Enron: The Smartest Guys in the Room

00:38:51,123 --> 00:38:51,987 financial statements, 803 00:38:52,291 --> 00:38:54,953 and the representations of the company's management. 804 00:38:55,194 --> 00:38:57,128 And we've been absolutely upfront with the analysts. 805 00:38:57,363 --> 00:38:59,696 Jeff Skilling was the critical component 806 00:38:59,900 --> 00:39:01,697 in creating the Enron illusion. 807 00:39:02,135 --> 00:39:04,729 Time and time again when we had a question 808 00:39:04,971 --> 00:39:07,872 to the sell-side analysts that they couldn't answer, 809 00:39:08,241 --> 00:39:10,641 the response was, 'I'll give Jeff a call; 810 00:39:10,911 --> 00:39:12,503 I'll run this by Jeff.' 811 00:39:12,746 --> 00:39:14,407 By giving Jeff a call, 812 00:39:14,614 --> 00:39:16,912 the analysts weren't 'analyzing' at all. 813 00:39:17,150 --> 00:39:18,583 They were willing to believe virtually 814 00:39:18,819 --> 00:39:20,720 anything Enron told them. 815 00:39:25,993 --> 00:39:28,553 Most of the analysts right now have a target price on us 816 00:39:28,830 --> 00:39:31,458 from a hundred to a hundred and fifteen dollars a share. 817 00:39:31,699 --> 00:39:33,599 Any analyst who didn't buy the company line 818 00:39:33,801 --> 00:39:35,792 became an enemy of Enron. 819 00:39:36,037 --> 00:39:38,232 Enron's CFO, Andy Fastow, 820 00:39:38,473 --> 00:39:40,464 had his eye on John Olson 821 00:39:40,742 --> 00:39:43,803 one of the only analysts skeptical of the Enron story. 822 00:39:44,046 --> 00:39:46,913 Enron loved analysts' strong buy recommendations. 823 00:39:47,282 --> 00:39:49,307 Merrill was informed by Fastow, 824 00:39:49,585 --> 00:39:53,521 either you get somebody who is on board with us as a strong 825 00:39:53,756 --> 00:39:57,852 buy recommendation and loves us at the same time 826 00:39:58,394 --> 00:40:00,089 or we don't do any business with you. 827 00:40:00,295 --> 00:40:03,196 I knew that my days were numbered. 828 00:40:03,499 --> 00:40:04,967 This is an abuse. 829 00:40:05,235 --> 00:40:07,601 Merrill Lynch fired John Olson. 830 00:40:07,871 --> 00:40:10,032 Soon after Fastow rewarded the bank 831 00:40:10,306 --> 00:40:12,103 with two investment banking jobs 832 00:40:12,442 --> 00:40:14,171 worth 50 million dollars. 833 00:40:14,411 --> 00:40:16,572 Analysts were routinely getting large bonuses 834 00:40:16,780 --> 00:40:18,543 from the investment banking departments to bring 835 00:40:18,748 --> 00:40:21,808 in investment banking deals. Ah... once that happens, 836 00:40:22,051 --> 00:40:25,077 you know, never was heard a discouraging word. 837 00:40:26,389 --> 00:40:28,824 While Enron's stock kept rising, 838 00:40:29,093 --> 00:40:31,118 its businesses kept losing money. 839 00:40:31,996 --> 00:40:34,658 Looking at the soaring stocks of the dot-coms, 840 00:40:34,932 --> 00:40:38,333 Skilling decided to take Enron into cyberspace. 841 00:40:39,270 --> 00:40:41,067 We're now in the process of seeing 842 00:40:41,305 --> 00:40:43,967 if we can create a bandwidth trading market. 843 00:40:44,208 --> 00:40:46,199 Enron is using its knowledge of trading gas 844 00:40:46,510 --> 00:40:48,569 to barter other forms of energy even space 845 00:40:48,879 --> 00:40:51,178 on the information superhighway called bandwidth. 846 00:40:51,650 --> 00:40:54,585 Ken Rice has worked at Enron for twenty years. 847 00:40:54,820 --> 00:40:57,687 Enron has found a way to stay ahead of the curve. 848 00:40:58,023 --> 00:41:01,288 From 7 PM to 7 AM we're paying for bandwith that 849 00:41:01,493 --> 00:41:03,290 we are not using. Why? 850 00:41:04,062 --> 00:41:05,256 Why? 851 00:41:05,564 --> 00:41:08,362 One of our themes around here is to always be asking why. 852 00:41:08,834 --> 00:41:10,734 Why something's done a certain way 853 00:41:10,969 --> 00:41:12,699 or why it's not done a different way. 854 00:41:13,005 --> 00:41:14,131 There's our market. 855 00:41:14,373 --> 00:41:16,739 Why can't we sell the bandwidth to other companies? 856 00:41:17,043 --> 00:41:20,274 Make it a commodity like a pork belly 857 00:41:28,955 --> 00:41:31,423 Just last week Enron captivated Wall Street 858 00:41:31,691 --> 00:41:33,659 with its bold move into broadband, 859 00:41:33,894 --> 00:41:36,886 teaming up with Blockbuster to deliver movies on demand. 860 00:41:37,197 --> 00:41:41,065 It was like being at a religious cult meeting. 861 00:41:41,335 --> 00:41:43,200 People started jumping up from their seats, 862 00:41:43,437 --> 00:41:45,132 with their cell phones and their Blackberrys, 863 00:41:45,506 --> 00:41:48,441 running out to the halls to call their bosses. 864 00:41:48,909 --> 00:41:50,877 One analyst summed up his recommendation 865 00:41:51,078 --> 00:41:53,046 to investors in one word 866 00:41:53,347 --> 00:41:58,308 Wow! Enron's stock soared 34 percent in two days. 867 00:41:58,853 --> 00:42:01,185 And you can tell from the response of the stock market 868 00:42:01,523 --> 00:42:03,548 tha