1 00:00:01,440 --> 00:00:04,240 Speaker 1: Welcome to Stuff you should Know, a production of I 2 00:00:04,360 --> 00:00:13,000 Speaker 1: Heart Radio. Hey, and welcome to the podcast. I'm Josh, 3 00:00:13,039 --> 00:00:15,560 Speaker 1: and there's Chuck and Jerry's here, and it's stuff you 4 00:00:15,560 --> 00:00:18,600 Speaker 1: should know. We mean it, you should know this stuff 5 00:00:19,520 --> 00:00:23,800 Speaker 1: because this is serious corporate mouthfeasance that I think it's 6 00:00:23,840 --> 00:00:26,800 Speaker 1: probably not an American over the age of twenty walking 7 00:00:26,840 --> 00:00:30,280 Speaker 1: around who doesn't know about this somehow, some way, to 8 00:00:30,400 --> 00:00:33,280 Speaker 1: some degree. I know they teach about this stuff in 9 00:00:33,360 --> 00:00:38,479 Speaker 1: business school. Um, it's been written on extensively, but I 10 00:00:38,520 --> 00:00:41,720 Speaker 1: mean I didn't understand the ins and outs of it until, um, 11 00:00:41,800 --> 00:00:45,640 Speaker 1: until I started researching this, and it's quite shocking. And 12 00:00:46,000 --> 00:00:49,560 Speaker 1: that shocking thing that I'm talking about is the rise 13 00:00:49,600 --> 00:00:55,200 Speaker 1: and fall of Enron, one of the greatest um swindles 14 00:00:55,760 --> 00:00:59,360 Speaker 1: in corporate American history, maybe in corporate history in the world, 15 00:00:59,560 --> 00:01:03,080 Speaker 1: definitely in corporate American history for sure. I'm really glad 16 00:01:03,120 --> 00:01:04,440 Speaker 1: you picked this because I didn't know all the ins 17 00:01:04,480 --> 00:01:08,440 Speaker 1: and outs either, because this is you know, when I 18 00:01:08,480 --> 00:01:11,840 Speaker 1: was a young late twenties, early thirties something, didn't have 19 00:01:11,880 --> 00:01:16,480 Speaker 1: a care in the world. Uh, And I finally watched 20 00:01:16,480 --> 00:01:21,880 Speaker 1: the smartest guys in the room today. Yeah, Yeah, the 21 00:01:21,920 --> 00:01:25,880 Speaker 1: documentary based on the book. UM, and we'll get to 22 00:01:25,920 --> 00:01:28,720 Speaker 1: the authors and stuff. It was Peter Elkind and who 23 00:01:28,840 --> 00:01:32,360 Speaker 1: was a co author, Bethany McClain. Okay, that was the 24 00:01:32,480 --> 00:01:35,480 Speaker 1: lead author even Okay, I knew she wrote the original 25 00:01:35,560 --> 00:01:38,399 Speaker 1: articles and Ford, so she co authored the book and 26 00:01:38,440 --> 00:01:41,919 Speaker 1: she's in the documentary, as is Elkland, and it really 27 00:01:42,240 --> 00:01:45,600 Speaker 1: is worth the watch. But just want to point out 28 00:01:45,640 --> 00:01:49,360 Speaker 1: that this is an overview of the Enron scandal. It's 29 00:01:49,400 --> 00:01:52,320 Speaker 1: pretty clear once you start poking around that this could 30 00:01:52,360 --> 00:01:55,200 Speaker 1: be like a ten part series. Yeah, for sure. And 31 00:01:55,200 --> 00:01:57,560 Speaker 1: there there probably is a podcast series out there that 32 00:01:57,600 --> 00:02:00,520 Speaker 1: covered just in Ron. UM. So there's lots of sort 33 00:02:00,520 --> 00:02:01,960 Speaker 1: of ins and outs that we won't be able to 34 00:02:01,960 --> 00:02:05,440 Speaker 1: touch on, UM, but we can definitely give her the overview, 35 00:02:05,520 --> 00:02:11,000 Speaker 1: which was the Enron was a corporation. Um. Originally it 36 00:02:11,040 --> 00:02:17,079 Speaker 1: was a natural gas line pipeline operator. UM. But they quickly, 37 00:02:17,320 --> 00:02:20,200 Speaker 1: well not quickly, UM, they got out of that business 38 00:02:20,240 --> 00:02:24,399 Speaker 1: almost entirely. When certain people were hired and we'll we'll 39 00:02:24,440 --> 00:02:25,960 Speaker 1: sort of get to all this in a minute too. 40 00:02:28,280 --> 00:02:31,239 Speaker 1: When certain people were hired that basically said you know what, 41 00:02:32,000 --> 00:02:35,160 Speaker 1: we don't we should even be in the pipeline industry. 