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The Smartest Guys in the Room

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The Smartest Guys in the Room

The Amazing Rise and Scandalous Fall of Enron

Portfolio,

15 min read
8 take-aways
Audio & text

What's inside?

Enron labeled debt as revenue and no one, not analysts, accountants or board members, stopped it. Why?

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Editorial Rating

9

Qualities

  • Analytical
  • Innovative
  • Eye Opening

Recommendation

Enron seems like old news, but its history is still deeply informative. Its spectacular, 2001 collapse was the first in a series of notorious corporate scandals. Most of the stories Bethany McLean and Peter Elkind tell already had appeared in the news media and the rush-to-publish books that appeared shortly after the scandal. Still, McLean and Elkind offer what may be the most comprehensive, detailed account, written like an anecdote-rich, lively business novel. Their reporting is intriguing and engrossing, though the book could use a timeline. If you’re going to read just one book on the Enron scandal, this is the one that pins it down as much as possible. As the authors note, “Everything was perception; nothing was real.”

Summary

Enron, a massive energy management firm, was a house of cards. Its strong code of ethics apparently never shaped its operations.

At 2 a.m. on Sunday, December 2, 2001, Enron’s attorneys filed a petition for Chapter 11 bankruptcy. Enron had no choice – it had tried to get acquired or merged, but every potential partner rebuffed its overtures. The United States’ seventh-largest firm reached an astonishing ending.

Six months later, a court found Enron’s auditor, Arthur Andersen, guilty of the destruction of evidence consisting of memoranda, letters and thousands of pages of other information. David Duncan, the Andersen partner who helped instigate the document shredding, pled guilty to obstruction of justice [but served as a key witness and was never jailed].

CEO Jeff Skilling spun fantastic tales about Enron’s rich prospects. Analysts, auditors and reporters believed him without skepticism.

Securities analysts tried to use the Andersen convictions as an excuse for their own malpractice. They claimed that Enron manipulated its accounting but that since Arthur Andersen, then a respected auditor, had signed off on the accounting, they could...

About the Authors

Bethany McLean also wrote All The Devils Are Here and Shaky Ground. Peter Elkind also wrote Client 9, Rough Justice and The Death Shift.

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