Enron

THE collapse of Enron was so complex that even the energy giant's top bosses didn't understand what was going on. The company dealt in industries as diverse as energy, water, advertising and newsprint. It conducted secret business with its own top executives, and its trading strategies were mud to anybody who didn't simultaneously understand stochastic calculus and the market for the relevant product. Last August, a reporter asked about Enron's ties to partnerships controlled by Chief Financial Officer Andrew S. Fastow, and Enron Chairman Kenneth L. Lay replied, "You're getting way over my head."

THE CAMERA trains in on a bright blue sign atop a stately church in downtown Houston. "Jesus Saves" it reads. As the camera slowly pulls back, a towering glass skyscraper emerges, swallowing the church. It's the headquarters of what was once the world's most famous energy company, the one that became known for its sleazy business dealings, crude corporate culture and spectacular collapse in 2001 - Enron. The irony is clear in the opening scene of Alex Gibney's new documentary, Enron: The Smartest Guys in the Room, which opens in Baltimore May 20th.

WASHINGTON - Washington - narcissistic and even solipsistic, as usual - thinks Enron's collapse is primarily a Washington, meaning a political, story. Actually, the debacle is, so far, primarily a tale of two other cities. Houston is Enron's hometown. New York is the center of the financial system that Arthur Andersen is supposed to serve. Andersen is the document-destroying accounting firm that failed - assuming, generously, that it tried - to report accurately Enron's activities. However, Washington will star in subsequent acts of this drama that may live on, in litigation, longer than anyone reading this column.

HOUSTON -- Former Enron chief executive Jeffrey K. Skilling stands at attention in the hallway of Houston's Federal Building, carefully straightening his tie and arranging his right sleeve as he chats with lawyers. Former Enron Chairman Kenneth L. Lay steps out of the elevator with his wife, Linda, moves quickly down the hall and into the courtroom. Soon members of the jury, dressed in casual attire of bright colors and stripes, shuffle into the high-ceilinged, dark-paneled courtroom.

WASHINGTON -- For all the furor over the meetings of embattled Enron officials with President Bush, Vice President Dick Cheney and other Bush administration officials, it's too early to say, as the Democrats claim, that the country is dealing with another Watergate affair or even another Whitewater. Important business leaders are forever phoning high government officials from the president on down, seeking help of one sort or another. In the Republican Party particularly, it's a routine thing in light of the many philosophical viewpoints shared.

HOUSTON -- The gleaming metal "E" that once marked the entrance to Enron Corp.'s downtown headquarters. The unfinished mansion commissioned by former Chief Financial Officer Andrew S. Fastow. The secondhand store that Linda Lay, wife of company founder Kenneth L. Lay, had opened to hawk her pricey castoffs. For $30, these and other sights tied to the rise and fall of Enron can be viewed from the comfort of an air-conditioned bus on the "Lifestyles of Houston's Rich & Infamous" Enron tour.

FINANCIAL ledgers have two sides, but the fantasies of white-collar frauds usually run in only one direction: up, up and away. In a finding that is telling about the psychology of corporate chicanery, North Carolina State professor Mark Beasley and two colleagues determined that most accounting shenanigans among publicly traded companies involve the inflation of assets or revenues, not the veiling of costs or liabilities. You can cook the books either way. The prosecutors don't care. But in possibly the most thorough study of recent financial statement fraud, Beasley discovered that dissembling managers prefer to accentuate - I use the word loosely - the positive.

BY NOW, many people have heard of the vanishing 401(k) savings of Enron Corp. employees. Heavily invested in company stock and barred from selling their shares as the price plummeted, many Enron workers saw their retirement savings nearly wiped out as the company headed for U.S. Bankruptcy Court last month. The debacle prompted President Bush to order a review of pension rules. "We are now seeing the chink in the 401(k) plan's armor. For the first time in 401(k) history, we are seeing the effect that placing all of this risk on the shoulders of plan participants is having," said John Hotz, deputy director of the Pension Rights Center in Washington.

HOUSTON -- The death early yesterday of Enron Corp. founder Kenneth L. Lay complicates the federal government's effort to close the books on one of its most ambitious corporate-fraud prosecutions. Lay, who died at age 64 of a massive heart attack at a rented Colorado vacation home near Aspen, was found guilty of conspiracy and fraud by a federal jury in May, along with former Enron Chief Executive Officer Jeffrey K. Skilling. Their trial resulted from the far-reaching scandal at the Houston energy company, in which more than 4,000 jobs and billions of dollars in stockholders' investments disappeared.

YOU DON'T hear many good things about Enron Corp. these days. But if there's one positive aspect, says AARP's president, it's that the Enron debacle has highlighted the need for Americans to understand the investment process. Numerous studies and surveys in recent years have revealed that Americans' financial knowledge is inadequate for a world where they must fund their own retirement and face a growing choice of mortgages, credit cards and investments. The consequences of not knowing financial basics are costly, according to statistics compiled by the Senate Committee on Banking, Housing and Urban Affairs: As many as half of those who borrow from subprime lenders could actually qualify for cheaper conventional loans.