42 00:02:35,240 --> 00:02:38,960 Speaker 1: We should invent almost a new kind of industry, which 43 00:02:39,040 --> 00:02:44,480 Speaker 1: is to use energy as financial instruments, and we should 44 00:02:44,520 --> 00:02:49,840 Speaker 1: become a trading company that trades natural gas and eventually 45 00:02:50,520 --> 00:02:55,200 Speaker 1: paper pulp and and electricity and you name it. Like, 46 00:02:55,200 --> 00:02:56,920 Speaker 1: we'll get into all the things that they sort of 47 00:02:57,520 --> 00:03:01,280 Speaker 1: pivoted to. But um in rounds started, I guess we 48 00:03:01,280 --> 00:03:05,840 Speaker 1: should start at the beginning when they when Houston Natural 49 00:03:05,880 --> 00:03:09,960 Speaker 1: Gas Company merged with a company called Enter North and 50 00:03:10,000 --> 00:03:15,560 Speaker 1: they combined to form this large energy corporation in Texas, 51 00:03:15,680 --> 00:03:20,280 Speaker 1: mainly natural gas. UH, and the chief executive of h 52 00:03:20,440 --> 00:03:22,600 Speaker 1: n G at the time was a man named mckin 53 00:03:23,240 --> 00:03:26,320 Speaker 1: or Kenneth Lay, who you might have heard of. Yeah, 54 00:03:26,480 --> 00:03:29,320 Speaker 1: and if you haven't prepared to meet ken Lay several 55 00:03:29,360 --> 00:03:34,080 Speaker 1: times across this episode. UM from the outset, I think, uh, 56 00:03:34,520 --> 00:03:38,480 Speaker 1: Houston Natural Gas and Inner North, we're both profitable. But 57 00:03:38,560 --> 00:03:41,200 Speaker 1: I saw that neither one of their um the companies 58 00:03:41,240 --> 00:03:44,800 Speaker 1: really benefited from the merger, although it did expand their 59 00:03:44,800 --> 00:03:48,320 Speaker 1: pipeline network. Really it just protected them from a hostile takeover. 60 00:03:49,440 --> 00:03:52,760 Speaker 1: But it was just a just a standard gas company, 61 00:03:52,840 --> 00:03:55,360 Speaker 1: you know, no big frills or anything like that. I 62 00:03:55,400 --> 00:03:58,640 Speaker 1: think the first year it posted a fourteen million dollar loss. 63 00:03:59,160 --> 00:04:01,840 Speaker 1: Put that in your uh, in your hat and smoke 64 00:04:01,920 --> 00:04:07,800 Speaker 1: it later with a pin. Okay uh. In that the 65 00:04:07,920 --> 00:04:11,760 Speaker 1: first year end Ron was around in it posted a 66 00:04:11,800 --> 00:04:15,560 Speaker 1: four two million dollar loss. Just remember that for later, Okay. Yeah. Also, 67 00:04:15,720 --> 00:04:17,800 Speaker 1: something else you should put in your hat for later 68 00:04:18,800 --> 00:04:21,040 Speaker 1: is the fact that Kenneth Lay, the gentleman I mentioned 69 00:04:21,120 --> 00:04:24,800 Speaker 1: who was the ZEO of Houston Natural Gas, was also 70 00:04:24,920 --> 00:04:30,359 Speaker 1: a very very tight with the Bush family, originally the 71 00:04:30,440 --> 00:04:35,120 Speaker 1: elder Bush and later on George W. As Governor of Texas, 72 00:04:35,480 --> 00:04:40,279 Speaker 1: big donor to their causes politically, and they ended up 73 00:04:40,320 --> 00:04:42,920 Speaker 1: having a very sort of you scratch my back, al 74 00:04:43,000 --> 00:04:46,920 Speaker 1: scratch yours kind of relationship. Yeah, it's I mean like 75 00:04:47,160 --> 00:04:49,920 Speaker 1: I just started twirling around over and over again out 76 00:04:49,960 --> 00:04:53,640 Speaker 1: of anger, like multiple times throughout the documentary because they 77 00:04:53,680 --> 00:04:57,200 Speaker 1: really go into um some good details about that. But 78 00:04:57,320 --> 00:05:02,320 Speaker 1: the upshot of the whole thing is George H. W 79 00:05:02,640 --> 00:05:06,560 Speaker 1: and George W. Bush Um would not probably have been 80 00:05:06,600 --> 00:05:09,160 Speaker 1: able to help Endron out as much as they did 81 00:05:09,480 --> 00:05:12,680 Speaker 1: had it not been for, of course, Ronald Reagan and 82 00:05:12,760 --> 00:05:17,560 Speaker 1: the sweeping deregulations that occurred in starting in the eighties. 