Enron Execs In Handcuffs

This is the week of the collapse of Enron Corporation so there are a lot of pictures of Enron execs, most of them coming to and from the court house. One trend is to show them in handcuffs if at all possible. Earlier today, the Chron switched out a normal picture of Rex Shelby for this one:

I really hate this picture. It is frightening. Rex Shelby is looking down because he is about to head down some narrow steps, but it looks like he’s ashamed. He had nothing to be ashamed of. If you notice, the agents are also looking down as they approach the steps. Furthermore, I’ve heard from someone who would know that he was actually pleasantly surprised by the FBI agents who arrested him — I hear that they got along well. One of them tried to shield him from the cameras, but he had to step back as they approached the narrow steps — that is when one of the camera slugs, who were camping at the courthouse in those days, managed to grab a photo, I guess.

The purpose of the perp walk is to humiliate the accused and put an image in the minds of media consumers that he is guilty. He’s in handcuffs, so he must be guilty.

The worst one in my opinion is a tie between Ben Glisan and Andy Fastow. Both were wearing chains. But look at this picture of Andy Fastow:

Seriously? Chains? Why? The FBI had taken his belt and his necktie in this photo, then bound his hands. It is painful to look at. His face is so sweet in this picture too – he looks daunted by what has happened to him.

They put Ben Glisan in chains too, but interestingly when he was arrested, they allowed him to cover his hands with his jacket (notice he is without a tie and belt too):

It is disgusting. None of the Enron executives were violent. None protested when they were arrested. And they were treated like violent murderers. When I see images like this, I just think the media beast is being fed. Absolutely must show them in handcuffs or else the public might get the wrong idea, like that maybe they’re innocent. Can’t have that!

Today In Enron History

Friday, October 26, 2001.

The stock opened at $16 and would close at $15.40 – a loss of only 5.81% of its value. Nothing to cheer about, certainly, but when compared to the losses every day of the week, it was one of the better days.

The morning was surreal. Overnight there had been a terror threat on the Enron building so when workers got to 1400 Smith Street, they found the surrounding avenues blocked off and police everywhere. Of course, it was a false alarm but it certainly was an external representation of how everyone was feeling inside. Like things were about to go boom.

Ben Glisan was at his desk early, researching Chewco. After the WSJ published a lurid exposé the previous day, it was essential to get a handle on the deal.

From 10 to 11, Ken Lay was on the phone with Deloitte and Touche. At noon he attended an Enron board meeting, in which Glisan gave a presentation on everything he knew about Chewco.

One of the executives present at the meeting, Rodney Faldyn, didn’t like the sound of Chewco. He went to see Rick Causey and told him he felt like there might be a problem with it.

A few hours later, Faldyn and Ryan Siurek called Tom Bauer at Arthur Andersen and asked for clarification about the three percent rule. Bauer explained that three percent of an off the books partnership had to come from an independent investor in order for the partnership to be valid and comply with accounting rules.

Faldyn believed then that Chewco did not meet that standard.

Chewco had been used to buy Calper’s interest in JEDI. JEDI spun off a lot of cash – there had never been any question about the JEDI deals. But if Chewco wasn’t independent, that meant that JEDI wasn’t either, and all the income reported on every income statement, every balance sheet, every bit of information that had exited the Enron building would have been wrong, all the way back to 1997.

Ben Glisan, Rick Causey, and Rodney Faldyn met to discuss Chewco. And thus Enron was confronted with the strangest question ever to face any company anywhere: How do federal accounting laws view homosexuality?

(I need to interrupt myself to say I feel really weird talking about about Kopper’s sexuality. You don’t hear me talking about anyone else’s lover – just Kopper’s – and it’s because he’s gay. It shouldn’t be any big deal. So though I’m talking about Kopper’s love life [a place I have no business being] please know I’m really only trying to explain what was happening. I’m not singling him out or anything like that. I’m not going to discuss the sex lives on any other Enron execs. You can take that to the bank.)

If Kopper’s lover had been his lawfully wedded spouse, the whole deal would have violated accounting rules because the capital would not have come from an independent party. But Kopper wasn’t married. In the eyes of the state of Texas and the US Government, he was a single man, and his “friend” could invest whatever the heck he wanted. But he was Kopper’s live in lover. So was his investment independent or not?

