Enron's "Conspiracy of Fools"

"These people who made $50 million a year, they destroyed the company because of their greed."

"How will I be able to file for unemployment and food stamps?"

-- Enron employees react after the layoff of 4,000 workers in Dec. 2001

We all remember the basic story: Enron Corporation had long been a giant in the business and political world. Its fall came swifter than anyone could have imagined. In 2001, as evidence of staggering corporate malfeasance slowly came to light, Enron's stock fell from $85 to a mere $0.30, ruining the lives of thousands of investors and employees. Enron also turned out to be just the first in a series of high-profile companies whose fraudulent practices were exposed, turning the first half of the decade into the era of robber barons getting their comeuppance. Out of the wreckage, Congress would pass the controversial Sarbanes-Oxley Act, the most important securities reform since the New Deal.

Now in a recently released book, Conspiracy of Fools, New York Times reporter Kurt Eichenwald recreates the long and twisted saga of the biggest corporate failure ever. In a 750+ page account written in the style of a John Grisham thriller, the book is a blow-by-blow detailed account that chronicles Enron from its very beginning to its disastrous end. Along the way, we are introduced to the whole infamous cast of characters, led of course by Ken Lay, Jeff Skilling, and Andy Fastow.

The first 2/3 or so of the book makes for a decent read, but isn't particularly scintillating. Eichenwald starts back more than a decade from the events of 2001, to show how everything came to happen the way it did, but occasionally while I was reading this section I was impatient to get to the thick of the story. Furthermore, Eichenwald's detailed description of Enron's complex financial maneuvering are rife with technical jargon aimed a bit above the average reader. While the laymen such as myself get the general idea that something is going wrong, Eichenwald's efforts here would probably be better appreciated by a reader with a background in accounting or finance. Still, the story of Enron is a long and complicated one, and Eichenwald does a good job (in the space of about 500 pages) to bring all the key pieces of the puzzle together.

With the setup complete, the book dazzles in the last 250 pages, moving at breakneck speed to keep up with Enron's stack-of-dominos collapse. Conspiracy's most page-turning moments come with its "insider" perspective on an out-of-control train wreck. Everything is there: the futile efforts of Enron insiders to notify the company of trouble ahead; the executive coverups and insistence that everything was okay; and of course, the ultimate, tragic demise. The story is well-written and superbly told--as I turned through the last pages of Conspiracy of Fools, I was left profoundly saddened by the culture of incompetence and arrogance Eichenwald reveals.

The book has its share of heroes and villains, though the former group obviously fights a losing battle. Eichenwald's chief protagonist and Bad Guy is Enron's CFO, Andy Fastow, who ruined Enron with his phony financial shenanigans and embezzled millions of dollars for himself, family, and friends. Eichenwald has drawn some criticism for not focusing as much on Enron's president, Jeff Skilling (portrayed as emotionally unbalanced and easily manipulated), and CEO Ken Lay (portrayed as a mostly clueless figurehead). On this note, I too find fault with Eichenwald. Regardless of the level of direct complicity on the parts of Skilling and Lay, they are at fault for allowing what went on to ever happen. Positions of great power come with the necessity to exercise responsible oversight, especially when the stakes are as high as they were.

All in all though, Kurt Eichenwald has done a terrific job in putting together a readable, informative, and entertaining presentation of one of the most important events in recent American history. Conspiracy of Fools tells a story too important for us to forget.