83 00:05:17,680 --> 00:05:20,479 Speaker 1: There was just a spirit of deregulation, which was this 84 00:05:20,720 --> 00:05:24,280 Speaker 1: Ronald Reagan said, and they quoted in the documentary. Government's 85 00:05:24,320 --> 00:05:27,120 Speaker 1: not the solution to our problems. Government is the problem. 86 00:05:27,440 --> 00:05:29,760 Speaker 1: And there was this idea that was really huge in 87 00:05:29,800 --> 00:05:34,120 Speaker 1: the eighties, um that if you got government out of 88 00:05:34,160 --> 00:05:38,400 Speaker 1: the way, competition was going to drive innovation, was going 89 00:05:38,440 --> 00:05:42,400 Speaker 1: to lower prices, was going to benefit society in myriad ways. 90 00:05:42,880 --> 00:05:47,160 Speaker 1: That is not untrue. The problem is when you deregulate 91 00:05:47,839 --> 00:05:50,960 Speaker 1: fully and just basically say we're checked out from now 92 00:05:51,000 --> 00:05:55,839 Speaker 1: on until something really bad happens. Something bad always happens. 93 00:05:56,279 --> 00:05:59,560 Speaker 1: That's the problem with deregulation in the eighties, not that 94 00:05:59,600 --> 00:06:03,040 Speaker 1: there's am with deregulation, that it was done incorrectly, like 95 00:06:03,080 --> 00:06:05,840 Speaker 1: it seems to be every single time. Yeah, I mean 96 00:06:05,839 --> 00:06:09,200 Speaker 1: Reagan is also in the documentary quoted as talking about 97 00:06:09,200 --> 00:06:12,800 Speaker 1: the magic of the marketplace, and uh, we've talked about 98 00:06:12,839 --> 00:06:14,479 Speaker 1: this over and over on the show. And this is 99 00:06:14,480 --> 00:06:19,160 Speaker 1: not um an attack on conservatism, but deregulation in in 100 00:06:19,240 --> 00:06:22,320 Speaker 1: the marketplace and letting the free market decide things is 101 00:06:22,360 --> 00:06:26,520 Speaker 1: one of the core tenets of conservatism generally. And what 102 00:06:26,680 --> 00:06:29,920 Speaker 1: we've always kind of hammered home year after years, And 103 00:06:30,279 --> 00:06:32,120 Speaker 1: you said it in one way, but I'll satting another 104 00:06:32,200 --> 00:06:36,000 Speaker 1: is it never takes into account humans are the ones 105 00:06:36,080 --> 00:06:39,680 Speaker 1: that are operating these systems. And when you have money, 106 00:06:40,400 --> 00:06:43,359 Speaker 1: lots and lots of money, and you have humans operating systems, 107 00:06:44,040 --> 00:06:49,080 Speaker 1: there are inevitably gonna be greedy humans with so much 108 00:06:49,200 --> 00:06:53,880 Speaker 1: hubrists that they sell their souls to make money. And 109 00:06:53,920 --> 00:06:57,960 Speaker 1: that's that's what happens every single time. Yet it's still 110 00:06:58,480 --> 00:07:02,039 Speaker 1: lessons are still not learned that that there are certain 111 00:07:02,120 --> 00:07:04,240 Speaker 1: kinds of humans and they always seems to be they 112 00:07:04,279 --> 00:07:06,520 Speaker 1: always seem to be the ones in charge here of 113 00:07:06,560 --> 00:07:09,440 Speaker 1: these systems. They will take advantage of them to the 114 00:07:09,480 --> 00:07:13,040 Speaker 1: detriment of the little guy and the little lady. And 115 00:07:13,080 --> 00:07:16,840 Speaker 1: that is would happened with en Ron. Yeah, And I 116 00:07:16,840 --> 00:07:19,000 Speaker 1: don't know if it's always like they're not taking into 117 00:07:19,000 --> 00:07:22,560 Speaker 1: account human greed. I think most of the people who 118 00:07:22,640 --> 00:07:27,800 Speaker 1: are powerful enough to deregulate UM in federal energy regulations 119 00:07:28,400 --> 00:07:31,280 Speaker 1: UM don't really care. In a lot of cases, they 120 00:07:31,360 --> 00:07:33,320 Speaker 1: know that they're going to make a boatload of money 121 00:07:33,360 --> 00:07:35,440 Speaker 1: by the time the thing really kind of blows up 122 00:07:35,480 --> 00:07:38,840 Speaker 1: sometime down the line. I think it could be either one, 123 00:07:39,440 --> 00:07:43,760 Speaker 1: but the there was a big sea change in UM, 124 00:07:43,800 --> 00:07:49,960 Speaker 1: a big change to regulation. The Federal Energy Regulatory Commission said, hey, um, 125 00:07:50,040 --> 00:07:55,000 Speaker 1: you can now buy and sell gas natural gas UM 126 00:07:55,040 --> 00:07:58,440 Speaker 1: from any seller anywhere in the United States. You don't 127 00:07:58,440 --> 00:08:01,000 Speaker 1: have to just buy and sell within your state. And 128 00:08:01,080 --> 00:08:04,920 Speaker 1: that opened up an entirely new market and all of 129 00:08:04,960 --> 00:08:07,760 Speaker 1: a sudden, you can make a lot more money moving 130 00:08:07,800 --> 00:08:11,840 Speaker 1: this stuff around. But like you said, they figured out 131 00:08:11,880 --> 00:08:15,400 Speaker 1: and run, you can make even more money by selling 132 00:08:15,440 --> 00:08:19,120 Speaker 1: this stuff as commodities UM and trading on like futures 133 00:08:19,160 --> 00:08:23,320 Speaker 1: and turning them into financial instruments, not actual just natural 134 00:08:23,360 --> 00:08:26,680 Speaker 1: gas or oil or electricity, but the concepts of them, 135 00:08:26,840 --> 00:08:29,600 Speaker 1: the right to sell it or buy that sometime down 136 00:08:29,680 --> 00:08:33,280 Speaker 1: the road. And that changed absolutely everything. Yeah, and this 137 00:08:33,360 --> 00:08:35,640 Speaker 1: is when things when you get into finance like this. 138 00:08:36,400 --> 00:08:39,800 Speaker 1: My it's not that my eyeballs glaze over. It just 139 00:08:39,840 --> 00:08:45,959 Speaker 1: becomes almost uh and I say almost not real because 140 00:08:46,000 --> 00:08:48,560 Speaker 1: it's it is kind of not real. It's it becomes 141 00:08:48,559 --> 00:08:51,520 Speaker 1: a form of gambling in a way. And that's very 142 00:08:51,559 --> 00:08:53,360 Speaker 1: much what happened to en Ron in a lot of ways. 143 00:08:53,360 --> 00:08:55,000 Speaker 1: And you'll you'll kind of see here and there throughout 144 00:08:55,000 --> 00:08:59,080 Speaker 1: the episode. UM. But they as a company UM. After 145 00:08:59,120 --> 00:09:02,400 Speaker 1: that eight four s Jean made a very faithful decision 146 00:09:02,480 --> 00:09:05,000 Speaker 1: of their own in nine nine, just a few years later, 147 00:09:05,440 --> 00:09:09,160 Speaker 1: when they got a consulting firm on board Mackenzie and Company, 148 00:09:09,600 --> 00:09:13,920 Speaker 1: in particular consultant for that company named Jeffrey Skilling UH 149 00:09:13,960 --> 00:09:17,280 Speaker 1: to create what they called the Gas Bank, which was 150 00:09:17,320 --> 00:09:19,720 Speaker 1: basically like I said earlier, like, hey, why don't we 151 00:09:19,760 --> 00:09:23,079 Speaker 1: just be an intermediary between buying and selling of gas? 152 00:09:23,640 --> 00:09:26,080 Speaker 1: And it was going so well that two short years 153 00:09:26,160 --> 00:09:30,600 Speaker 1: later Skilling left there and Uh went to work full 154 00:09:30,600 --> 00:09:35,160 Speaker 1: time at en Ron. Oh sure, and eventually working his 155 00:09:35,200 --> 00:09:39,600 Speaker 1: way up to the CEO of that company. Yes, so 156 00:09:39,800 --> 00:09:42,600 Speaker 1: UM he was he but for the most part he 157 00:09:42,720 --> 00:09:46,760 Speaker 1: was the right hand man, but essentially co CEO with 158 00:09:46,920 --> 00:09:50,480 Speaker 1: ken Ley, who I think took him on as a protege. 