Ken Lay must have felt a lead weight in his chest when he picked up the phone to call the Fed chairman, Alan Greenspan. High-flying Enron needed help, and Ken Lay probably never thought he’d see the day. He told Greenspan that Enron was having problems with its trading partners and cash was drying up. He did not ask for a bailout. He would have no doubt taken one, but he didn’t ask for one. Greenspan said he would monitor the situation. Ken Lay then put in a few other calls to his well-placed Washington friends.

After the call, he had a meeting with James Derrick (general counsel) and Rick Causey. Rick told him that they were still looking at Chewco, they hadn’t drawn any conclusions, but it looked like there might be a very serious problem with it.

That night the Enron 401(k) plan was locked down. After months of friendly reminders, Enron employees could not touch their accounts until November.

Today In Enron History

Wednesday, October 24, 2001.

The stock opened at $19.74 and would close at $16.41 at extremely heavy volume. The stock lost 17.4% of its value.

First thing in the morning, Andy Fastow and Whalley discussed the problems with the banks – or, more to the point, the problem the banks were having with Fastow. Andy said that he understood he was no longer effective in the role of CFO, and Whalley agreed. Andy then said he would talk to his team and McMahon and get back to him. Whalley politely said okay.

He showed Andy out and saw several others, including McMahon, waiting to speak to him. He asked them to head upstairs and he’d join them in a few minutes.

Whalley immediately went to Ken Lay’s office and informed him he was firing Andy Fastow and replacing him with Jeff McMahon. Lay hesitated. He still wanted to believe Andy was the old Andy Fastow – the brilliant star who had the world by the balls. He said he’d take it up with the board. Whalley felt that Lay didn’t quite understand the urgency of the matter. NO BANK WOULD DO BUSINESS WITH ENRON IF ANDY FASTOW WAS CFO! So he basically gave Lay an ultimatum: either Enron would have a new CFO or it would have a new COO.

Whalley left Ken’s office and hustled up to the meeting with Andy, McMahon and others. Without board approval, he fired Andy Fastow and replaced him with McMahon. Both were shocked. Not that it was done, but that it was done like that. Whalley understood the situation. He was an excellent COO, seeing what was in front of him, not what he wanted to see. And he was moving quickly to fix it as best he could. He was sort of a little like Jeff Skilling in this way. Whalley immediately moved on to the next order of business: pulling down the revolving credit lines, which McMahon suggested the day before. Fastow objected but nobody listened.

McMahon deputized Ray Bowen, then they assembled a team who would try to rescue Enron from financial meltdown. He said he’d meet Bowen in the new Enron tower on the fourth floor in thirty minutes. There was no time to waste.

Dazed from being fired, Andy Fastow made it to his office in time to field a phone call from Jeff Skilling. Skilling had no idea that he’d just been fired and was surprised by the news. He tried to say a few encouraging words to his old friend, but Andy quickly got off the phone with him. Andy dialed his attorney, David Gerger. He then got in touch with Michael Rubenstein, another attorney. Andy and Lea had a conference call with Rubenstein that lasted two hours.

Ken Lay was spending the day in a management meeting at the Four Seasons Hotel. He directors listened as Ken Lay expressed concerns that Andy Fastow might not be able to fulfill his role as CFO any longer. He was unaware that Whalley had already tossed him out and filled the position with McMahon. John Duncan mentioned that his call with Andy the previous day had revealed that Andy made much more money on the LJMs than they’d been led to believe. He admitted to $45 million. Ken Lay was shocked; he felt then that he had been deceived by Andy Fastow. He would have to be terminated. But there was a catch. Andy Fastow had an employment contract that stated the board needed special cause to fire him. So one of the board members made a motion that Andy Fastow would take a leave of absence and McMahon would replace him, effective immediately. It passed unanimously.

McMahon was trying to keep calm over in the new Enron building, but he could not believe his ears. The financial SWAT team he’d assembled needed answers – how much cash Enron had on hand, how much it owed, a maturities schedule for debt. And nobody could produce any of it.

