Please don't misunderstand: Alex Gibney has no great beef with capitalism. Indeed, many of his best friends back in Summit, New Jersey, are investment bankers. But when Gibney looks at the prodigious rise and precipitous fall of Enron in Enron: The Smartest Guys in the Room, the remarkable documentary that premiered January 22 at the Sundance Film Festival, the award-winning filmmaker sees the collateral damage of an economic system dangerously out of whack. And when he looks at Ken Lay and Jeff Skilling, the former Enron executives now charged with perpetrating egregious fraud and deception during their stewardship of the now-bankrupt company, Gibney sees the lead players in a worst-case scenario that eventually could undermine capitalism itself.
Midway through the recent Sundance festivities in Park City, Utah, Gibney popped into a trendy eatery on Main Street, the main drag of this faux-rustic ski resort, to promote his film. Magnolia Pictures, the distributor of Control Room and Capturing the Friedmans, has Enron tentatively scheduled for a 2005 theatrical run. And yet, speaking in a quietly impassioned tone, Gibney insisted that when it comes to hard-sell tactics, he's a rank amateur compared to his "stars."
During their Enron heyday, Gibney said, "Ken Lay and Jeff Skilling saw themselves as being the apostles for the purest possible form of capitalism. All the markets were going to be open. They were going to be ruthless inside the company, and ruthless outside the company, because that was going to make everything more efficient.
"But I think that for everybody else who's in business, they would look at these guys and think they're capitalism's worst nightmare. Because if capitalism works like this, there are going to be some winners, but there also are going to be a lot of losers. And sooner or later, those losers are going to get very, very angry."
Thousands of Enron employees and investors lost untold millions of dollars when the company, once America's seventh largest, collapsed in 2001. But even after all the congressional investigations, criminal indictments, plea bargains and made-for-TV docudramas, the "Enron tragedy" (to use Gibney's term) defies comprehension. All this talk about negative cash flow, document shredding, deregulated markets, mark-to-market accounting -- it's enough to make your head swim.
The beautiful part of Enron: The Smartest Guys in the Room is that, to a degree unrivaled by almost any other account, the movie manages to clarify the issues. To be sure, some might complain Gibney's narrative is a tad too facile, with rapid-fire intercutting of speculation, stock footage and sometimes jokey imagery, all linked by pop tunes. Gibney does to Enron's disgraced management what Michael Moore did to the Bush administration in Fahrenheit 9/11. But Gibney makes no apologies for using flashy style to illuminate substance.
"Someone asked me how I'd explain what happened at Enron to my nine-year-old daughter," Gibney said. "I guess to a nine-year-old, I would say, 'They took money that wasn't theirs They lost people jobs and a lot of money. And they lied to people in a way that had terrible consequences.' "
For grown-ups, Gibney has painted a more comprehensive picture. Using additional reporting on the latest revelations and indictments, C-SPAN coverage and newly filmed interviews, he cleverly expands on his chief source, The Smartest Guys in the Room, a 2003 best-seller by Fortune magazine reporters Bethany McLean and Peter Elkind. Gibney spent five weeks in Houston while producing Enron in 2004. Interview subjects include whistle-blower Sherron Watkins; Gibney offered Lay and Skilling a chance to appear, but, it's not surprising, they declined.
Which is not to say they are absent from the movie. Actually, they qualify as above-the-title lead players, thanks to their frequent (and sometimes inadvertently revealing) appearances in news footage, C-SPAN clips, and a treasure trove of corporate audio and video tapes Gibney obtained "from a network of former employees and other interested parties."
"I was stunned when I took a look at this stuff," Gibney said. The videotapes, mostly morale-boosting speeches, presentations and -- no kidding! -- comedy skits designed for employee-only viewing, let the filmmaker tell the story from the inside out. "Instead of having experts talking about Enron, you could let the people at Enron tell the story themselves [Executives] just made stuff up. They were very skilled at making the Enron story seem so convincing that everyone wanted to believe it."
One of the many darkly comical highlights in Enron is a corporate-approved comedy skit designed to celebrate mark-to-market accounting, which Skilling introduced shortly after being hired in 1990.
"In the stock market," Gibney said, "mark-to-market accounting actually is a conservative kind of accounting. Because at the end of a portfolio on any given day, you mark to market. That is, if you've made $10 million, or lost $10 million, it's reflected in that kind of accounting. So, you know, in that context, it's extremely conservative. And it's valuable for some companies. But what Enron did was just grossly abuse it. They saw a loophole, and so they would just project out, say, 'Ten years down the road, this power plant we're building in India is going to make millions of dollars. So we're going to take that as profit today.'
