ENRON'S LAST YEAR
The New York Times
February 10, 2002
Web of Details Did Enron
In as Warnings Went
Unheeded
nytimes.com
By KURT EICHENWALD with DIANA B. HENRIQUES
H OUSTON, Feb. 9 - Kenneth L.
Lay strode onto a ballroom stage
at the Hyatt Regency Hill Country
Resort in San Antonio, walking
between two giant screens that
displayed his projected image. Before
him, bright light from the ballroom's
chandeliers spilled across scores of
round tables where executives from
the Enron Corporation (news/quote) waited to hear the words of Mr. Lay, their
longtime chairman and chief executive.
This meeting of hundreds of Enron executives in the first week of January 2001
was a time of revelry, a chance to celebrate a year when business seemed good -
even better than good. At night, according to executives who attended, Champagne
and liquor flowed from the open bar, while fistfuls of free cigars were available for
the taking. Executives could belly up to temporary gambling tables for high-stakes
games of poker. Others found their excitement in the company- sponsored car
race; one executive had even hired a truck to transport his three Ferraris from
Houston for the event.
Now, as waiters wearing bolo ties scurried about, the executives listened eagerly to
Mr. Lay's descriptions of Enron's recent year of success, and the new successes
that were within reach. Already, Enron was near the top of the Fortune 500, a
multibillion- dollar behemoth that had moved beyond its roots in the natural gas
business to blaze new trails in Internet commerce. For 2001, Mr. Lay said, the
company would take on a new mission, one that would define everything it did in
the months to come: Enron would become "the world's greatest company." The
words replaced his image on one of the screens.
But it was not to be. For, unknown to almost everyone
there, Enron was secretly falling apart. Even as the
celebrations unfolded, accountants and trading experts at
the company's Houston headquarters were desperately
working to contain a financial disaster, one that
threatened - and ultimately would destroy - everything
Enron had become. A handful of executives were
struggling to sound the alarm, but with Enron's
confidence in its destiny, the warnings went unheeded.
"We were so sure of what we were doing and where we
were going," one executive who attended the San Antonio
meeting said. "We didn't know we were living on borrowed
time."
Investigators picking through the wreckage of Enron,
seeking to understand what caused its collapse in
December, have explored its byzantine partnerships and
financial strategies. From these details, a clearer picture
has begun to emerge about what happened inside the
thick walls of Enron during its last 11 months. It is two
completely different tales - the public image, polished by
its most senior officers, of an innovative powerhouse on
the verge of reshaping the world, and the hidden truth of
a company plagued by secrets, whose executives were
struggling to hold it together. It was like a gleaming ocean
liner seemingly powering forward, its passengers dining in
luxury, while, below the waterline, its sweaty crew
frantically bails against the force of an in-rushing sea.
By the final days, the sea had won. Attempts by Enron
executives to seek a rescue from their powerful friends in
Washington and last-ditch efforts to save the company
through a merger had ended in failure. When the
company finally sought bankruptcy protection, it marked
the biggest, fastest corporate collapse in American history.
Details of Enron's last year were pieced together from
internal records of the company and its auditor, audio and
video tapes, court documents, partnership records,
Congressional testimony and information from a report by
a special committee of the company's board and from
interviews with current and former executives, government
officials and lawyers involved in the case.
With the speed in which they traveled from confidence to
collapse, executives who once thought they could see their
futures clearly and who believed in their employer have
found their faith fundamentally shaken. "Given the events at Enron, given the
short time period in which it happened, given the economic disaster, it
fundamentally challenges everything I think about the way companies work," said
Allan Sommer, former vice president for corporate systems at Enron. "If Enron was
able to hide this the way they did, why couldn't other companies do it, too?"
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