Ken Lay kept thinking about Jeff’s offer to come back to Enron. He was desperate and needed something to stop the vortex of doom that was sucking them all down. And maybe Jeff was that thing. He asked Whalley to meet with him and he agreed. He’d go to Jeff’s house — there was no frecking way Jeff could show up at the building without causing a huge commotion.

Jeff was waiting for him. Before he even stopped his car in Jeff’s drive, Jeff was outside, walking toward him. “What the fuck is going on?” Jeff demanded.

“It’s bad,” Whalley said. “Really, really bad.”

Back inside, they discussed facts and figures. Whalley estimated they needed about $3.2 billion to keep the trading business alive.

Jeff was immediately animated. He wanted to jet to New York immediately – just let him change out of his shorts and shave, and he was ready. He believed that if he could meet with the bankers, tell them there wasn’t a problem, that the banks would get their money back, it would all be okay. This was freaking Enron! There was no problem Enron couldn’t handle. It was the darling of Houston.. a shining star on Wall Street.

Whalley returned to the office a true believer. He told Lay that they should bring Skilling back. They decided they’d talk to the management committee about it.

But it wasn’t happening. Back at Jeff’s house, the phone wasn’t ringing. Jeff wasn’t having it. He called Whalley back, demanding to know what was going on, and trying to impress upon him that they needed to be in New York that night. They needed to be taking bankers to dinner, proving themselves. Whalley, who had shown a penchant for speed with Andy Fastow, said there was simply nothing to do: they had to have a management meeting.
When the call finally came, it was not good news. Skilling could not return to Enron. The management team had suddenly turned a cold shoulder to their former CEO.

This was one of those “if only…” moments. If only Jeff had been permitted to return. If the market saw that he was truly invested in the company, that he loved it… if only. Maybe there would have been a slight slowing of the hemorrhaging, just enough to catch their breath. Just enough to calm the panicking markets.

But it wasn’t to be. Skilling was out and he was going to stay out.

Enron issued a press release in the mid-afternoon:


FOR IMMEDIATE RELEASE: Wednesday, October 24, 2001

HOUSTON – Enron Corp. announced today that it has named Jeff McMahon chief financial officer. McMahon had been serving as chairman and CEO of Enron’s Industrial Markets group. From 1998 to 2000, McMahon was Enron’s treasurer.

“Jeff has unparalleled qualifications and a deep and thorough understanding of Enron,” said Kenneth L. Lay, Enron chairman and CEO. “He has the trust and confidence of our investors and financial institutions.”

Andrew Fastow, previously Enron’s CFO, will be on a leave of absence from the company. “In my continued discussions with the financial community, it became clear to me that restoring investor confidence would require us to replace Andy as CFO,” Lay said.

McMahon, 40, joined Enron in 1994 and spent three years in the London office as chief financial officer for Enron’s European operations. Upon returning to the United States, McMahon was executive vice president of finance and treasurer for Enron Corp. In 2000, he was named president and chief operating officer of Enron Net Works, where he had responsibility for Enron’s e-commerce activities.

McMahon has a bachelor’s degree in business from the University of Richmond in Virginia. He is a Certified Public Accountant, SFA registered and is a member of the American Institute of Public Accountants and Association of Corporate Treasurers.

Sherron Watkins was thrilled by the changing of the guard in the upper echelons of Enron. With her nemesis out as CFO and her friend Jeff McMahon in the power position, she thought for sure she could leverage the situation. In fact, she was pretty sure Jeff McMahon needed her advice on lots of things – like whether to get rid of Glisan. Now there was no love lost between Glisan and McMahon, but Sherron Watkins was not in a position to be advocating for firings. In any case, as soon as the email announcing McMahon’s new position was sent, she drafted a letter to McMahon:

—–Original Message—–
From: Watkins, Sherron
Sent: Wednesday, October 24, 2001 4:12 PM
To: McMahon, Jeffrey
Subject: Your new CFO spot and the job I want

Jeff, Congratulations, you deserve the job and can do it superbly! You know you will need to replace Ben Gilson as Treasurer – possibly with Bill Brown.

