The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron

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The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron Page 73

by Bethany McLean


  Grasso, Richard, 395

  Gray, Rod, xiv, 95, 250, 253, 255

  greater fool theory, 74

  Greater Houston Partnership, 86

  Greenspan, Alan, 240, 385

  Greenwich NatWest, 194

  Gross, Richard, xvii, 353

  growth portfolio managers, 232

  Grubman, Jack, 231, 234

  Grubman, Richard, xvii, 325–26, 374

  Grutzmacher, Patricia, 148

  Guam, 74, 251

  Guatemala, 74

  Guinness Brewery, 364

  Gulf & Western, 10

  Gulf States Oil and Refining, 16

  Hadar, Miriam, 134–35

  Haedicke, Mark, xiv, 275–77, 309, 335, 405

  Hain, Mary, 273, 274, 275

  Hall, Stephen, 276, 277

  Halliburton, 87

  Hamel, Gary, xiv, 226, 239

  Hannon, Kevin, xiv, 42–43, 57, 122, 288, 296, 415

  indictments against, 412

  Harding, John, xiv, 18–19

  Harrison, William, 395

  Harvard Business School, 31, 32, 45, 46, 51, 52, 57, 71, 73, 76, 391, 416

  case studies of, 222–23, 239

  Harvard Law School, 419

  Hawaii, 125–0, 293

  HealthSouth, 413

  heat-rate swaps, 207

  Hecker, James, xvi, 148–49, 362, 383

  Heckmann, Richard, 248–49

  hedge funds, 219, 319–21, 325, 385

  hedging, 37, 131, 300, 305–6, 307–8

  Hendrick, Max, III, 357, 360–61

  Henry Pratt, 30

  Hermann, Bob, 128

  Herring, Joanne, 10

  Herring, Robert, 10

  Herrold, Beau, 424

  Herrold, Linda Phillips, see Lay, Linda

  Highfields Capital, 325

  high-tech investments, 324

  Hinds, Michael, LJM and, 196, 304

  Hirko, Joe, xiv, 185, 186, 243, 287–88

  indictments against, 412

  historical-cost accounting, 39–40

  HMOs, 184

  HNG InterNorth, 11–13

  hog futures, 226

  Hogin, David Ralph, 17

  Hoglund, Forrest, xiv, 101, 108–9, 245

  hold ratings, 234, 321

  Holder, Eric, 428

  Holman, Hugh, 244

  Hopley, John, 117

  Horton, Stan, 391, 401

  Hotelero del Atlántico, 78

  “Hotel Kenneth-Lay-a,” 148–49, 362

  House Energy and Power Subcommittee, 173

  Houston, Tex., xxi, 4, 7, 8, 10, 12–13, 15, 406, 409, 411, 415–16, 418, 422–23

  Houston Astros, 86, 423

  Houston Chronicle, 9, 33, 350–51, 429

  Houston Fire Department, 33

  Houston Forum, 417

  Houston Natural Gas (HNG), 10–13, 108, 128

  InterNorth merger with, 16, 17, 25, 46, 47, 73, 162, 395

  Houston Pipeline, 56

  Howard, Kevin, xiv, 294, 295–97, 415

  indictment against, 412

  Hueston, John, 419, 420, 422

  Hulme, Ron, xiv, 240, 244

  Human Rights Watch, 81–82

  Humble Oil, 5, 6

  Humphrey, Gene, 60, 137–38, 202

  Hunt family, 1

  Hurt, Harry, III, xvii, 94, 318–19

  HVAC (heating, ventilation, air conditioning), 183

  hydrocarbons, 108

  hydroelectric power, 221, 271–72

  IBM, 31, 178

  ICI, 48, 49

  Illinois, 252

  ImClone, 413

  Independent System Operator (ISO), 266, 267, 268, 270, 271, 274, 276–78

  India, 74, 79–83, 109, 240, 315, 342, 345, 353

