[pullquote cite=”” type=”left, right”][amazon text=Amazon&template=carousel&chan=That Film Guy&asin=B000GJ0NT8][/pullquote] The collapse of Enron in late 2001 caused shockwaves across the world economy and reshaped the corporate landscape forever. Indeed it is hard to exaggerate the magnitude of the fraud and deceit that occurred under the control of crooked CEOs and, much more worrying, right under the auditors noses. Much like the Titanic, the impossible happened and the ramifications were vast.
The story of Enron began in 1985 in Omaha, Nebraska following the merger of two companies in the natural gas market. As CEO of Enron, Kenneth Lay hired Jeff Skilling in 1990 as head of finance who had impressed as a consultant on earlier projects. Skilling, as this documentary shows, was as ruthless as he was charming and was charged with ensuring that Enron’s stock would consistently rise making it an attractive investment opportunity.
In 1993, Skilling employed Andrew Fastow to exploit the newly deregulated energy market and it is here, via the use of complex financial arrangements that the financial statements of Enron began to tell a not altogether truthful tale of its performance. Using specially set up entities, Fastow managed to keep liabilities away from the Enron balance sheet thus making it attractive to investors and receiving consistently favourable investment grade credit ratings from analysts.
Perhaps the biggest breakthrough for Lay, Skilling and Fastow came when the auditors, Arthur Andersen (at the time one of the ‘Big Five’ accounting firms in the world) signed off on the use of ‘Mark to Market’ accounting in Enron’s financial statements. This effectively meant that Enron could strike a deal to create potential future profits but report them now as if they had already occurred. This extraordinary decision by Arthur Andersen eventually lead to the downfall of not only Enron but of Arthur Andersen itself in 2002 following criminal charges relating to their handling of Enron.
The complex story is told clearly in sections with interviews provided by key players interspersed with archive footage from the many Enron meetings that were held to reassure stockholders and analysts that everything was rosy and that the outlook was excellent.
Whilst Lay, Skilling and Fastow were all sentenced to long prison sentences for their parts in masterminding the fraud, the real tragedy was the loss of 22,000 jobs and the entire $2bn of pension funds the loyal employees had contributed or were contributing up to the time of the collapse.