessness of the company. That they did not work like a normal company.


TL: Do you get to have a hand in the casting of the movie?


KE: Such confidence you have. My last book is being made into a movie, and I have absolutely no hand in it. So my answer would be, if this one is lucky enough to become a movie, I am sure that I will have no hand in it.