Living in a House of Cards

One of the coalition's founders, Diana Peters, an information technology specialist, planned to take advantage of Enron's early retirement program in three years so she could care for her husband, who is suffering from a brain tumor. Unlike many, Peters had the presence of mind to move some of her 401(k) assets into mutual funds. What she didn't realize was that when Enron's share price fell to less than a dollar, leaving her 401(k) account with a negative balance, her mutual fund was tapped to make up for the shortfall. Left with no health benefits to cover her husband's treatment, Peters had to take the first job she was offered. She says it's a good one, but that's hardly consolation.

"I want money from Arthur Andersen," she says. "I want money from Vinson & Elkins. I want money from Jeff Skilling and Andy Fastow. I want money from the board of directors. And I want somebody to go to jail."

Support for Peters and other rank-and-file employees has been universal -- almost. In early March, Michael Lewis, an author and columnist for Bloomberg News, suggested that employees should be among those held accountable for the Enron debacle. Calling them "expensive beggars," Lewis compared employees to the getaway driver for a failed bank heist who lays claim to his share of the take confiscated by police.

"[E]verything we know so far about Enron suggests many, many employees were, at the very least, willing accomplices to the schemes dreamed up by their bosses. And now they want their money back!" Lewis wrote in a column that appeared in, among other publications, The Washington Post. "The Enron case as it is currently playing out sends the following message to corporate employees: You aren't responsible for what you do…[So] long as you aren't one of the top bosses, you will enjoy the moral status of the victim."

Indeed, after reviewing the now-familiar partnerships, the Powers committee concluded that "literally hundreds of people…were involved in one way or the other in the transactions." Watkins told Lay that deceptive accounting was an open secret at Enron. "We're such a crooked company," she quoted one co-worker. During the company's internal investigation, Watkins told Vinson & Elkins attorneys that she was worried that as many as 300 employees with knowledge of the transactions would start talking to journalists, the SEC or both.

Watkins also pointed to the "Lay It On The Line" survey as a possible source of corroboration. She told the V&E lawyers that two employees involved in the survey said questions about accounting issues were not reflected in Lay's summary. Watkins suggested that a legal assistant could "plow through" the responses to find out how widespread the concerns were, although there is no evidence that either V&E or the Powers committee ever did that.

Nonetheless, according to the survey's results, many respondents were aware that something was indeed rotten in the state of Enron. Nearly one in three respondents told Lay they thought Enron had become less ethical during the previous 12 months. Almost 40 percent considered the company more arrogant and less trustworthy, while far fewer than half the respondents believed senior executives possessed "a clear view of where Enron is going and how to get there."

Lay skillfully dodged those concerns in his summary, instead noting that "Lay It On The Line" confirmed the "great things you feel about Enron." According to Lay, Enron's stock price, which had been cut in half since January 2001, was the No. 1 concern of the 4,000 respondents. He blamed the decline on several factors: the recession, the slower-than-expected pace of electricity deregulation, a marked decrease in natural gas prices and a "meltdown" in the high-speed Internet, or broadband, industry, which Lay estimated accounted for more than a third of the company's stock price at its peak a year earlier.

But by last summer, many employees were wondering how Enron stock ever got as high as $90 a share. "People were aware that the stock was overvalued, that the earnings being reported did not reflect reality," says Michael L. Miller, a former vice president with Enron Wholesale Services. "There was more uncertainty than people [outside the company] perhaps appreciate."

Why that hasn't translated into more people offering up evidence to prosecutors is a question some former employees have asked themselves. Michael J. Miller -- not to be confused with the Enron Wholesale executive, Michael L. Miller -- says that as the investigations grind forward, he expects more former employees to contribute to the prosecution of those responsible, many by offering firsthand accounts of wrongdoing.

"That's the way they are going to weed out a lot of the facts, by corroborating evidence, having people step forward who are credible and in a position to know what was going on in the machine," says Miller, whose tenure at Enron dates back to before it emerged from the conglomeration of Houston Natural Gas and Internorth in 1985. "I don't know how five people could have pulled this off."