Enron – Contribution, Collapse, Bankruptcy

SUMMARY: Enron is quickly becoming a 21st century equivalent of the 1950’s game show scandals that inspired the film Quiz Show. Both events involved a very large organization, an apparently active conspiracy to deceive the public and employees, and touches a very broad section of our political and economic power structure. Enron had emerged from the smoke and mirrors associated with all scandals as a clearly unfathomable organization – Enron is an enigma. Before the bankruptcy, Enron enjoyed an enormously successful history of brokering energy to and from various points on the compass – from virtually blackmailing California during that state’s energy crisis of the summer of 2000, to the general failure to meet energy contracts throughout the county. Enron’s excesses, mismanagement, shady accounting, questionable ethics, and its octopus-like hold on seemingly half of all the congressional politicians in Washington combine to lend credence to conspiracy theorists who assert that there are commercial forces at work behind governmental decisions that supercede concerns for the American citizenry. Like any scandalized person or organization, prior to exposure, everyone is ecstatic to be in bed together, but post-exposure, all the partners jump out of bed faster than roaches under a sun-lamp. Enron collapsed because it was a giant built upon a balsa wood foundation. It is the purpose of this paper to examine the factors involved in the collapse of Enron.

Enron is quickly becoming a 21st century equivalent of the 1950’s game show scandals that inspired the film Quiz Show. Both events involved a very large organization, an apparently active conspiracy to deceive the public and employees, and touches a very broad section of our political and economic power structure. Enron had emerged from the smoke and mirrors associated with all scandals as a clearly unfathomable organization – Enron is an enigma. Before the bankruptcy, Enron enjoyed an enormously successful history of brokering energy to and from various points on the compass – from virtually blackmailing California during that state’s energy crisis of the summer of 2000, to the general failure to meet energy contracts throughout the county. Enron’s excesses, mismanagement, shady accounting, questionable ethics, and its octopus-like hold on seemingly half of all the congressional politicians in Washington combine to lend credence to conspiracy theorists who assert that there are commercial forces at work behind governmental decisions that supercede concerns for the American citizenry. Like any scandalized person or organization, prior to exposure, everyone is ecstatic to be in bed together, but post-exposure, all the partners jump out of bed faster than roaches under a sun-lamp. Enron collapsed because it was a giant built upon a balsa wood foundation. It is the purpose of this paper to examine the factors involved in the collapse of Enron.

Enron deserves metaphors. It is a subject matter that is prime for made-for-TV movies, books, exposes, and broad social scorn – Enron is the perfect I-told-you-so to our economy of uncontrolled capitalistic excesses that refuse to take social responsibility into consideration. The first problem with Enron, is that it has become an onion – layer after layer of useless stink. But, Enron has proven to be something more complicated than just a metaphorical onion. A typical example of the corrupt nature of Enron is its rather paltry and less than symbolic participation in Earth Day events (park cleanups) which, in terms of 'making the world better' far outweighs any damage caused by the largest power plant in the world, the Dabhol Power project in India, right (“Philanthropy or Villan-trophy?”, 61)? What distinguishes Enron from, say, the other top-10 firms in last year's Fortune 500 may be less its outrageous business practices than its simple indescribability.

Both The Wall Street Journal and The Washington Post have printed elaborate, full-page diagrams in attempts to explain just what Enron actually did–not the criminal undertakings per se, but simply how it worked, how it made money (some of which was likely very criminal). By contrast, America's other biggest corporations can be described fairly simply: You don't need full-page diagrams to understand the basic business of General Motors, Exxon, and Microsoft (“Too Cool to Comprehend”, 7). Enron's self-description grew more and more vague as the company continually reshaped itself around every possible deal. Two years ago, as the L.A. Times recently reported, Enron's executive committee scrapped the company's old slogan–"The world's leading energy company"–and picked instead "World's coolest company." Putting aside the mortal affront to the fifties' hipsters who invented the concept of cool, note the elimination of the one genuinely descriptive word from the slogan: "energy." The new Enron was too cool to be described (“Too Cool to Comprehend, 7). Enron was simply too complex, too murky, too secretive, to be trusted by anyone.

Little more than a pipeline company in the 1980s, the Enron Corporation flourished in a new postindustrial economy, growing immense in the 1990s by evading the checks and balances built for another age. Like the S&L crisis, the Enron affair is a direct product of deregulation–not so much from the Reagan-Bush years but from the period of Republican congressional control under Newt Gingrich after 1994 (“All Grown Up and Really Dense”, 6). With Gingrich as their fire-eater, congressional Republicans and their K Street bankrollers mounted huge resistance to the regulatory efforts of the Clinton administration, as well as to the existing regulatory rule-books. Kenneth Lay and Enron lobbyists were particularly aggressive (Wilentz, 21).

