Conspiracy of Fools (112 page)

14.
Some details of Skilling’s background from a transcript of his secret deposition before the SEC on Dec. 5–6, 2001. Other details from his deposition of Sept. 19, 1997, in the case of
Bernard H. Glatzer v. Bear Stearns & Co.
, 95 civ. 1154, filed in U.S. District Court for the Southern District of New York, 10–14. Other details from Peter Tufano and Sanjay Bhatnagar’s case study for Harvard Business School, “Enron Gas Services,” number N9-294-076, March 4, 1994. Also see an untitled Jan. 6, 2001, draft of an article by Professor Christopher A. Bartlett for the
Harvard Business Review
. In addition, see McLean and Elkind,
Smartest Guys in the
Room; Fox,
Enron;
and Swartz with Watkins,
Power Failure
.

15.
Some details of the contentious board meeting of Nov. 12, 1985, from the official minutes. The documents, which are not public, were obtained by the author. Details of the movie production from Steve Millburg, “Movie Crew Ends Omaha Stay,”
Omaha World Herald
, November 26, 1985.

16.
Some details of the audit committee meeting of Jan. 20, 1986, from the official minutes.

17.
Details of the Enteron debacle from Matt Moffett, “HNG/InterNorth Goes to Pros in Bid to Get New Name.”
Wall Street Journal
, Feb. 20, 1986, sec. 1, 12. Also see “Enteron, Is It?”
Inside FERC
, Feb. 24, 1986, 6; and “HNG-InterNorth Scraps Proposed Name Because of Publicity over Meaning,” Associated Press, March 7, 1986.

18.
Details of the original Valhalla investigation come from several confidential records, created preceding, during, and after the review. They include a document Woytek wrote dated Jan. 30, 1987, “Summary of Conversations in Regards to InterNorth International Oil, Inc.,” and the preliminary report submitted by the internal-audit department to Kinder on Feb. 9, 1987, “Investigation of ‘Off-Balance-Sheet’ Cash Transaction of Enron International Oil, Inc.” Unsigned notes of discussions that took place surrounding the investigation, dated Feb. 9, 1987, are included in the official corporate file relating to this investigation and describe some of the events that occurred. In addition, the author relied on details from the Feb. 9, 1987, report, “Enron International: Special Project.”

19.
Details of the Andersen investigation from the confidential report of April 22, 1987, written by the firm to Mick Seidl, president and chief operating officer of Enron. Also see a March 12, 1987, letter to corporate auditing from Steve Sulentic.

20.
A copy of the confidential private investigations report, conducted by Intertect Inc. of Houston and dated Dec. 13, 1987, was obtained by the author.

21.
Some details of the April 29, 1987, audit committee meeting from the official minutes.

22.
Some details of the meeting between Seidl and Borget from McLean and Elkind,
Smartest Guys in the Room
, 22.

23.
Some details of the oil-trading scandal from Enron’s official release on the matter, “Enron Discontinues Subsidiary,” Oct. 22, 1987.

1.
Some details of the development and functioning of the Gas Bank from Skilling’s SEC deposition of Dec. 5–6, 2001, as well as his Sept. 19, 1997, deposition in
Glatzer v. Bear Stearns
, 27–29. Other details from Tufano and Bhatnagar, “Enron Gas Services,” and the untitled Jan. 6, 2001, draft of the Bartlett article for the
Harvard Business Review
.

2.
Details of the events surrounding the economic summit from a variety of sources, including a transcript of the June 21, 1990, White House briefing conducted by Marlin Fitzwater, the Press Secretary; a transcript of the July 11, 1990, broadcast of
ABC World News Tonight;
Sean McCormally, “Sherpas and Snappers, Nocturnal and Otherwise,” United Press International, July 12, 1990.

3.
Much of the information on Lay’s relationship with the first President Bush from an array of White House documents, including personal papers of the President. These include a May 18, 1989, memo written by a White House official named Patricia Mack Bryan to C. Boyden Gray, the White House counsel, relating to Lay’s approaches on locating the Bush library in Houston; a March 21, 1989, letter to Bush from Lay; and a personal letter dated Oct. 11, 1989, from Bush to Lay. Bush directly communicated with Lay regarding the summit in a handwritten note, Jan. 23, 1990; a typed note, June 5,
1990; and a typed letter, Sept. 7, 1990. Some information also came from a follow-up letter from John Sununu, the White House Chief of Staff, to Lay, July 24, 1990.

