Conspiracy of Fools
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Authors: Kurt Eichenwald
ALSO BY KURT EICHENWALD
THE INFORMANT
SERPENT ON THE ROCK
CONSPIRACY OF FOOLS. Copyright © 2005 by Kurt Eichenwald. All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without written permission from the publisher. For information, address Broadway Books, a division of Random House, Inc.
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First edition published 2005.
Library of Congress Cataloging-in-Publication Data
Eichenwald, Kurt, 1961–
Conspiracy of fools : a true story / Kurt Eichenwald.—1st ed.
p. cm.
1. Enron Corp.—Corrupt practices. 2. Energy industries—Corrupt practices—United States. 3. Lay, Kenneth L. 4. Business failures—United States. I. Title.
HD9502.U54E5736 2005
333.79′0973—dc22 2004058216
eISBN: 978-0-7679-1180-1
v3.1
To my parents,
Elva Eichenwald and Heinz Eichenwald,
Who encouraged me to fight my windmills
And cheered me when I won.
Reason dreams of an empire of knowledge, a mansion of the mind. Yet sometimes we end up living in a hovel by its side.
—Heinz R. Pagels,
The Dreams of Reason
If I remember, I predicted fence integrity would fail.
—The character of Ian Malcolm,
in Michael Crichton’s
Jurassic Park
This narrative account is based on more than a thousand hours of interviews with over a hundred participants in these events as well as a review of tens of thousands of confidential corporate and government documents. Those include FBI notes of interviews and testimony before federal grand juries, the SEC, and other federal bodies. The dialogue comes from those documents and contemporaneous records—including personal diaries—or from the best recollections of participants. This, then, is the full story of America’s biggest corporate scandal, one that, in the end, involved events that even now may seem difficult to believe. But they’re all real.
and Their Primary Roles
WITH THE ENRON CORPORATION, HOUSTON, TEXAS
The Top Officers
Kenneth Lay, chairman and CEO
Jeffrey Skilling, president (1997–2001), CEO (2001)
Rich Kinder, president (1989–1996)
Greg Whalley, president (2001)
In the Finance Division
Andrew Fastow, chief financial officer (1998–2001)
Michael Kopper, head of special projects
Jeffrey McMahon, treasurer (1999–2000), CFO (2001–2002)
Ben Glisan Jr., treasurer (2000–2001)
Raymond Bowen Jr., treasurer (2001–2002)
Jordan Mintz, general counsel
Lea Fastow, assistant treasurer
Michael Jakubik, vice president
Jim Timmins, director, private equity
Tim Despain, vice president
Bill Brown, vice president
The Internal Accountants
Richard Causey, chief accounting officer
David Woytek, vice president, corporate auditing
Rodney Faldyn, vice president, transaction accounting group
Ryan Siurek, member, transaction accounting group
In Risk Assessment
Richard Buy, chief risk officer
Vince Kaminski, vice president of research
Stinson Gibner, analyst
Vasant Shanbhogue, analyst
Rakesh Bharati, analyst
Kevin Kindall, analyst
In Corporate Development
J. Clifford Baxter, executive vice president
Mark Muller, senior vice president
Sherron Watkins, vice president (2001)
The Corporate Staff
Rebecca Carter, investor relations representative, corporate secretary
Mark Palmer, head of corporate communications
Stephen Kean, head of government affairs (1998), chief of staff (1999–2001)
Mark Koenig, head of investor relations
Cindy Olson, head of community relations
In the Legal Department
James Derrick, general counsel
Rob Walls, deputy general counsel
Rex Rogers, associate general counsel
In Wholesale Energy
Kenneth Rice, chief executive
Kevin Hannon, president
Greg Whalley, president (2000)
Amanda Martin, managing director, asset management
Mark Haedicke, general counsel
Kristina Mordaunt, co-head of finance legal cluster (1997–1999)
Timothy Belden, managing director, west power trading division
John Forney, manager, west power real time trading desk
Stuart Zisman, senior counsel
Mark Frevert, president, London (1998), unit chairman (2000–2001)
In Retail Energy
Andrew Fastow, managing director (1996)
Lou Pai, chief executive (1996–2001)
David Delainey, chief executive (2001)
Raymond Bowen Jr., vice president
In the International Division
Rebecca Mark, chief executive
Joseph Sutton, deputy
In the Broadband Division
Kenneth Rice, co-chief executive (1999), chief commercial officer (2000)
Joseph Hirko, co-chief executive
Kevin Hannon, chief operating officer
Rex Shelby, senior vice president
Kristina Mordaunt, general counsel (1999–2001)
At Portland General, an Electric Utility
Kenneth Harrison, chairman
Joseph Hirko, chief financial officer (1991–1996)
At Azurix, a Water Company
Rebecca Mark, chief executive
Amanda Martin, executive director
Colin Skellett, executive director
On the Board of Directors
John Duncan
Herbert “Pug” Winokur Jr.
Norman Blake
Charles “Mickey” LeMaistre
Robert Jaedicke
Robert Belfer
Wendy Gramm
William Powers
.
Joseph Berardino, managing partner (2001–2002)
Andrew Pincus, general counsel
John Riley, practice director
Rich Corgel, practice director
In the Houston Office
David Duncan, partner
Stephen Goddard, partner
Thomas Bauer, partner
Carl Bass, partner
Debra Cash, partner
Patricia Grutzmacher, partner
Gary Goolsby, global managing partner
James Hecker, partner
In the Professional Standards Group, Chicago, Illinois
John Stewart, partner
Ben Neuhausen, partner
In the litigation group, Chicago, Illinois
Nancy Temple, lawyer
Chuck Watson, chairman and chief executive
Stephen Bergstrom, president
Keith Fullenweider, deputy general counsel
Rob Doty, chief financial officer
Daniel Bayly, head of global investment banking
James Brown, head of strategic asset lease and finance
Schuyler Tilney, relationship banker, Houston office
Robert Furst, relationship banker, Dallas office
John Olson, securities analyst
Gary Mulgrew, managing director
Giles Darby, managing director
David Bermingham, banker
James (Jimmy) Lee, vice chairman
Rick Walker, relationship banker
James Chanos, president
Dennis Kozlowski, Tyco International
Rupert Murdoch, News Corporation
Sumner Redstone, Viacom
At Vinson & Elkins, Houston, Texas
Joseph Dilg, managing partner
Ronald Astin, partner
Max Hendrick III, partner
At Wilmer, Cutler & Pickering, Washington, D.C
.
William McLucas, partner
Charles Davidow, partner
Joseph Brenner, partner
William Joor, partner
Reed Brodsky, counsel
At Weil, Gotshal & Manges, New York City
Thomas Roberts, partner
Mary Korby, partner
George H.W. Bush (1988–1992)
Bill Clinton (1992–2001)
George W Bush (2001–2004)
.
Dick Cheney, Vice President
Andrew Card, Chief of Staff
.
John Ashcroft, Attorney General
Larry Thompson, Deputy Attorney General
Michael Chertoff, head of the criminal division
On the Enron Task Force
Leslie Caldwell, director
Andrew Weissmann, deputy director
With the Federal Bureau of Investigation
Robert Mueller, director
Joseph Ford, special agent