159 00:09:50,920 --> 00:09:52,920 Speaker 1: And Jeffrey Skilling was the one who said, let's set 160 00:09:53,000 --> 00:09:58,559 Speaker 1: up this market UM. And he also transformed the company's culture. 161 00:09:59,120 --> 00:10:01,640 Speaker 1: One of the things he came him up with was 162 00:10:01,960 --> 00:10:05,679 Speaker 1: um the idea that every year they should review and 163 00:10:05,760 --> 00:10:09,920 Speaker 1: rate every employee, and the bottom ten percent of employees 164 00:10:09,960 --> 00:10:13,280 Speaker 1: should be fired. So every year he was planning on 165 00:10:13,360 --> 00:10:17,400 Speaker 1: firing ten percent of their workforce. About two thousand people 166 00:10:17,800 --> 00:10:20,040 Speaker 1: every year. And the reason he was doing this is 167 00:10:20,080 --> 00:10:22,360 Speaker 1: because he's saying, we can do better. We can hire 168 00:10:22,400 --> 00:10:24,520 Speaker 1: the best and the brightest, We'll replace those people with 169 00:10:24,600 --> 00:10:27,240 Speaker 1: much better people, and then the ones who are doing 170 00:10:27,280 --> 00:10:29,600 Speaker 1: really well now we'll get moved to the back and 171 00:10:29,600 --> 00:10:32,560 Speaker 1: we'll just constantly be improving on the people that were hiring. 172 00:10:33,200 --> 00:10:35,760 Speaker 1: It makes sense in a really Machia Valley and kind 173 00:10:35,760 --> 00:10:39,679 Speaker 1: of way, but it's also psychotics as well. Yeah, And 174 00:10:40,200 --> 00:10:42,600 Speaker 1: the way I understood it from the documentary, it wasn't 175 00:10:42,720 --> 00:10:46,520 Speaker 1: just like regular upper management reviews of the people that 176 00:10:46,520 --> 00:10:49,040 Speaker 1: that that report to them, but it was all the 177 00:10:49,120 --> 00:10:53,120 Speaker 1: employees rating one another like within their department. Isn't that right? 178 00:10:53,640 --> 00:10:55,480 Speaker 1: That's what I took it as too. So, I mean, 179 00:10:56,480 --> 00:11:00,520 Speaker 1: you don't have to like be a Sue Sayer to 180 00:11:00,559 --> 00:11:04,440 Speaker 1: see where that heads when uh, And it certainly creates 181 00:11:04,440 --> 00:11:07,600 Speaker 1: competition if that's what they're all about with uh, you know, 182 00:11:07,640 --> 00:11:10,440 Speaker 1: the sort of the charter of the company creating more 183 00:11:10,440 --> 00:11:13,480 Speaker 1: competition by deregulating. They sort of did the same thing 184 00:11:13,520 --> 00:11:16,800 Speaker 1: within the ranks and created a very I mean I've 185 00:11:16,840 --> 00:11:21,079 Speaker 1: seen it described everywhere as uh, it's just overly macho 186 00:11:21,240 --> 00:11:25,560 Speaker 1: and testosterone fueled UM. It seems like the traders there 187 00:11:25,600 --> 00:11:29,679 Speaker 1: were uh were hired and kept on that were especially aggressive. 