My issue, and I feel very strongly about this, is that I want to be on the crisis management team to determine how we save our trading franchise. It can disappear over night and I believe there’s more bad news coming re: these raptor deals (ie, restatement). I have clearly proven myself to be the only person at Enron that had the character, at great risk to my own career, much less personal risk, to go to Ken Lay and let him know what was going on here. I resent all these late comers joining the band wagon – it’s damn easy to make a statement now, when Ken has made the hard decision to unwind these deals and write them off. Mainly I resent being stuffed into a holding tank, I should not be the pariah here! Despite your comment to me several weeks ago when I told you that’s how I felt and you replied “what did you expect?” I have been professional in this 100%, I went to Ken and Ken alone, in contrast to yesterday’s VP Jim S. who put Ken on the spot by asking unanswerable questions at the all employee meeting. I hope to meet with Ken Lay soon. But I’d like to talk to you about my role in the ‘inner circle’, because I firmly believe I deserve it and have proven so by my past evaluations of the negative impact of these structures and then by my actions in doing something about it. You can help me with your endorsement of me to Greg Whalley, Mark Frevert and Ken Lay. I hope I have it. Thanks and good luck in the new job,


What a delusional psychopath.

But anyway, after she sent that crazy, self-serving email, she forwarded it to Cindy Olson with a message:

—–Original Message—–
From: Watkins, Sherron
Sent: Wednesday, October 24, 2001 4:14 PM
To: Olson, Cindy
Subject:FW: Your new CFO spot and the job I want

Cindy, I sent this to Jeff McMahon today. I wanted you to see it. You can forward it to Ken if you’d like – I am very interested in speaking with him as soon as that can be arranged. I very much appreciate your insightful and professional support of me in all of this from day one! Thanks, Sherron.

Need I point out that Enron was on fire and this woman was only concerned with her career. McMahon was tied up with the financial SWAT team all day, trying to figure out the real position of Enron. He didn’t have time to baby-step Sherron Watkins career up the ladder. I do love the fact that she thinks she belongs in the “inner circle.” Again, I repeat what one of her former bosses told me: she was one of 180 VPs, she was utterly undistinguished and she knew absolutely nothing about deals. He did say she was aggressive and ambitious though, and that comes through in these emails.

Jeff McMahon called Ken Lay that afternoon, not to discuss the social climbing Watkins but to apprise him of the situation Enron was really in. Thirty billion in debt, about $10 billion current. They had to visit with the banks and try to renegotiate the debt. McMahon then called Whalley and told him the same thing.

Another option, Whalley said, was a merger. A merger with someone with a stronger balance sheet would at least save the company – there was no shame in that. McMahon said he’d give it some thought.

That night, McMahon and some other guys met at a dim, dank Houston landmark bar called Kenneally’s that supposedly serves the best pizza in town. McMahon had been thinking about Whalley’s idea of a merger. He threw it out there to see what the guys thought.

They pondered who would be a good candidate for a merger. Exxon? Shell?

“Dynegy,” someone said.

Today In Enron History

Tuesday, October 23, 2001.

The stock opened at $23.25, its high for the day.

Ken Lay convened a conference call with analysts to try and keep them apprised of what was happening ( Call transcript here ). The room at the Enron building was packed; Ron Astin, a V&E attorney, was present, as were Richard Causey, Ben Glisan, Greg Whalley, Mark Palmer, Andy Fastow. Tension zinged through the room. The only thing Whalley could say was that an SEC investigation had begun but he could give no other details, which was the only thing that the world wanted to know. Causey was uncomfortable; Fastow was angry.

Most of the analysts were polite, until Richard Grubman took the line. Only a few months earlier, Jeff Skilling had called the Highfields Capital short seller an asshole ( transcript here). Grubman asked a question about Azurix, saying that the water company would require a billion dollars of support from Enron, and had Enron taken reserves against that liability?

Causey answered that Azurix was well-positioned to handle all of its obligations. Grubman persisted, stating that the value just wasn’t there.

Ken Lay stepped in. “Richard… I know you want to drive the stock price down. And you’ve done a good job of doing that, but let’s move on to the next question.”

Lay and Grubman tangled for a few more moments.

Listening from home, Jeff Skilling must have been smugly satisfied. That guy was a pill, and it was difficult for even consummately professional Lay to gracefully handle him.

David Duncan had been watching the stock price during the conversation. It was chugging downward with every second.

