I finally dragged my husband and some friends to see the Enron documentary. Overall, I thought it told the story the best way that it could be told. (As I've mentioned before, I practiced law and taught in Houston from 1994-2003, and Enron was my client in 1997-98). Instead of focusing on the structured finance vehicles and conflicts of interest that merely covered up losses, the documentary begins by looking at the culture and personality of the company that may have resulted in the losses themselves. The interesting part of the Enron story that makes it different from every other accounting fraud story is the risk-taking culture there that resulted in such hubris-filled business risks that backfired, such as (my project) the Dabhol, India power plant, the Azurix water plant, and the dreams of broadband. The documentary begins by examining that personality that enabled Enron to create markets and industries that did not exist beforehand but that would ultimately be its downfall.
If you are an expert on any piece of the puzzle, you will be able to criticize that piece of the puzzle in the documentary.
For example, the documentary describes "mark-to-market" accounting in about 3 sentences, so of course, the description is not entirely apt. Of course, the movie could have tried to describe mark-to-market in 300 sentences, but then everyone would walk out of the movie. When the narrator tells the audience that Merrill-Lynch bought a barge from Enron, the audience chuckles because what would ML need a barge for? But, in 1999, many financial firms were buying assets, but that detail is omitted. The documentary describes the California power crisis and details how Enron called "the Power Plant" (words on the screen) to tell it to shut down in order to increase demand for electricity. But, the documentary does not mention that Enron did not own that power plant (or any in California) and does not mention the big power company that did.
Many people come off easy in the documentary. Gray Davis, for instance, and the California legislature that created such a stupid PX system. Vinson & Elkins and Arthur Andersen are named a couple of times, but no individual is named and there is no footage of their buildings or logos. No Enron director is named. The documentary focuses on Ken Lay, Jeff Skilling, and to some extent, Andy Fastow. Lea Fastow's name is never mentioned, nor is her picture shown.
Prof. Ribstein today talks about a NYT article analyzing the emails that surfaced during the Enron investigation. The movie talks about emails and also replays tapes of the power traders. As the NYT article mentions, no one in these emails/conversations are guarded about what they were doing. Part of that reason is that not everyone, and certainly few of the rank-and-file people, knew the entire picture and that what they were doing was illegal. The power traders, for instance, were following the rules of the California power exchange. If you had asked them whether they were manipulating the market, they would have said, "Of course. That's my job." The line between legal manipulation and illegal manipulation is very unclear, which probably explains why all the federal indictments for manipulating the power market during that time have languished for years.
The most interesting footage in the documentary was of Sherron Watkins testifying in front of Congress. I never picked up on this, but she had to sit at the same table as Jeff Skilling, with only Skilling's lawyer in between them. So, Watkins would say that Skilling knew about something, then two people down, Skilling would call her a liar. That kind of whistleblowing takes a lot of bravery, I think.
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