188 00:11:30,400 --> 00:11:34,160 Speaker 1: And there are interviews in the documentary about about some 189 00:11:34,240 --> 00:11:37,360 Speaker 1: of these men who were traders that were like, you 190 00:11:37,400 --> 00:11:40,320 Speaker 1: would uh cut the throat of the guy next to 191 00:11:40,360 --> 00:11:43,640 Speaker 1: you on the trading floor, your fellow employee if you 192 00:11:43,720 --> 00:11:46,280 Speaker 1: felt like you could make a few extra bucks. Yeah, 193 00:11:46,320 --> 00:11:49,120 Speaker 1: and that was very much encouraged, not just by Jeffrey Skilling, 194 00:11:49,120 --> 00:11:53,559 Speaker 1: but ken Leigh had a history of UM at the 195 00:11:53,679 --> 00:11:57,000 Speaker 1: very least turning a blind eye, if not actively encouraging 196 00:11:57,080 --> 00:12:01,320 Speaker 1: people to break the law. Um you immoral stuff that 197 00:12:01,400 --> 00:12:04,000 Speaker 1: may or may not have been legal, all in the 198 00:12:04,040 --> 00:12:07,520 Speaker 1: interest of maximizing profits. Like if you were making money 199 00:12:07,600 --> 00:12:11,800 Speaker 1: and you got in trouble, you didn't get fired because 200 00:12:11,840 --> 00:12:14,280 Speaker 1: you made money for the company. That's all that mattered 201 00:12:14,320 --> 00:12:16,600 Speaker 1: was making money for the company. So in that sense, 202 00:12:16,679 --> 00:12:20,240 Speaker 1: Jeffrey Skilling was a really great protegee for Kenley. But 203 00:12:20,320 --> 00:12:23,400 Speaker 1: he was like ken Lay on steroids, UM and I 204 00:12:23,440 --> 00:12:26,600 Speaker 1: get the impression. And Kenley has always or back in 205 00:12:26,640 --> 00:12:30,640 Speaker 1: the day, he was a master at presenting this really 206 00:12:30,760 --> 00:12:39,000 Speaker 1: laid back, almost um detached persona. But if you watch 207 00:12:39,040 --> 00:12:41,839 Speaker 1: the documentary and you read about him, you really get 208 00:12:41,880 --> 00:12:45,400 Speaker 1: the impression that he knew exactly what outcome was ten 209 00:12:45,480 --> 00:12:48,840 Speaker 1: steps down the road by just nudging this thing over here, 210 00:12:49,000 --> 00:12:52,120 Speaker 1: nudging that thing over there, all with plausible deniability, but 211 00:12:52,160 --> 00:12:57,359 Speaker 1: at the same time presiding over this incredibly complex, complicated, 212 00:12:57,559 --> 00:13:02,680 Speaker 1: masterful machination um that was all dedicated to the service 213 00:13:02,720 --> 00:13:06,079 Speaker 1: of making money for by by whatever means possible. Yeah, 214 00:13:06,120 --> 00:13:08,240 Speaker 1: and and Lay. I mean, the reason the documentary is 215 00:13:08,280 --> 00:13:12,800 Speaker 1: called the Smartest Guys in the Room is because I 216 00:13:12,800 --> 00:13:17,160 Speaker 1: think unequivocally everyone would admit that Ken Lay and Jeffrey 217 00:13:17,160 --> 00:13:20,480 Speaker 1: Skilling and uh, we should introduce you to a younger 218 00:13:20,480 --> 00:13:23,760 Speaker 1: recruit named Andrew fast Al who was a key player 219 00:13:23,800 --> 00:13:26,640 Speaker 1: eventually becoming the CFO and was up to all kinds 220 00:13:26,640 --> 00:13:31,000 Speaker 1: of shenanigans. But these were brilliant guys with amazing ideas 221 00:13:31,080 --> 00:13:33,400 Speaker 1: and a lot of the ideas that they had for 222 00:13:33,440 --> 00:13:36,880 Speaker 1: this company. We're really good and ahead of their time. 223 00:13:37,400 --> 00:13:40,520 Speaker 1: But they had the notion that you should be able 224 00:13:40,559 --> 00:13:44,360 Speaker 1: to trade and make money off of great ideas and 225 00:13:44,400 --> 00:13:48,240 Speaker 1: not necessarily the results of those great ideas. Because time 226 00:13:48,240 --> 00:13:51,000 Speaker 1: and time again, as you'll see as we tell this story, 227 00:13:52,200 --> 00:13:56,200 Speaker 1: these ideas were not making actual money, maybe because some 228 00:13:56,280 --> 00:13:58,640 Speaker 1: of them were ahead of their time, but that didn't 229 00:13:58,640 --> 00:14:01,640 Speaker 1: matter because they had way very creative ways to hide 230 00:14:01,640 --> 00:14:05,440 Speaker 1: those debts and losses. And that's that's the whole sort 231 00:14:05,480 --> 00:14:08,320 Speaker 1: of followed in ron Is is wrapped up in that statement. 