  Indonesia, 74, 260

  In Search of Excellence, 31, 121

  Inside FERC, 227

  insider trading, 410–11, 414, 416

  Institute for Advanced Study, 202

  Institute for Policy Studies, 88

  Institutional Investor, 83, 136, 232

  institutional investors, 176, 231, 232, 243–44, 252, 326, 340

  Interior Department, U.S., 6–7, 24

  Internet, 70, 92–93, 184, 187–88, 223, 243, 256, 284–85, 288, 308, 343, 367

  collapse of, 309, 331, 412

  mania of 1990s, 185, 186, 222, 288

  providers, 191, 332

  start-ups, 251

  stocks, 185, 231, 315

  InterNorth, 11–13, 15, 16, 33, 61, 96, 108, 350

  HNG merger with, 16, 17, 25, 46, 47, 73, 162, 395

  investment bankers, 166, 190, 230, 234, 251, 252

  personal investments of, 165, 167

  investment banks, 133, 162, 164, 233, 387, 407

  Enron’s fees to, 162–63

  Enron Tiers for, 164–65, 194, 294

  Global Finance compared to, 151–52, 165

  investment grade credit ratings, 236, 239, 341, 374, 394–95, 402

  IPOs, 191, 233

  IRS, 20, 129, 170, 358

  “Is Enron Overpriced?,” 323

  Isla, 18, 19, 21, 23

  ISO (Independent System Operator), 266, 267, 268, 270, 271, 274, 276–78

  Italy, 158

  Jacobs, Irwin, 11, 12, 13, 162

  Jaedicke, Robert, xiv, 20–21

  Janus, 232, 340

  J-Block, 50–51, 103–4, 111, 176, 375

  J. C. Penney, 304

  JEDI, 67, 127, 132, 138, 141, 168–69, 189, 190, 355, 364, 383–84

  JEDI II, 176, 316

  Jefferies & Company, 175

  Jesus Christ, 424

  Jobs, Steve, 230

  Joint Committee on Taxation, 241

  Jones, Lincoln, 51

  Jordan, Carl, 358

  Joyce, Mary, 373

  J. P. Morgan, 159, 202, 230, 233

  J. P. Morgan Chase, 159, 160, 301, 341, 387, 388, 389, 393, 395, 402–3, 404–5, 407, 410

  junk bond ratings, 14, 224, 236, 237, 256, 394–95, 400, 403

  Jusbasche, Michael, 253

  Justice Department, U.S., xxiv, 408. 410–13, 415

  Kafus, 130

  Kaiser Permanente, 184

  Kaminski, Vince, xiv, 192–93, 206, 228, 305, 306, 363, 373

  Kaplan, Jana, 365, 371

  Katy Interconnect, 38

  Kean, Steve, 346

  Kelly, Bob, xiv, 51, 54, 73, 75, 76, 103

  Kelly, Emmett, 4

  Kelsey, Robert, 194

  Kinder, Anne, 25

  Kinder, Rich, xiv, 46, 94–95, 105, 125–27, 148, 164, 171, 391

  as Bush finance chairman, 88

  CEO ambitions of, 97–99

  departure of, 97–99, 100–101, 104, 110, 139, 160, 314, 362

  ECT and, 56, 103

  Kinder, Rich (cont.)

  Enron Oil and, 18–22

  Gas Bank and, 35

  importance of, 86, 91–92, 93

  McNeil’s marriage to, 97–98

  Mark and, 73, 75, 77, 78–79, 82, 83–84

  rise to prominence of, 24–26, 27

  Skilling compared with, 107

  Kinder Morgan, 98

  King, Martin Luther, Jr., 424

  Kirkland & Ellis, 311, 328

  Kissinger, Henry, xxiv, 79, 367

  Kitchen, Louise, xiv, 222–23, 333, 398, 404

  Koch Industries, 65

  Koenig, Mark, xiv, 322–23, 325, 345, 347, 360, 420–21

  Komansky, David, 313

  Kopper, Michael, xiv, 155, 161, 164, 166, 167, 168, 169, 212, 279, 305, 343, 354, 383–84, 400, 414