An analyst from Goldman Sachs finally got to the question everyone wanted answered – whether there was more to come in terms of LJM. Ken Lay said that he couldn’t say much about LJM because of the SEC investigation.

Skilling thought this was exactly the wrong answer. This was what people wanted to know – the one question that had the potential to turn around the stock price and people’s perception of Enron, and Lay refused to answer it.

That was when Skilling called Enron. Lay was still on the call, but Skilling asked his secretary to have him call back asap.

When the call ended, the general feeling in the room was that they’d just created another disaster. A huge, ugly, nasty disaster.

Shutting off the webcast in his office, David Duncan reiterated the document policy and told his team to get in compliance with it.

When he was finished with the analyst call, Ken Lay called Skilling. Skilling asked to be brought back to Enron. He believed it would send a good signal to the street and help tourniquet the blood loss the company was experiencing. Ken Lay said he’d think about it.

A little while later, Ken Lay headed to the Imperial Ballroom of the Hyatt for an all-employee meeting ( Transcript here). The employees were worried about the stock price; many were angry. Ken Lay was calm and affable, as always, and assured them that the stock was way undervalued.

The employees had been asked to provide questions anonymously to Mr. Lay. Most of them were concerns about the stock price and what the company’s strategy would be going forward. Then he picked up a question written on a card and said, “A lot of these I think I’m going to have to handle, like this one.” He read: “I would like to know if you are on crack.”

The crowd laughed.

“If so,” he continued, “that would explain a lot. If not, you may want to start because it is going to be a long time before we can trust you again.”

The crowd laughed again. Even under attack, Dr. Lay looked relaxed and appeared to be enjoying himself, though we know that could not possibly be happening.

“I think that’s not a very happy employee,” Lay said. “I’m sure a lot of you have some hatred.” He paused. “No, I’m not on crack.”

The decision of the board to ask Andy Fastow how much he had earned with the LJM structures had been made last week. Today John Duncan and Mickey LaMaistre would ask. Jim Derrick, the firm’s general counsel, had composed a script (script here) to make sure they asked the right questions.

LaMaistre, who was in Colorado at the time, looked down at the script and began to read it.

“Andy, because of the current controversy surrounding LJM1 and LJM2, we believe it would be helpful for the board to have a general understanding of the amount of your investment and your return on investment in the LJM entities.” He asked four specific questions, which allowed for no wiggle room.

Fastow answered that he made twenty-three million on LJM1 and twenty-two million on LJM2. The actual number would be about fifteen million dollars higher — over sixty million dollars all told.

In Global Finance, two very bad things were happening. The first was that Enron’s short term loans in the commercial paper market weren’t rolling over. The second was that Ben Glisan was attempting to get some credit from bankers, to no avail. No bank wanted to do business with Enron as long as Fastow was still CFO. Thus Ben Glisan was put in the uncomfortable position of having to tell his boss that he was the corporate equivalent of anthrax.

Pug Winokur, a board member, and president Greg Whalley were at that moment fighting over whether Andy Fastow would stay as CFO. The board – and Pug – adored Andy. Whalley believed Fastow was poison.

Fastow and Glisan convened the finance team – including Rick Causey – trying to find a way out of the morass of problems that had been dumped on their laps. Whalley suggested they call Jeff McMahon.

McMahon and Glisan were not on good terms. Just three days earlier McMahon had tried to fire Glisan. But the Boy Scout had survived. So when Glisan told him that the company was unable to roll commercial paper, McMahon could only roll his eyes. Obviously Glisan was too stupid to even know the words he was using.

“Ben, obviously you didn’t mean you couldn’t roll it,” McMahon said. Probably what had happened was that he couldn’t issue as much as the company would like, which was not a surprise in this market.

Then Andy’s voice came on the line. “No, Jeff. Ben is right. We were unable to find any buyers for our commercial paper.”

McMahon was stunned. And sickened. Through the astonishment of the situation, only one solution presented itself. It was time to draw down the revolving credit lines that backed the commercial paper.

Getting off the phone with Glisan, Causey and Fastow, McMahon then called Whalley. “We have a major liquidity crisis,” he said.

The stock closed at $19.79, a loss of 4 percent of its value.