They sought to gain political influence, largely with Republicans in Texas and in Washington, D.C., in order to alter regulations and gain exemptions so that Enron could operate in a completely deregulated zone. "Deregulation" and "free market" were mantras for both the Gingrich Republicans and Enron. But their talk of freedom was highly misleading. The Gingrich Republicans were not interested in creating some fanciful, pristine, abstract "free market." Such a free market has never existed and never will. Rather, through intensive government efforts, they sought to create new market rules that were favorable to Enron and a host of other influential corporations. The so-called free market that resulted was no state of nature: It was a highly crafted artifice, coolly manufactured on K Street and on Capitol Hill by the Republican Congress–and in Enron's case, with the help of Kenneth Lay's close friend, the new governor of Texas, George W. Bush (Starr, 3).

Enron had its fingers in too many pies. Another of its primary faults was its fervor to control national policy. Enron’s corporate involvement with the government (both parties, any accepting candidate and office holder in virtually any power position in any state) has been wide spread. It has donated money to more political candidates than any other organization. All of this jumping into bed with any taker has resulted in conflicts and scandals. To begin with, there's the scandal of inviting Enron to formulate the administration's energy policy in closeddoor meetings with Cheney, and of Ken Lay effectively selecting the regulators charged with overseeing Enron's conduct. And it wasn't just the administration that did Enron's bidding. The energy bill passed by the Republican House contained a cozy $3.5- billion tax break for natural-gas extraction and distribution, not to mention an exemption from taxes on revenue from selling, buying, or operating a power grid. Enron was hardly the only beneficiary of these provisions, but it certainly was a megabeneficiary. Find more papers at PhDify.com

What's more, the stimulus bill that passed the House (and, like the House energy bill, is stuck in the Senate) provided Enron with a $254-million rebate as part of the retroactive repeal of corporate taxes (Meyerson, 2). Sometime in mid-January, the worm turned for Enron executives. You could see it in the way George W. Bush raced to distance himself from his friend Kenneth L. Lay, like Prince Hal denouncing Falstaff: "I know thee not, old man. Fall to thy prayers." And it's beginning to look as if Lay, the recently resigned chairman and CEO of the energy-trading corporation, may have need of prayer. Calls for criminal prosecution of Enron heads have begun to sound–and remarkably, free-market conservatives, including one formerly on the Enron payroll, have been the first to raise their voices (Mooney, 10).

The resulting fallout has led to enormous changes in how the nation perceives its politicians. Unlike other smaller scandals (Monica Lewinsky, Chappaquiddick, Iran-Contra) where a single person or relatively small group of people can be identified as being involved in something unpleasant, nearly a majority of all national level politicians in the United States are at least indirectly if not directly connected to Enron. While most certainly had nothing to do with the collapse of the corporation, they are associated with something unpleasant, and it’s far too huge to sweep under any rug. On one hand, this situation is going to provide a significant boost to those who have never taken anything from Enron in that they can truthfully say that they aren’t connected at all with one of the worst examples of American greed since the robber barons of the last century. On the other hand, as happens in all powerful organizations and associations, when the majority are involved, it never really gets solved. The likelihood of independent councils, depositions, and trials resulting from politician involvement with Enron is exceptionally small – there are simply too many people involved. Enron is a failed company. It is an example of the kind of Hindenburg-like danger that all bloated, out of control, and useless organizations face. Enron failed because it was corrupt, empty of real worth, and surrounded by fair weather friends.

Works Referenced

• “All grown up and really dense”. The American Prospect, March 11, 2002 v13 i5 p6(1)
• Meyerson, Harold. “Enron’s Enablers”. The American Prospect, Feb 11, 2002 v13 i3 p2(2)
• Mooney, Chris. “Getting lay: will Enron's top brass go to jail?” The American Prospect, Feb 25, 2002 v13 i4 p10(2)
• Mooney, Chris. “Daschle and Destiny: does the majority leader dare disturb the universe?” The American Prospect, Feb 11, 2002 v13 i3 p10(2)
• “Philanthropy or Villain-trophy?” Ecologist. Nov, 2001 v31. i9. p61.
• Starr, Paul. “The democrats' energy problem”. The American Prospect, March 11, 2002 v13 i5 p2(2)
• “Too cool to comprehend”. The American Prospect, Feb 25, 2002 v13 i4 p7(1)
• Wilentz, Sean. “A scandal for our time: Republicans ruled; ergo, Enron”. The American Prospect, Feb 25, 2002 v13 i4 p20(3)