Anthony's Film Review
Enron: The Smartest Guys in the Room (2005)
Not just about a company's downfall, but also about the evil of white-collar greed...
Let me start with a disclaimer. I do not have any formal education in business or economics. I never went to business school or majored in economics in college. So when I decided to see this documentary about the rise and fall of Enron, I wondered if I could understand it all. I can tell you that those with the background would understand the movie better than those without. However, the narration from start to finish is arranged nicely and simplified enough that the rest of us can get it.
Enron: The Smartest Guys in the Room is based on the book by the same name. The two authors of the book also appear in the film as interviewees, along with former Enron employees, analysts, and former California Governor Gray Davis. The film begins with footage of newscasts reporting the fall of Enron as well as an actor portrayal of a man who drives to a house at night and sits in his car with some soft music playing. In a distant camera shot, we see a flash and hear a bang from the car. This is Cliff Baxter, the man who committed suicide after Enron went bankrupt.
As with any story, you have the beginning, middle, and end. Here, the story is about Enron as the company is born, appears to grow into an energy giant, and dies in shame. The main characters are chairman and founder Ken Lay, CEO Jeffrey Skilling, and CFO Andrew Fastow. There is also brief narration about Lou Pai and an Enron trader on the West coast named Tom Belton. All of these characters have one thing in common: they're all greedy white-collar criminals. Simple as that.
The notion I had throughout the two hours of this film was that Enron was never a rich company to begin with but appeared that way because its executives created an illusion. Jeffrey Skilling had ways to inflate the balance sheet, including mark-to-market profits by which projected earnings are recorded as the company's profits. This goes on even as Enron is actually losing money. One piece of the debt comes from starting a power plant in India where people are too poor to even afford it.
Then you have Andy Fastow. What does he do to desperately generate a cash flow for Enron? Well, he does something rather deceitful. To erase Enron's debt, he conceives many companies. We see a diagram showing how money flows between these companies and Enron. One of these companies that supposedly supplies money for Enron is one called LJM. Fastow successfully duped investors into contributing money for LJM, and in the end, he managed to get millions of dollars each from nearly 96 banks, including Merrill Lynch and JP Morgan.
And if you think that's a horrendous crime, try the fiasco with California's energy crisis. What Tom Belton did as a trader, along with other traders, was to call some power plants in the state and ask them to shut down temporarily. These plant operators complied and were even willing to make up a reason for the downtime, as suggested over the phone. The result: energy prices skyrocket, allowing Enron to step in and swindle California out of a lot of money. This, of course, leads to dissatisfaction with Governor Gray Davis, who is eventually recalled out of office and replaced by Arnold Schwarzenegger. Meanwhile, the traders are laughing about the whole thing, as audio tapes of them prove. So the state never had a shortage of energy. Enron created it.
Once you watch this film, you will likely find yourself not trusting corporate America. Enron is an example of a company that was bad from the start but disguised itself so well that it tricked the whole country into admiring its growth and potential. And how many other Enrons are out there? We've heard of Worldcom already. Which corporation is next?
The film overall is both enlightening and also heartbreaking, especially when you consider how many employees lost their pensions after Enron's collapse or how Fortune magazine put Enron in its 500 list. It's a story about white-collar crime and how it can be just as evil as blue-collar crime. Regardless of how much you take pride in your work, you never know what kind of business you're stepping into.
For more information about Enron: The Smartest Guys in the Room, visit the Internet Movie Database.