| Enron: The Smartest Guys in the Room | |
|---|---|
 Theatrical release poster | |
| Directed by | Alex Gibney |
| Written by | Alex Gibney |
| Based on | The Smartest Guys in the Room byBethany McLean Peter Elkind |
| Produced by |
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| Narrated by | Peter Coyote |
| Cinematography | Maryse Alberti |
| Edited by | Alison Ellwood |
| Music by | Matthew Hauser |
Production companies |
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| Distributed by | Magnolia Pictures |
Release date |
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Running time | 109 minutes[3] |
| Country | United States |
| Language | English |
| Budget | $700,000[4] |
| Box office | $4.9 million[5] |
Enron: The Smartest Guys in the Room is a 2005 Americandocumentary film based on the best-selling 2003book of the same name byFortune reportersBethany McLean and Peter Elkind, who are credited as writers of the film alongside the director,Alex Gibney. It examines the 2001 collapse of theEnron Corporation, which resulted in criminal trials for several of the company's top executives during the ensuingEnron scandal, and contains a section about the involvement of Enron traders in the2000-01 California electricity crisis.Archival footage is used alongside new interviews with McLean and Elkind, several former Enron executives and employees, stock analysts, reporters, and formergovernor of CaliforniaGray Davis.
The film won the awards forBest Documentary Feature at the21st Independent Spirit Awards andBest Documentary Screenplay at the58th Writers Guild of America Awards.[6] It was nominated for theAcademy Award for Best Documentary Feature at the78th Academy Awards.[7][8]
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The film begins with a profile ofKenneth Lay, who founded Enron in 1985. In 1987, the company becomes embroiled in scandal after two traders begin betting on the oil markets, resulting in suspiciously consistent profits. One of the traders, Louis Borget, is also discovered to be diverting company money to offshore accounts. Auditors uncover their wrongdoing, but Lay encourages them to "keep making us millions". However, the traders are fired when it is revealed they gambled away Enron's reserves and the company is narrowly saved from bankruptcy by executive Mike Muckleroy, who managed tobluff the market long enough to recover Borget's trading losses. Lay later denies having knowledge of any wrongdoing.
Lay hiresJeffrey Skilling, a visionary who joins Enron on the condition that they usemark-to-market accounting, allowing the company to record potential profits on certain projects immediately after contracts were signed, regardless of the actual profits made. With the vision of transforming Enron from an energy supplier to an energy trader, Skilling imposes hisDarwinian worldview on Enron by establishing a review committee that grades employees and annually fires the bottom fifteen percent, a process nicknamed within the company as "rank and yank". Skilling also hiresJ. Clifford Baxter, an intelligent butmanic-depressive executive, andLou Pai, the CEO ofEnron Energy Services, notorious for his nightly habit of visitingstrip clubs. Pai abruptly resigns from EES, having already sold $250 million of stock as a result of divorce proceedings.
With its success in thebull market brought on by thedot-com bubble, Enron seeks to beguile stock market analysts by meeting their projections. Executives push up their stock prices and then cash in their multimillion-dollar options, a process known as "pump and dump". Enron also mounts aPR campaign to portray itself as a profitable, prosperous, and innovative company, even though its worldwide operations are performing poorly. Elsewhere, Enron begins ambitious initiatives, such as attempts to usebroadband technology to delivermovies on demand and to "trade weather" like a commodity. Both initiatives fail, but, using mark-to-market accounting, Enron is able to record non-existent profits for these ventures.CFOAndrew Fastow creates a network ofshell companies designed solely to do business with Enron, for the ostensible dual purposes of sending Enron money and hiding its increasing debt. Fastow also pressuresWall Streetinvestment banks into investing in these shell entities. However, Fastow has a vested financial stake in these ventures and uses them to defraud Enron of tens of millions of dollars in business deals that he effectively conducts with himself. All of this is done with the permission of Enron's accounting firmArthur Andersen and Enron's corporate board. Most of these deals were leveraged with Enron stock, meaning that a significant decline in their stock price could cause Fastow's network of shell companies to fall apart. During this time, Enron's executives encourage employees to invest their savings and retirement funds into Enron stock while they are selling off their shares for millions.
Enron's successes continue as it becomes one of the fewinternet-related companies to survive theburst of the dot-com bubble in 2000 relatively unscathed, and it is named the "most admired" corporation byFortune magazine for the sixth year running. However,Jim Chanos, an Enron investor, andBethany McLean, aFortune reporter, question irregularities about the company's financial statements and stock value. Skilling responds by calling McLean "unethical", though he does send three Enron executives to meet with McLean and herFortune editor to explain the company's finances. When McLean's critical article is published, Skilling accusesFortune of just trying to counteract a recent positive piece about Enron inBusinessWeek,Fortune's competitor.
