Enron Scandal

"If there's one word that explains why Enron Corp. failed and why former executives Ken Lay and Jeff Skilling, convicted in Houston last month, are facing long stints in prison jumpsuits, it's this: hubris. Enron failed because Lay (who faces up to 165 years in prison) and Skilling (185 years) didn't understand basic business management. They believed that Enron was so good and its business model so impressive that they didn't have to work at making real cash profits. It almost sounds too obvious to say it, but Enron failed because it ran out of cash. And the failure to manage the company's cash is direcdtly attributed to purposeful mismanagement by Lay and Skilling. Lay has a PhD in economics from the University of Houston but couldn't read a cash-flow statement. Skilling has a Harvard MBA but once told another Enron employee that cash "didn't matter".

"At trial, their arrogance was on full display. The lawyers for Lay and Skilling tried to convince jurors that Enron had done everything legally. The two executives had no choice but to take the witness stand, where the prosecutors ripped their stories apart. On the stand, Lay and Skilling had two choices: admit they were stupid, or admit they were crooks. The latter choice being unappealing, both men took the former, and throughout their trial insisted that they'd been duped by subordinates. Fortunately, jurors didn't buy their bullshit. Lay was convicted on numerous charges, including conspiracy, bank fraud, securities fraud, mail fraud, and (in a separate bench trial held immediately after the jury trial) making false statement to banks. Skilling was convicted of securities fraud, insider trading and conspiracy" (Robert Bryce. "Kenny Boy Goes to Jail." Texas Observer, June 16, 2006: 13, 20).

"Enron.. purchase[d] the water system of Buenas Aires... Workers were fired en masse, allowing Enron to pocket their pay... left the water contaminated" (134-135).

"Brazil's government privatized Rio Light, selling it... Reliant, the Houston company.. promised improved service for Rio -- then axed 40 percent of the company's workforce... Nearly every day, a new neighborhood went dark" (135).

"The windfall from reduced wages and price increases allowed the foreign owners to hike dividends [profits] by 1,000 percent" (Greg Palast. The Best Democracy Money Can Buy. NY: Plume, 2003: 136).

Colby Glass, MLIS