River Road Venturer       St. Gabriel & the Great River Road...by Burton LeBlanc 

Conspiracy of Fools

This book contains an amazing amount of detail on the Enron fiasco. Having followed Enron somewhat in its glory days, when the first news broke about questionable practices, it was realized that we were seeing only the tip of the iceberg.

There are two aspects to the book: The first is that it brings into consideration the importance of the public company. Historically, public corporations were first used largely in England, and to some extent in the Netherlands and France, to pool together resources from investors, for the pursuit of ventures in the Americas, Africa and Asia. Some of these became quite successful and left their constructive and destructive mark in the areas exploited.

Since the American colonies had been subjected to some of the abuses originated by these entities, there was widespread opposition to these corporations as exemplified in the Boston Tea Party episode. After the formation of the United States there was a reluctance to permit the formation of new publicly financed corporations. They were first permitted for companies which performed services for the public such as railroad companies and the like.

Later their role expanded and Chief Justice Marshall gave them solid footings in his rulings, particularly the one which gave them the privilege of “persons” under the United States Constitution.

The increase in output per individual person, whether farmer or maker of products, provided by the Industrial Revolution, has usually been attributed only to the development of new machines and assembly production. Of significant importance, also, was the creation of a system of pooling individual resources to form a company with the financial strength to carry out these objectives. The excesses of the “Robber Barons” led to the realization that government needed to play some role in restraining these excesses.

An integral part of these institutions has always been the “hype” used to lure investors. In recent years the marketing of shares has become an art form of the highest order. This book provides a recitation, in chapter and verse, of one of the standout examples of such over exuberant salesmanship. This recounting has important legal and economic ramifications, and certainly is interesting from that stand point.

The other aspect of the book that is appealing is its almost Shakespearean treatment of the principal persons involved. The leading persons in the cast are Lay, Skilling, and Fastow.They are, of course, all real characters.

We start with Fastow because he is the simplest. He had an inordinate desire to make money even though his wife seemed to have had worthy assets. He came up, almost daily with schemes to set up companies which basically Enron financed. It was represented that they would provide revenues to Enron or at least improve its balance sheet. Fastow took a chunk out of deal, to the extent of some forty million dollars.

He had a cohort within the company named Koppers, who was basically in charge of these companies, and who not only dipped in handsomely, but also permitted his gay lover, who was technically and “outside party”, and ostensibly gave the arrangement more legitimacy, to dip into the till. Fastow even permitted one of the checks to be sent to his wife, Lea, which, of course, was a gross error.

The names that they came up with for the companies were imaginative and defiant, such as Raptors. Fastow had a dominating, or at least a cocksure, personality and was the Chief Financial Officer.

Skilling is more difficult to fathom. He is more Hamletesque. He was obviously, skilled [pun intended] in making presentations to investor advisors on the “great strengths” of the company. It was heralded as the most innovative and the leading company in the energy field.

 Skilling had great esteem for Fastow. It is not know to what extent he knew about Fastow’s dealings. This is a mystery and may remain so.

Lay is also an enigmatic figure. A friend of both President Bushes and of the high and mighty in the political land, he appears of perhaps not having been conscious of what was going on in his domain. He apparently excelled in relations with high powered persons, including the tsars of finance. He played his role naturally, such as at the dedication of Enron Park.

There were some in the company who resisted the direction it had taken such as Kaminski and Bowen. There was the suicide by Cliff Baxter. There was the manipulation of the California electricity market. There is a recount of how Andersen, which had been the leading accounting firm working with energy companies, engaged in document shredding which led to its destruction.

There will be a sequel, as the trials take place, and one can be certain that the denouement will also be Shakesperean.