4.
Bush chastised his staff for failing to forward him a Lay letter in a May 30, 1991, memo he typed to Phil Brady, a White House staffer. This resulted in a series of written communications that day between Bush, Brady, and Shirley Green, a special assistant to the President, culminating in a personal letter from Bush to Lay, May 31, 1991.

5.
Bush described his feelings about the event in Houston in his remarks at the “Thank You Houston Celebration” which were transcribed in
Public Papers of the President
, vol. 26, doc. 1085, July 11, 1990. All of Bush’s public dialogue comes from that transcript, and certain events that had just occurred, including his thoughts, were described in his speech.

6.
The timing of the conversations between Spencer Stuart and Fastow was established by the dates automatically printed on faxes that day that went to both Fastow and Enron.

7.
Portions of Fastow’s background from his 1997 deposition in
Glatzer v. Bear Stearns
. Also see David Barboza and John Schwartz, “The Financial Wizard Tied to Enron’s Fall,”
New York Times
, Feb. 6, 2002, A1. Other information from a copy of Fastow’s 1990 résumé.

8.
Fastow’s encounter with the cabdriver was chronicled by Ann Marie Lipinski and Hanke Gratteau, “What Some Cab Riders Suffer Is a Crime,”
Chicago Tribune, May
27, 1986.

9.
A copy of the document faxed from Spencer Stuart to Skilling was obtained by the author. It contains an automatically printed fax “telltale,” which reveals the time and date it was sent.

10.
Details of Fastow’s employment from a Dec. 3, 1990, Personnel Action Form, maintained by Enron’s human-resources department and specifying the terms of his deal. Other information from a Nov. 27, 1990, memo for Enron’s human-resources department, written by Sheila Knudsen and addressed to Glenda Czaplewski, spelling out additional terms of Fastow’s arrangement.

11.
Some details of the early days in the finance group from Tufano and Bhatnagar, “Enron Gas Services” and the untitled Jan. 6, 2001, draft of the Bartlett article for the
Harvard Business Review
.

12.
Some details of the mechanisms used in structured finance from Vinson & Elkins, “Structured Finance Overview,” April 1999.

13.
The perceptions within Enron Gas Services of mark-to-market accounting are drawn from a number of documentary sources. They include a June 1990 document, “Summary of Example of Mark-to-Market Accounting,” and a preliminary internal report from the same month, “Criteria for Adoption of Mark-to-Market Accounting.” Also see the report “Enron Gas Services Mark to Market Accounting Memorandum to the Securities and Exchange Commission,” June 11, 1990, as well as a June 28, 1991, letter signed by Jack Tompkins and George Posey and submitted to John Albert, the SEC’s associate chief accountant. Details of mark-to-market accounting from an Arthur Andersen document dated Oct. 11, 1999, commissioned for Enron, entitled “Application of Mark-to-Market and Fair Value Accounting.”

14.
A copy of the application to the SEC by Enron Gas Services pushing for a change in the division’s accounting was obtained by the author. Dated June 11, 1991, it was signed by Tompkins and Posey and sent to George Diacont, then the SEC’S acting chief accountant.

15.
The conversation between Posey, Tompkins, and Albert comes from contemporaneous notes of the discussion, which Posey and Tompkins transcribed that same day into a single, agreed-upon rendition of everything that had been said.

16.
A number of records documented Skilling’s presentation to the SEC. They include a copy of the presentation itself, “Presentation by Jeff Skilling, CEO, Enron Gas Services,” Sept. 17, 1991, as well as an outline of additional comments made at the meeting, and unsigned notes that were taken during the discussion, which were obtained by the author. Also see an Oct. 4, 1991, letter from Posey of Enron to Mike Foley in the office of the chief accountant at the SEC.

17.
The questions to Enron from the SEC are documented in a number of letters from Posey. These include one to Diacont, Nov. 5, 1991; another to John Albert, Dec. 5, 1991; and a final one to Albert, Dec. 16, 1991. Enron officials met a second time with the SEC, on Dec. 19, 1991, and the author obtained the written presentation for that meeting.

18.
A copy of the Jan. 30, 1992, letter from the SEC to Enron was obtained by the author. Signed by Walter Schuetze, the chief accountant, it was addressed to Tompkins.

19.
Enron’s decision to utilize mark-to-market accounting effective Jan. 1, 1991, is revealed in a Feb. 11, 1992, letter from Tompkins to Schuetze. The motivation for that move was discussed with the author by Enron officers involved in the decision.