232 00:14:08,360 --> 00:14:12,280 Speaker 1: But these are all really really smart guys, and uh, 233 00:14:12,600 --> 00:14:16,480 Speaker 1: they were really really good at making money. And maybe 234 00:14:16,480 --> 00:14:18,160 Speaker 1: we should take a break there. It's a nice little 235 00:14:18,160 --> 00:14:20,880 Speaker 1: set up, and we'll come back and talk a little 236 00:14:20,880 --> 00:14:24,160 Speaker 1: bit more about their lobby to deregulate. And then some 237 00:14:24,240 --> 00:14:36,800 Speaker 1: of the early shenanigans right after this a large sk 238 00:14:37,800 --> 00:14:51,040 Speaker 1: as watch sks you should know. Okay, So after about 239 00:14:51,080 --> 00:14:54,840 Speaker 1: six years after that big deregulation from Firk that said 240 00:14:54,880 --> 00:14:56,840 Speaker 1: you can buy gas and sell it at wherever in 241 00:14:56,880 --> 00:14:59,600 Speaker 1: the country. That opened up a huge market, there was 242 00:14:59,640 --> 00:15:06,360 Speaker 1: another or watershed deregulate deregulation UM that that reverse an 243 00:15:06,360 --> 00:15:09,440 Speaker 1: act that went back to nineteen thirty five, the Public 244 00:15:09,560 --> 00:15:14,080 Speaker 1: Utilities Holding Company Act PUKA. I love that one that 245 00:15:14,240 --> 00:15:18,600 Speaker 1: said if you UM are generating and selling electricity, you 246 00:15:18,640 --> 00:15:22,400 Speaker 1: are a local utility and we're going to regulate you 247 00:15:22,840 --> 00:15:26,320 Speaker 1: like you are providing the life blood of America. Because 248 00:15:26,960 --> 00:15:32,160 Speaker 1: electrical utilities provide the lifeblood of America and have since 249 00:15:32,200 --> 00:15:36,400 Speaker 1: long before nineteen thirty five. And in ninete they managed 250 00:15:36,440 --> 00:15:38,720 Speaker 1: to get that reversed and now all of a sudden, 251 00:15:38,920 --> 00:15:42,920 Speaker 1: anybody could buy an electric utility. And Enron definitely jumped 252 00:15:42,920 --> 00:15:46,160 Speaker 1: on that. Yeah, for sure, they their lobby UH was 253 00:15:46,240 --> 00:15:50,840 Speaker 1: strong to put up mildly, they hired lobbyists to lobby 254 00:15:50,840 --> 00:15:55,720 Speaker 1: different states. In those states, as no surprise, ended up 255 00:15:56,040 --> 00:16:00,680 Speaker 1: getting millions of dollars flowing back towards en Ron UM. 256 00:16:00,720 --> 00:16:04,520 Speaker 1: I think they hired lobbyists for at least thirty seven states. 257 00:16:05,240 --> 00:16:09,960 Speaker 1: They also helped overturn along that said the military has 258 00:16:10,000 --> 00:16:13,640 Speaker 1: to buy power UM from local utilities, and they said, 259 00:16:13,680 --> 00:16:16,320 Speaker 1: now let's open that back up UM pretty soon, and 260 00:16:16,480 --> 00:16:19,920 Speaker 1: Ron got its twenty five million dollar contract for supplying 261 00:16:19,920 --> 00:16:24,520 Speaker 1: electricity to Fort Hamilton's in Brooklyn. And these are just 262 00:16:25,120 --> 00:16:27,320 Speaker 1: I mean, twenty million ends up being peanuts in the 263 00:16:27,320 --> 00:16:30,280 Speaker 1: grand scheme. But these are just examples as they sort 264 00:16:30,280 --> 00:16:34,640 Speaker 1: of ramped up to their schemes of how they deregulated 265 00:16:34,720 --> 00:16:37,120 Speaker 1: or lobbied to get things deregulated such that it was 266 00:16:37,160 --> 00:16:40,120 Speaker 1: allowed to happen. Right, And one of the things one 267 00:16:40,120 --> 00:16:43,920 Speaker 1: of the schemes that got the attention of the entire country. 