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Enron: The Smartest Guys in the Room

Company Formed: 1985 through merger of natural gas carriers (10:30) Valhalla scandal: 1987 two oil traders making illegal trades (12:30) Louis Borgett (EOT President) imprisoned for embezzlement, cooking books, destroying trading records (14:30) (17:15) Tom Mastroeni (EOT Treasurer) had original books. received suspended sentence (17:15) Dabhol Energy Plant (India): 1993 - Lost almost $1 billion for Enron (36:00) Portland General Electric Company: Bought by Enron in 1997 (37:00) Employees invested 401k into Enron believing it to be as stable as the previous company (37:00) Bandwidth Trading: 1999 - Enron attempts to create bandwidth trading market (40:30) Enron teams up with blockbuster to stream movies online, technology did not work, blockbuster soon backed out of the deal, $53 million booked on future value despite that no money was made on the deal (41:30) California Energy Crisis: Tim Belden in charge of Enron’s west coast energy trading desk (1:06:30) Belden developed strategies to exploit California’s partially deregulated energy markets (1:07:00) Enron made money by booking up cross-state transmission lines and artificially shutting down generation capacity (1:08:30) California governor Gray Davis appeals to the Federal Energy Regulatory Commission for energy price caps. His appeals were thwarted by Bush Jr. appointee Pat Wood who was recommended for the job by Ken Lay. (1:20:00) Gray Davis subsequently loses recall election to Arnold Schwarzenegger (1:22:00) Investor Scrutiny: Jim Chanos had doubts about Enron’s financial statements, informed Bethany McLean of Fortune Magazine who interviewed skilling via phone. (March, 2001) (46:00) SEC launches investigation after Wall Street Journal articles about Fastow’s business deals (1:31:30) Arthur Anderson and Enron began massive shredding after SEC investigation launched (1:32:00) Arthur Anderson convicted of obstructing justice. (1:44:00) Bankruptcy: Enron declares bankruptcy on 12/2/2001 (1:37:15)

Notable Individuals
Jeff Skilling: Instrumental in creating the energy trading market (stock market for natural gas) (18:40) Wanted mark-to-market accounting. Method approved by Arthur Anderson and SEC (19:30) Darwinian world view (22:00) Instrumental in convincing analysts to issue buy recommendations (38:30) Resigns his position as CEO on 8/14/2001 (1:24:00) Indicted for insider trading and conspiracy in 2004, pleads innocent, pays his attorneys a $23 million retainer for his defense. (1:43:30) Ken Lay: Chairman of the Board & CEO. Takes over as CEO after Jeff Skilling’s resignation (1:26:30) Son of a Baptist preacher. PhD in Economics (9:00) Friend of the bush family (“Kenny Boy”) (7:00) (11:00) George Bush Sr. helped secure government subsidies for Enron early on (12:00) Indicted for conspiracy to commit fraud (1:44:30) Andrew Fastow: Enron CFO (protégé of Jeff Skilling) (50:30)

Got john Olson fired from Merrill Lynch via threats to discontinue business with the company. $50 million via two investment deals awarded to Merrill after Olson’s firing (39:30) Created hundreds of shell companies used to hide Enron losses and debt via structured accounting (48:30) Used LJM Partners to raise capital from major financial institutions in order to buy Enron assets (55:00) Set up as fall guy at Enron. Plead guilty to conspiracy to commit wire fraud. Sentence reduced to 10 years in exchange for testimony. Forfeited $23 million in assets (1:34:00) (1:42:30) Lou Pai: CEO of Enron Energy Services (EES) (28:00) Really into Strippers (29:00) Left Enron with $250 million (30:30) John Clifford “Cliff” Baxter: Big deal maker at Enron, manic depressive, close to skilling (27:00) 2-25-2002 suicide due to media attention and civil suit (1:41:30) Told Jeff Skilling: “They are calling us Child molesters. That will never wash off.” (3:30)