Today In Enron History

Monday, October 22, 2001.

The stock opened at the high it would reach for the day: $24.

The SEC alerted the company that it had begun an investigation; it was not entirely unexpected since the Wall Street Journal had spent almost the entire previous week raising questions and accusing Enron of covering up the $1.6 billion loss. Questions had begun to swirl, and accusations. So when it finally happened, there was something almost inevitable about it. ( Press release here).

At 8am Ken Lay convened a meeting of Enron’s executives in the Dogwood room of the Hyatt Regency across the street from the Enron towers. Absent was Andy Fastow, who was currently meeting with Jordan Mintz in Fastow’s office. Ken Lay had asked him not to attend.

There was a lot to discuss: LJM, the write-downs, the SEC inquiry, the sinking stock. Ken Lay’s hope was that by having a very frank discussion, he might calm the company – and possibly come up with a short-term strategy that would halt the kamikaze death spiral that Enron was in.

Almost immediately, the meeting was bedlam, a scene out of the English parliament with executives yelling in the middle of the other’s questions and comments. Some believed the company should apologize and vow to do a better job of disclosure. Others yelled back that was nonsense, that taking a defensive posture was absolutely the wrong thing to do.

Ken Lay reiterated his support (and the Board’s) for Andy Fastow. In the end, nothing was really solved by this meeting, but at least it must have been crystal clear to Ken Lay that with so many executives calling for Fastow’s neck, he could not remain CFO for long. In fact, he had two more days in that role.

At 10:30 Andy Fastow called Mike Edsall, an attorney at Kirkland & Ellis, LJM’s outside counsel. They spoke for half an hour.

From 12:30 to 2pm, he met with Houston attorney David Gerger- who would become his attorney through-out the Enron trials. One can speculate what was going on here, but I’ll just assume he was eager to catch up with an old friend. (Gerger was a friend of Lea Fastow).

At 3pm, Ken Lay hosted a special Board of Directors meeting, which Ken Lay again asked Andy Fastow not to attend. Ben Glisan made a presentation, noting that demand for the company’s bonds was soft, but restating that Enron had plenty of liquidity. After a brief discussion with Rick Causey about an arcane accounting structure of Azurix, Ken Lay asked if any of the Board members if they knew how much money Andy had made from the LJM structures. Nobody knew. The time had come to just ask him. Two directors, John Duncan and Mickey LeMaistre were appointed to call Fastow and ask him.

At 3:30pm Houston time, Enron stock closed at $20.65, having lost 20.7% of its value since Friday.

At 4pm, Fastow had another phone conversation with Mike Edsall lasting for one hour.

At 5pm, Fastow attended a strategy meeting to prepare for the next day’s special investor conference call. In attendance were Ken Lay, Greg Whalley, Mark Koenig, Rick Causey, Steve Kean, and Ben Glisan.

At 6pm, the meeting broke up and most of the executives left for the annual fundraiser at the Holocaust Museum, which was also an occasion to honor Jim Reilly of Salomon Smith Barney. Andy Fastow, having been offered a chance to speak about his contribution to the museum, took a special moment to acknowledge Ken and Linda Lay, saying that the couple were Lea and his own personal role models and paragons of community service. Though I do not know this, I think it is reasonable to assume that Andy knew at this point that the walls were closing in. He’d been locked out of two critical meetings that day. He was on the phone with lawyers. He wasn’t stupid. Putting those three factors together, it not difficult to arrive at the conclusion that he definitely knew something was very wrong. I believe his rather slobbery display over the Lays that evening was an attempt to charm and woo Ken back into his corner. Ken had always adored Andy — I think Andy was trying to remind him of that.

That night, about the time everyone was driving home from the gala, an automated email went out to all Enron employees reminding them that the Enron Savings Plan was moving to a new administrator, and that October 26 would be the last day they could touch their funds until November 20.

Highlights of Ben Glisan’s Testimony

“We needed that cash and needed it badly. There wasn’t a plan to hold onto these assets for a better deal,” Glisan testified, in response to a defense suggestion that Enron held poor-performing assets in hopes of securing a better price.

