is not a political documentary. It is a crime story.
No matter what your politics, ``Enron:
The Smartest Guys in the Room'' will make you mad. It tells the story of
how Enron rose to become the seventh-largest corporation in America with
what was essentially a Ponzi scheme, and in its last days looted the
retirement funds of its employees to buy a little more time.
There is a general impression that
Enron was a good corporation that went bad. The movie argues that it was
a con game almost from the start.
It was ``the best energy company in
the world,'' according to its top executives: Kenneth Lay and Jeffrey
Skilling. At the time they made that claim, they must have known that
the company was bankrupt, had been worthless for years, had inflated its
profits and concealed its losses through bookkeeping practices so
corrupt that the venerable Arthur Andersen accounting firm was destroyed
in the aftermath.
The film shows how it happened.
To keep its stock price climbing,
Enron created good quarterly returns out of thin air. One accounting
tactic was called ``mark to market,'' which meant if Enron began a
venture that might make $50 million 10 years from now, it could claim
the $50 million as current income.
In an astonishing in-house video made
for employees, Skilling stars in a skit that satirizes ``HFV''
accounting, which he explains stands for ``Hypothetical Future Value.''
Little did employees suspect that was more or less what the company was
Skilling and Lay were less than
circumspect at times. During a Q&A session with employees, Lay actually
reads this question from the floor: ``Are you on crack? If you are, that
might explain a lot of things. If you aren't, maybe you should be.''
One Enron tactic was to create phony,
offshore corporate shells and move their losses to those companies,
which were off the books. We're shown a schematic diagram tracing the
movement of debt to such Enron entities.
Two of the companies are named ``M.
Smart'' and ``M. Yass.'' These ``companies'' were named with a reckless
hubris: One stood for ``Maxwell Smart'' and the other one - well, take
out the period and put a space between ``y'' and ``a.''
What did Enron buy and sell, actually?
Electricity? Natural gas? It was hard to say. The corporation basically
created a market in energy, gambled in it and manipulated it. It moved
on into other futures markets, even seriously considering ``trading
At one point, we learn, its gambling
traders lost the entire company in bad trades, then covered their losses
by hiding the news and producing phony profit reports that drove the
share price even higher. In hindsight, Enron was a corporation devoted
to maintaining a high share price at any cost. That was its real
The documentary is based on the
best-selling book of the same title, co-written by Fortune magazine's
Bethany McLean and Peter Elkind. It is assembled out of a wealth of
documentary and video footage, narrated by Peter Coyote.
Much of the footage is taken from
testimony at congressional hearings, and from interviews with such
figures as disillusioned Enron exec Mike Muckleroy and whistle-blower
Sherron Watkins. It is best when it sticks to fact, shakier when it goes
for visual effects and heavy irony.
It was McLean who started the house of
cards tumbling down with an innocent question about Enron's quarterly
statements, which did not ever seem to add up. The movie uses in-house
video made by Enron itself to show Lay and Skilling optimistically
addressing employees and shareholders at a time when Skilling in
particular was coming apart at the seams.
Toward the end, he sells $200 million
in his own Enron stock while encouraging Enron employees to invest their
401(k) retirement plans in the company. Then he suddenly resigns, but
not quickly enough to escape Enron's collapse not long after.
Televised taking the perp walk in
handcuffs, both he and Lay face criminal trials in Texas.
The most shocking material in the film
involves the fact that Enron cynically and knowingly created the phony
California energy crisis. There was never a shortage of power in
California. Using tape recordings of Enron traders on the phone with
California power plants, the film chillingly overhears them asking plant
managers to ``get a little creative'' in shutting down plants for
Between 30 percent and 50 percent of
California's energy industry was shut down by Enron a great deal of the
time. The percentage grew to 76 percent at one point, as the company
drove the price of electricity higher by a factor of nine.
We hear Enron traders laughing about
``Grandma Millie,'' a hypothetical victim of the rolling blackouts, and
boasting about the millions they made for Enron. As the company goes
belly-up, 20,000 employees are fired. Their pensions are gone, their
stock worthless. The usual widows and orphans are victimized.
A power company lineman in Portland,
who worked for the same utility all his life, observes that his
retirement fund was worth $248,000 before Enron bought the utility and
looted it, investing its retirement funds in Enron stock. Now, he says,
his retirement fund is worth about $1,200.
Strange that there has not been more
anger over the Enron scandals. The cost was incalculable, not only in
lives lost during the power crisis, but in treasure: The state of
California is suing for $6 billion in refunds for energy overcharges
collected during the phony crisis.
If the crisis had been created by al-Qaeda,
if terrorists had shut down half of California's power plants, consider
how we would regard these same events. Yet the crisis, made possible
because of deregulation engineered by Enron's lobbyists, is still being
blamed on ``too much regulation.''
If there was ever a corporation that
needed more regulation, that corporation was Enron.
© 2005 The Ebert Co. Ltd.