  departure from Enron of, 330, 361

  earnings and wealth of, 153, 169–70, 330, 413

  guilty plea and deal of, 413

  homosexuality of, 153, 384

  LJM and, 192, 196–97, 198, 203–4, 210, 306, 311, 328, 330, 353, 364, 366, 376, 381

  performance reviews of, 152–53

  Korea, 354

  Koslowski, Dennis, 182

  Krautz, Mi
ke, xiv, 289, 294, 296, 415

  indictment against, 412

  Kristol, William, 240

  Krugman, Paul, 240

  Kuhn, Thomas, 230

  Kynikos Associates, 319–21, 326, 348–49

  Lake, Simeon, 419, 422, 423, 424, 429

  Lanier, Bob, 423

  Larry King Live, 417

  Las Vegas, Nev., 425

  Launer, Curt, xvii, 179, 232, 348, 353, 371, 407

  Lavorato, John, xiv, 215–16, 226, 276, 282, 304, 398, 404

  Lawson, William, 424

  Lawyer, Larry, 289

  Lay, Bonnie, 4

  Lay, Elizabeth, 6, 367

  Lay, Judith, xiv, 5–8

  Lay, Ken, xiii, xxiii, 58, 100, 103, 108, 162, 215, 219, 222, 232–33, 326, 334, 341

  on accounting practices, 39, 41, 146, 158

  on Azurix, 247, 250, 251, 255, 257, 258

  background of, 2, 72, 96

  Beth Tilney and, 190

  board of directors and, 96–99, 314, 344–45, 349–50, 402–4, 415–16

  campaign contributions of, 173

  charitable activities of, 3, 49, 85, 86, 96,

  98

  COO search by, 352–53

  on corporate ethics, 240, 269, 275

  on Dabhol, 80, 315

  as deregulation advocate, 2–3, 172, 175, 240, 265, 267, 278, 281, 327

  distance from Enron of, 85–86, 91, 101, 240

  divorce of, 7–8, 27, 46

  in Dynegy’s proposed acquisition, 392, 395–400, 402–3

  early career of, 1, 5–14

  earnings and wealth of, 7, 12, 89, 93, 98, 240, 313, 343

  ECT and, 56

  education of, 4–5, 9

  EES supported by, 182

  on Enron International, 259, 261–62

  Enron Oil and, 15, 18–19, 21–24

  in Enron’s collapse, 403–5

  Enron stock promoted by, 242, 366–67, 417

  in exit-strategy mode, 328, 342

  on Fastow and financial structures, 134, 150, 169, 190, 193, 199, 289–90, 305, 370, 375–77

  at Federal Power Commission, 6

  financial problems of, 343–45, 367, 398, 416

  at Florida Gas, 6–8, 10, 11, 19, 25, 46

  Gas Bank and, 35

  homes of, 7, 89, 96, 344, 392, 416

  influence of, 172–73, 234–35, 291, 385

  at Interior Department, 6–7, 24

  Kopper unknown to, 153

  management style of, 3, 24–25, 26, 45, 46, 75, 85, 89–90, 92, 101–2

  Mark and, 73, 75, 79, 83, 84, 110, 111, 261–62

  marriages of, see Lay, Judith; Lay, Linda

  modest origins of, 3, 4, 28

  on outside corporate boards, 86, 182, 344

  at Pentagon, 5

  as political donor and fund-raiser, 85, 87–88, 173

  positive public statements made by, 121, 126, 133, 171, 177, 229, 259, 292, 379

  religious background and beliefs of, 2, 3, 5, 385, 423

  reputation of, 3, 85, 96, 230, 246

  resignation of, 415

  return to CEO position by, 347, 352–53, 355–62, 366–67, 369–70, 372–77, 384–86

  rise to CEO of HNG by, 10

  sense of personal entitlement of, 3–4, 91, 119

  on share buyback program, 105

  Skilling and, 59, 68, 118, 125, 176, 389

  on Skilling as CEO, 342–43, 346–49

  social prominence of, 86, 416, 423–24

  stepping down as Enron CEO, 313–14

  stock sold by, 320, 344, 367

  and Teesside power plant, 48–49

  in think tanks, 85, 87, 146

  values of, 3, 89

  Watkins’s letter to, 355–58

  Wing and, 47–48, 52–54, 73

  Lay, Linda, xiv, xxiii, 7–8, 10, 86, 89, 90, 98, 343, 367, 386, 398, 416, 422, 423