* * *

Glisan was asked whether short-sellers, who make money when a stock falls, could disrupt Enron’s access to capital markets. “It’s true that short-sellers want to interject negative information. The question is can the company respond to it?”

* * *

On cross-examination, Lay lawyer Bruce Collins sought to poke holes in Glisan’s assertion that he adequately warned Lay in October 2001 of Enron’s shaky finances. Collins cited a corporate secretary’s notes from an October 2001 board meeting that showed Glisan told directors — including Lay — that Enron had immediate access to $1.5 billion in cash and more was “under consideration by the company.”

* * *

Glisan acknowledged that he walked out of a meeting on Oct. 22, 2001 before Enron’s accounting chief told Lay and the other directors that auditors had determined that no write-down would be necessary for the company’s water unit. Collins presented Glisan’s admission to the jury as evidence that Glisan, Lay and Skilling were working off of different information.

* * *

Glisan testified about the financial structures that he helped design that had no other business purpose than to help Enron manage its accounting of losses and poor assets. “We took pride — I took pride — in helping the company do that,” Glisan told the jury.

* * *

Glisan testified that, at an October 23, 2001 meeting, he told Fastow that “bankers had lost confidence in him and the expectation was he would leave the company.”

* * *
Collins took issue with Glisan’s characterization of Lay “giggling … in delight” at the notion that outside auditors had approved of the Raptors. “I’ve gotten to know Mr. Lay pretty well. He may chuckle, but he doesn’t giggle,” Collins said. “I concede chuckle as opposed to giggle,” Glisan replied.

* * *

One of the defense’s key arguments is that Enron’s collapsed was triggered by a loss of investor confidence not fraud. “If Enron hadn’t gone bankrupt, we wouldn’t be here, would we?” Petrocelli asked, to which Glisan replied: “That’s hard to know.”

* * *

Glisan testified that, in October 2001, he told Lay that “Bankruptcy is inevitable,” and that Lay didn’t have much of a reaction, though seemed “somewhat resigned.” The next day, according to a transcript of a meeting shown to jurors, Lay told employees, “The company is doing well financially and operationally,” and “liquidity is fine.”

* * *

Petrocelli’s cross of Glisan got heated at times, with Petrocelli at one point asking Glisan if he’d “lied all day” on the stand Wednesday when he gave detailed accounts of wrongdoing by Enron management. “Absolutely not,” Glisan replied.

* * *

Petrocelli accused Glisan of signing a statement that was written for him by prosecutors. “They picked the crime, they wrote it up, you signed your name!” Petrocelli said. “I wrote it,” Glisan replied. “I edited it to make sure the statement I gave was accurate.”

* * *

Glisan testified that Skilling backed the Raptors as a way to skirt accounting rules, though admitted that he had no notes, emails or documentation to that effect. “The conversations were quite memorable,” Glisan said, defending his recollection. And even though he took extensive notes during his last two years at Enron, he testified that, “some of the meetings I had with Mr. Lay did not allow me the opportunity to take notes.”

* * *

Glisan described to jurors his first pitch of the Raptors to Enron’s finance committee in May 2000. Enron’s former top accountant, Richard Causey, told the committee that the structure was risky but nonetheless approved by outside auditors. Lay’s response was to “giggle in delight,” according to Glisan’s testimony.

* * *

In 2001, Lay asked Glisan to find out how large a write-down would have to be to affect the energy giant’s credit rating, according to Glisan’s testimony. “That’s backwards,” Glisan told jurors. “What should occur is we should take the charges that we needed to take and then deal with the consequences.” What actually occurred, Glisan said, was that Enron reported a charge of about $1 billion, which wouldn’t prompt a downgrade, instead of the several billion in actual charges that executives had discussed internally.

* * *

At one meeting, several Enron executives suggested doing away with “structured finance” transactions to help the company manufacture earnings. According to Glisan, Lay replied: “we rely on these; they are imperative to hit our numbers and we’re going to keep doing them.”

* * *

Lay went to the board’s finance committee to ask for an increase in the risk Enron’s trading unit could take on, Glisan testified. When the committee chairman balked, Glisan said Lay countered with: “were the finance committee not able to increase risk limit, we might not reach our earnings targets … and might have to issue a warning” on earnings.