"Well, pretty soon, it gets to the point where they've stated these enormous profits, but only a tiny trickle of cash is coming in the door. So they go out and start borrowing massive amounts of money from all these banks. And when the bankers look at Enron's books, they think the company is doing a fantastic job. And not only that, their stock keeps rising. One of the ways Enron was able to fool the analysts was to keep rigging their numbers every quarter, so that it appeared they kept ascending very, very steadily. Which, of course, was a lie.
"The funny thing is, if you look at the commercials Enron used to produce, at the end they always used the same phrase: 'Ask why.' It's almost like the clue the master criminal is always leaving the detective, as a kind of cat-and-mouse game. Enron was practically daring everybody and anybody to 'ask why.' Or 'ask how.' Like, how does Enron make its money?"
Some rank-and-file Enron employees began to see through the smoke and mirrors long before Bethany McLean raised the indelicate question in a February 21, 2001, Fortune magazine article: "How exactly does Enron make its money?" (Gibney shows Skilling petulantly dismissing the article as Fortune's reaction to a more Enron-friendly piece in Business Week.) But most other Enronites remained true believers almost to the very end. Perhaps the most jaw-dropping moment in Enron occurs when Lay, eager to rally support for beleaguered CFO Jeff Fastow, reads written questions from the audience at a company gathering. The first query: "Are you on crack?"
"It's an amazing moment," Gibney said. "I mean, on the same day that Ken Lay is giving that speech, [the staff at accounting firm] Arthur Andersen was shredding over a ton of Enron documents just a few blocks away When they asked if Lay was on crack, it was like they really were saying, 'What kind of fantasyland are you living in? We're going bankrupt, we're being investigated by the SEC, The Wall Street Journal is writing about us.' "
And yet Lay did read the question. He could have wadded it up and tossed it aside without comment. But he read it. And then he laughed. "It is bizarre, isn't it?" said Gibney. "The degree of self-deception at that company was just extraordinary."
If the videos invite us to giggle at hubris, the audiotapes plunge us into the heart of darkness. While we watch brush fires raging throughout California, we hear predatory Enron traders bragging about their plans to game the deregulated energy market by manufacturing a state energy crisis through selectively shutting down power plants.
"When you hear them chuckling about California going up in flames, it's hard to believe your ears. It's like hearing economic terrorists in action. I'm willing to bet that, in their private lives off the job, they're very decent people, they're very good with their kids, they give to charities, they do a lot of community work. But inside that company, they were economic terrorists."
Here and elsewhere in Enron, Gibney suggests that for an unconscionably long period, Enron remained unfettered by federal oversight agencies because of an under-the-table agreement between President George W. Bush and the man he nicknamed "Kenny Boy." Enron points to a meeting Lay had with Arnold Schwarzenegger before Ah-nold announced plans to run against Democratic governor Gray Davis in a 2003 recall election. Coincidence? Gibney doesn't think so.
If you like this story, consider signing up for our email newsletters.
SHOW ME HOW
You have successfully signed up for your selected newsletter(s) - please keep an eye on your mailbox, we're movin' in!
Of course, that incendiary speculation is why many commentators are likely to attack Enron. To those critics, Gibney offers a preemptive response: Look at the evidence and draw your own conclusions.
"I don't think there was a meeting where people got together and said, 'Look, we're going to do this, this and this, and Schwarzenegger's going to become governor,' " Gibney said. "But it's clear that Schwarzenegger was invited to that meeting with Lay for a reason. They knew about his political aspirations. And they knew that was important for him to use this whole battle over deregulation to beat up Gray Davis. And ultimately, that's what happened -- with the help of our president. The beautiful thing about what Bush did is, he did nothing. And as Gray Davis says, 'He did it very well.'
"I know that the Drudge Report is going to say -- and there already are other people saying -- that this is an Oliver Stone-like conspiracy theory. But it's not a conspiracy theory. It's a series of facts presented in close proximity to each other, that would lead you to the possibility that such things can happen. Because exactly what they wanted to happen happened. There was a Democratic governor of the largest state -- the seventh-largest economy in the world -- who was a presidential contender, who was suddenly blamed for an energy crisis that Enron caused because [Davis] was suddenly becoming an opponent of deregulation. And the very person Lay met with suddenly becomes governor of California.