  campaign contributions of, 87, 88

  Lay, Mark, xiv, 6, 59, 90, 343, 385

  Lay, Omer, 4

  Lay, Robyn, xv, 90

  Lay, Ruth, 4

  Lay, Sharon, xv, 4, 90

  Lay It on the Line survey, 372

  Lay/Wittenberg Travel Agency in the Park,

  90

  LBO, 136–37

  LeBoutillier, John, 31

  Lee, James (Jimmy), xvii, 201, 389, 393, 395, 402

  Leff, Dan, 179

  Lehman Brothers, 154, 202, 353, 401

  LeMaistre, Charles, xv, 96, 345, 370, 373, 374, 376–77, 404

  Lerach, Bill, 410

  Levitt, Arthur, 146

  libertarians, 31

  Library of Congress, 367

  Limbaugh, Rush, 25

  Linda and Ken Lay Family Foundation, 86

  LJM, 189, 191–207, 209–11, 212, 231, 237, 238, 242, 261, 262, 277, 294, 305, 308, 310–12, 317, 327–30, 333, 345, 355, 361, 363–66, 370–71, 374–77, 408, 412, 414, 416, 421

  annual meeting of, 311–12

  Fastow’s sale of, 329–30, 353, 360,

  365–66

  SEC’s inquiry into, 371, 375

  LJM1, 191, 193, 203, 210, 305, 330, 376, 384, 393

  LJM2, 197–207, 209, 289, 294, 305–9, 312, 317, 328–29, 365, 370–71, 376, 381

  LJM3, 209, 310, 330, 373

  LJM Cayman, see LJM1

  LJM Investment Activity, 1999, 206

  LJM Swap Sub, 191, 193–96, 384, 412

  LoChiano, Rocco, 11

  Lockheed Martin, 178

  Lockyer, Bill, 281

  London School of Economics, 152

  Long, Susan, see Skilling, Susan

  Long-Term Capital Management, 219,

  385

  Los Angeles Department of Water and Power, 281

  Los Angeles Times, 273, 280, 281, 429

  Louisiana, 2, 38

  Lowther, Mike, 317

  Lucchetti, Aaron, 246

  lumber trading, 225

  Luntz, Frank, 372

  Lynn, Kathy, xv, 152, 164

  LJM and, 196–97, 204, 304, 355

  MacArthur Foundation, 202

  McConville, Kevin, xv, 130–31, 305, 308

  McCullough, Robert, 277

  McGlone, Denise, 140

  McLane, Drayton, 423

  Mack, Toni, xvii, 72, 94, 318–19

  McKinsey, James, 31

  McKinsey & Company, 9, 31–32

  on Azurix, 256

  Enron and, 106, 215, 239–40, 244–45,

  280

  peer review at, 63

  Skilling at, 12, 31, 32–35, 55, 66, 68, 233

  McLean, Bethany, 321–22

  Maclin, Todd, 201

  McLucas, William, xv, 390, 393–94, 399

  McMahon, Jeff, xv, 152, 155, 204, 208–11, 237, 305, 355, 356, 358, 361, 411

  as CFO, 377, 378–80, 389–90, 394–95, 398–99, 402, 405

  McNealy, Scott, 243–44

  McNeil, Nancy, xv, 86, 97–98

  Madera County, Calif., 254–55

  Maharashtra State Energy Board (MSEB), 80–83, 315

  Mahonia, 159

  Mandela, Nelson, xxiv, 240

  Manufacturer’s Hanover, 162

  margin calls, 343

  Mariner Energy, 129–31, 414

  Mark, Rebecca, xiii, 54, 77, 93, 94, 100, 158, 180, 409

  appearance and personality of, 71–72

  at Azurix, 113, 124, 246–63

  Azurix termination of, 246, 257–58, 262–63

  background and education of, 72–73

  charm and drive of, 72, 76, 251

  Dabhol project and, 70–84, 102, 409

  earnings and compensation of, 78–79, 83, 111, 113, 138, 262, 397