* * *
On the day Skilling resigned, Enron’s financial condition was “weak,” Glisan testified. That same day, Lay and Skilling offered an upbeat assessment of the company and outlook. When asked if Lay and Skilling were aware of Enron’s problems, Glisan replied, “Yes, they were.”

* * *

Glisan testified that there were “billions of dollars of embedded losses” in Enron’s international assets. The company didn’t take write-downs because it would have required “a larger loss than we could have stomached,” Glisan said.

* * *

Outside the jury’s presence, Glisan invoked the Fifth Amendment when asked if he committed any other crimes while at Enron.

A Trivial Observation About Enron Execs

* I was reviewing some handwritten notes from various Enron executives this evening and was struck at the absolute lack of doodles, particularly hearts. I don’t think I’ve taken a page of notes in my entire life that wasn’t covered in hearts, squiggles, squares, 3-D squares, flowers, and stars. I think the lack of doodles indicates a mind that is so focused on what is going on that they don’t doodle.

* This got me thinking. I looked up some writings from Ben Glisan, Michael Kopper, Ken Rice, Jeff Skilling and Rex Shelby. In none of the samples did any of them scratch out anything. I think this is because they think in full, clear paragraphs. Or maybe the sample was so small it was irrelevant. Still, I find it interesting.

* Clear thinking equals clear writing.


* I also noticed that all of them have very similar handwriting. It is slashing with no curves (Rex does have some curves on his Ys but no other letters) and invariably written in black ink.


Best handwriting sample I’ve ever seen:

Timothy Despain’s Emails Regarding S&P and Moody’s (Plus Ben Glisan’s Handrwritten Notes)

I found some emails from Tim Despain regarding Enron’s troubles with credit rating agencies. They seem timely – though they’re now ten years old.

Despain’s email to Ken Lay regarding credit rating agencies

Despain’s email regarding Moodys (written four days later).

Ben Glisan’s handwritten notes about S&P

Ben Glisan Stencil

I’m still working on this stencil. He keeps coming out looking evil. Despite the fact he looks scheme-y here, know that I DO NOT THINK HE IS EVIL! (For an example of my [incredibly] magnanimous stenciling, see Sherron Watkins You know if I make Sherron Watkins look that good, I am very serious about NOT MAKING PEOPLE LOOK EVIL).

Anyway, whatever you might think of Ben’s actions at Enron, the man is pistol hot. Like Ken Rice level hot. So I’m really not trying to slander him with this, and in the meantime I’ll keep working on toning down the menace in his dreamy green eyes.

My Enron Movie, Part One

A certain someone and I have been playing a game for almost three years now. Ever so often, we think about who we would cast to play various people in a limitless-budget production of the real Enron story.

Today, I’m coming clean with some of my choices (and his).

Ken Lay should be played by Jeff Bridges.

Jeff Skilling is a little more difficult to cast, but I think I’ve settled on Sean Penn. Sean Penn doesn’t have Jeff’s build, which bothers me because Jeff actually has a lot of physical presence, but Penn is a magnificent actor and I think he’d capture Jeff’s crystal-bright intelligence, and the hidden sadness. It should be noted that I chose an unconventional picture of Jeff Skilling. I could have found one of him smiling and non-threatening, but I like this one because it’s unguarded. He’s angry and sad as he leaves the court house — exactly as any reasonable person would be.

For Andy Fastow, Kevin Spacey. Kevin Spacey is edgy, I can’t get comfortable watching Kevin Spacey, he’s strange and unknowable, and I think he could bring that to a portrayal of Andy Fastow. I have never seen Kevin Spacey clown around in a movie and I think it would be vital to show that silly side of Andy. But I think Kevin Spacey can handle it.

Ben Glisan is the easiest one of all the Enron execs to cast. He shall be played by Ben Affleck. I decree it, thus it shall be so! They have more than just a passing resemblance, and I think Ben Affleck could capture Ben perfectly.

Ken Rice has to be played by Gerard Butler. They have the same physique and their faces have a passing resemblance, but more importantly and I think Gerard Butler can capture Ken’s coolness and complexity. We must work on getting rid of that Scottish accent, however.

These graphic things take forever to make so I’ll have to get to part two tomorrow.