Public perception of Enron begins to change due to its role in the2000–'01 California electricity crisis. Given the company's purchase ofPortland General Electric in 1997, Enron traders are able to exploit California's newly deregulated energy market by creating artificial energy shortages, making the company $2 billion. The film includes tape-recorded conversations between Enron traders who seem to derive enjoyment from this, citing theMilgram experiment to explain their behavior. It also explores the strong political connections Ken Lay and Enron had, particularly to the administrations ofPresidentGeorge H. W. Bush and his son, President (and earliergovernor of Texas),George W. Bush, and suggests that theBush administration's lack of response during the California energy crisis could have been intended as a means of sabotaging then-governor of CaliforniaGray Davis, who was speculated to be a strong potential challenger to the younger Bush in the2004 Presidential election. Indeed, the crisis was a contributing factor toDavis being recalled in 2003, which ended his political career. Skilling, who succeeded Lay as Enron's CEO on February 12, 2001, blamesCalifornia's energy laws for the crisis and denies that Enron is acting inappropriately, infamously stating in a 2001 episode ofFrontline that "We are the good guys. We are on the side of angels." Eventually, theDemocratic-controlledUnited States Senate ends the crisis by imposing price controls. Bush's connections to Ken Lay come under scrutiny in the press, which intensifies after Enron's collapse.
Meanwhile, throughout 2001, much more scrutiny is brought upon Enron's balance sheet. This agitates Skilling, leading him to engage in odd and irrational behavior, such as calling an investor an "asshole" during a conference call. This culminates in Skilling's abrupt resignation as CEO in August 2001, after which Ken Lay retakes the position. Skilling's odd behavior serves as ared flag to investors, who begin to question how financially healthy the company really is. Soon after Skilling's departure,whistleblowerSherron Watkins discovers the fraud in Enron's books and alerts Lay, telling him the company is headed to certain collapse unless he acts immediately. Like in 1987, Lay largely ignores the warnings and assures that Skilling left for personal reasons and the company is financially solid. The board fires CFO Fastow after discovering he hadembezzled more than $30 million from the company through his shell companies. With Fastow gone, Enron's accountants issue restatements that erase a majority of the company's profits from 1997 through 2000, add nearly $1 billion of debt to the company's balance sheet, and remove over $1 billion of shareholder equity as a means ofwriting down the losses from Fastow's shell companies. Despite Lay's continued assurances that Enron is in good shape and will pull through, the company's stock price tanks as its investors and customers lose all confidence, forcing Enron to file forChapter 11 bankruptcy protection in November 2001.
As a result of Enron's bankruptcy, many of its employees lose their pensions and life savings, while investors lose over $11 billion in shareholder value. Skilling testifies at the ensuing congressional hearings, but Ken Lay and Andrew Fastowplead the fifth. Fastow eventually pleads guilty and agrees to testify against his former coworkers in exchange for a reduced sentence, while Lay and Skilling plead innocent and spend tens of millions of dollars ondefense attorneys, with their trials scheduled to take place in 2006.
Enron: The Smartest Guys in the Room received positive reviews. It has a rating of 97% onRotten Tomatoes, based on 119 reviews, with an average rating of 8.09/10; the site's consensus states: "A concise, entertaining documentary about the spectacular failure of Enron."[9] OnMetacritic, the film has a rating of 82%, based on 37 reviews.[10]
Film criticRoger Ebert, writing in theChicago Sun-Times, gave the film three-and-a-half out of four, commenting that: "This is not a political documentary. It is a crime story. No matter what your politics,Enron: The Smartest Guys in the Room will make you mad".[11] Ebert's co-host on the television programEbert & Roeper,Chicago Tribune criticRichard Roeper, said the film is "a brilliantly executed, brutally entertaining dissection of what one observer called the greatest corporate fraud in American history".A. O. Scott ofThe New York Times wrote that: "This sober, informative chronicle of the biggest business scandal of the decade is almost indecently entertaining."Owen Gleiberman called the film: "A nimble investigative workout that leaves you with the exhilarated sensation of understanding the defining financial scandal of the virtual era."[12]
The film won the award forBest Documentary Screenplay at the58th Writers Guild of America Awards[6] and was nominated for theAcademy Award for Best Documentary Feature at the78th Academy Awards, but lost toMarch of the Penguins.[13]
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