20.
Some details on the history of Mark’s division and the India power project from Minority Staff, U.S. House of Representatives, Committee on Government Reform, “Background on Enron’s Dabhol Power Project,” Feb. 22, 2002. Also see the 2002 case presentation number A07-02-0008 at Thunderbird, the American Graduate School of International Management, by Professor Andrew Inkpen, “Enron and the Dabhol Power Company,” and Inkpen’s case presentation number A07-97-0004, “Enron Development Corporation,” 1997. Specific details from original documents, including the minutes of the 118th meeting of the Central Electricity Authority, Dec. 11, 1993; and the confidential minutes of the Foreign Investment Promotion Board, Oct. 11, 1993. Some background of Mark from Toni Mack, “High Finance with a Touch of Theater,”
Forbes
, May 18, 1998, 140.

21.
Some details of the arrangement between Enron and its international power-project developers from a copy of their contract.

22.
Some details of the meeting between the Indian delegation and Rebecca Mark from “U.S. Tour by Indian Delegation Ups Proposal Tally to over 7,300 MW,”
Independent Power Report
, June 19, 1992.

1.
The financial performance of Enron Gas Services from the company’s 10-K, filed with the SEC, for 1992.

2.
Some details of Amanda Martin’s background and role at Enron from a copy of her executive employment agreement, renewed as of Jan. 1, 1998.

3.
Details of the agreement between Baker, Mosbacher, and Enron from the company’s Feb. 22, 1993, press release, “Enron Corp. Signs Arrangement with Former Secretary of State James Baker and Former Secretary of Commerce Robert Mosbacher.” Also see “Baker and Mosbacher Are Hired by Enron,”
New York Times
, Feb. 23, 1993, D5.

4.
Some details of the Dabhol plant from Abhay Mehta’s fascinating book,
Power Play: A Study of the Enron Project
, published in India in 2000. Also see Claudia Kolker and Tom Fowler, “Dead Enron Power Plant Affecting Environment, Economy, and Livelihoods in India,”
Houston Chronicle
, Aug. 4, 2002, Business section, 1. See also the May 20, 1998, memo for the file from Carl Bass and Michael Jones, “Report for Dabhol Power Company.”

5.
Some details of Bower’s hunt for investment opportunities and the subsequent effort in developing JEDI from Christopher Palmeri and Ronald Grover, “Too Close for Comfort?”
Business Week
, March 18, 2002, 78–80, and from internal documents, including “Monitoring Plan for California Public Employee Retirement System’s Investment in Energy Asset Development Limited Partnership,” June 9, 1993, and “Formation of Joint Energy Development Investment Limited Partnership,” June 29, 1993.

6.
Some details of the executive committee meeting on May 17, 1993, from the official minutes.

7.
Details about the cover and contents of Enron’s 1992 annual report from the original document.

8.
Mack’s article “Hidden Risks” was printed in
Forbes
, May 24, 1993, 54.

9.
Some details about Enron’s clean-fuels division from the company’s 1993 annual report.

10.
Some details of Lay’s golfgame with Clinton, Ford, and Nicklaus from “Clinton Plays Bipartisan Golf, Then Switches to the Sax,” Associated Press, Aug. 15, 1993, and Thomas Ferraro, “Clinton, Ford Engage in Bipartisan Golf,” United Press International, Aug. 14, 1993.

11.
A copy of the consultant’s report on the Richmond plant was reviewed by the author.

12.
Information about the Guatemalan financial transactions from “Report of Staff Investigation of Enron Corp. and Related Entities Regarding the Guatemalan Power Project,” CP-108-15, issued by the Senate Finance Committee, March 2003.

13.
Some details of the Dominican Republic deal and the subsequent battle with Bayside Inn from
Hotelera del Atlantico v. Smith-Enron et al.
, filed with the arbitrage court of the Santo Domingo Chamber of Commerce.

14.
Kopper’s background from a copy of his résumé, his written performance review at Enron for 1995
and the first six months of 1996, and a July 11, 1996, e-mail from Kopper to Causey and Fastow headed “Year to Date Performance.” Also see “Exhibit A to Executive Employment Agreement Between Enron Capital Management and Michael Kopper,” for July 1, 1998, through June 30, 2000. See also Kopper’s testimony of Sept. 27, 2004, in the case of
United States of America v. Daniel Bayly et. al.
, H-CR-03-363, in Federal District Court in Houston. Among the trips taken by the Fastows with Kopper and Dodson was a weekend jaunt to California wine country to the $550-a-night Auberge du Soleil, which is documented on an itinerary for May 26–29, 2000, with the heading “NAPA TRIP.”