  Enron International resignation of, 112, 246

  on Enron’s board of directors, 253, 261

  as glamorous, 44, 70, 71–72, 79, 251

  as high-profile woman, 70, 76

  marketing expertise of, 76, 79, 82, 112, 252

  marriages of, 73, 253

  optimism of, 72, 78,
257

  Skilling’s conflicts with, 71, 88–89, 100–101, 110–13, 180, 246–47, 250, 255–56, 258, 259–63, 315, 326

  Wing’s relationship with, 44, 45, 52, 70, 73, 75

  Mark, Thomas, 73

  market capitalization, 185, 285

  mark-to-market accounting, 39–42, 45, 60, 66, 78, 92, 94, 127, 131, 158, 181, 218, 227, 296, 303, 305, 318–20, 388

  Marlin, 249–50, 253, 258, 341, 374, 380, 416

  Martin, Amanda, xv, 38, 61, 118, 121–23, 134, 337

  at Azurix, 124, 250, 252, 253, 260

  Rice’s relationship with, 123–24, 186–87, 213

  Masters golf tournament, 139, 146–47

  Mastroeni, Thomas, xv, 17–21, 23–24

  Matthews, M. D., 10

  Maxey, R. Davis, xv, 128–29, 163

  M. D. Anderson Cancer Center, 96

  Meade, Andre, xvii, 235, 321, 326

  meat futures, 226

  Meeker, Mary, 231

  Melcher, Patty, 166

  Meringolo, Peter, 275–76

  Merrill Lynch, 165, 180, 190, 197, 200, 201–2, 206–9, 222, 231, 234–35, 242, 244, 251, 252, 300, 311, 313, 320, 348, 360, 370, 381, 410–11

  Mertensotto, Bob, 160

  metals trading, 225, 333, 396

  methane, 1

  Microsoft, 56, 93, 224, 226, 230, 313

  Milken, Michael, 17, 412

  Millett, Doug, 321

  minority-interest financings, 155, 157

  see also specific entities

  Mintz, Jordan, xv, 327–29, 401

  Mirant, 220, 277, 283

  Missouri, University of, 4–5, 8, 25, 98

  Mobil, 241

  momentum investors, 232, 318

  momentum portfolio managers, 232

  monetization, 182, 293, 296, 368, 378

  money-market funds, 236

  Montana Power, 271

  Moody’s, 14, 80, 236–38, 260, 273, 279, 282, 373, 380, 394–95, 403, 407

  Mordaunt, Kristina, xv, 152, 297, 335

  LJM and, 196–97, 355, 394

  Morgan, Bill, 8, 25, 98

  Morgan Stanley, 63, 102, 164, 220, 231

  Morocco, 339

  Morton, Rogers, 6

  Mosbacher, Robert, 87, 96, 423

  Motley Fool, 281

  Mozambique, 74, 259

  Mozillo, Angelo, 427–28

  MTBE, 104

  Muckleroy, Mike, xv, 21–23

  Mulgrew, Gary, xvi, 194–96, 365, 384

  Mulva, James, 104

  municipal bonds, 343

  mutual funds, 232, 319

  NAPCON (North American Power

  Consortium), 107

  Napoleon III, emperor of France, 248

  National League, 86

  natural gas, 1–2, 8, 33–34, 36, 79, 109, 159, 172, 225, 244, 248, 278, 300, 345

  distribution of, 258

  futures in, 38, 39, 105, 223, 284

  market for, 126

  marketing of, 280

  pipelines, see pipelines

  prices, 88, 109, 409

  producers of, 35, 36, 105

  supply deals in, 49, 61

  traders and trading in, 37, 38, 56–69, 105–6, 110, 171, 224, 243, 284, 339, 396, 397

 

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