268 00:16:44,480 --> 00:16:48,440 Speaker 1: UM in two thousand, two thousand one, UM was an 269 00:16:48,480 --> 00:16:53,840 Speaker 1: electrical scheme in California. California had undergone its own electrical 270 00:16:53,880 --> 00:16:58,400 Speaker 1: deregulation power deregulation, but it had had adopted this weird 271 00:16:58,600 --> 00:17:03,880 Speaker 1: patchwork compromise. Is UM law or set of laws that 272 00:17:04,520 --> 00:17:06,920 Speaker 1: just had looped loopholes you could drive a truck through, 273 00:17:06,960 --> 00:17:09,959 Speaker 1: and that we're just really created all sorts of legal 274 00:17:10,080 --> 00:17:13,280 Speaker 1: gray areas. And so rather than just kind of like 275 00:17:13,359 --> 00:17:17,080 Speaker 1: here they're biting around the edges seeing what they could do, instead, 276 00:17:17,080 --> 00:17:22,280 Speaker 1: the energy traders at UM enron UM started figuring out 277 00:17:22,320 --> 00:17:25,560 Speaker 1: how to move energy out of the state, wait for 278 00:17:25,680 --> 00:17:27,439 Speaker 1: the state to be like, hey, we need some energy, 279 00:17:27,840 --> 00:17:32,719 Speaker 1: and move it back at incredibly inflated prices. UM. They 280 00:17:32,760 --> 00:17:38,879 Speaker 1: would purposefully UM take electrical utilities that they owned offline 281 00:17:39,200 --> 00:17:42,439 Speaker 1: to generate more demand, a spike in demand, and so 282 00:17:42,520 --> 00:17:47,480 Speaker 1: they could raise prices again, and they actually basically crippled California. 283 00:17:48,000 --> 00:17:51,639 Speaker 1: I think I saw that California had UM a couple 284 00:17:51,720 --> 00:17:56,439 Speaker 1: dozen blackouts in six months after that deregulation. After Enron 285 00:17:56,520 --> 00:17:59,440 Speaker 1: started coming in and messing with stuff. Whereas the six 286 00:17:59,480 --> 00:18:02,840 Speaker 1: months before deregulation they had had one blackout. So if 287 00:18:02,880 --> 00:18:05,520 Speaker 1: you watch the documentary and you listen, you know, you 288 00:18:05,600 --> 00:18:08,960 Speaker 1: read some other sources about it. This was an entirely 289 00:18:09,080 --> 00:18:14,439 Speaker 1: fabricated um a scarcity of electricity. There's plenty of it, 290 00:18:14,680 --> 00:18:16,520 Speaker 1: and run just figured out that they could kind of 291 00:18:16,520 --> 00:18:18,600 Speaker 1: pull this lever and that lever and charge way more 292 00:18:18,960 --> 00:18:22,600 Speaker 1: by creating this this fake scarcity. Yeah. Uh, and by 293 00:18:22,600 --> 00:18:26,680 Speaker 1: pulling a lever like literally sometimes they called up a 294 00:18:26,680 --> 00:18:30,280 Speaker 1: power company, a power plant and said pull the lever 295 00:18:30,440 --> 00:18:33,680 Speaker 1: to the off position, and they have them on tape. 296 00:18:33,720 --> 00:18:36,280 Speaker 1: You know, they played this in the documentary. Well they'll 297 00:18:36,320 --> 00:18:38,400 Speaker 1: they called one in Las Vegas and said, hey man, 298 00:18:38,720 --> 00:18:41,240 Speaker 1: can you take this thing offline, uh for a few 299 00:18:41,240 --> 00:18:45,119 Speaker 1: hours and just just make something up? Because of rolling 300 00:18:45,160 --> 00:18:48,359 Speaker 1: blackout meant big money, um, all of a sudden, California 301 00:18:48,440 --> 00:18:51,439 Speaker 1: again was was buying their own energy back at a 302 00:18:51,480 --> 00:18:54,600 Speaker 1: higher rate. And Governor Gray Davis at the time, and 303 00:18:54,600 --> 00:18:57,240 Speaker 1: this is you know, I'm not like giving some full 304 00:18:57,280 --> 00:19:01,320 Speaker 1: throated endorsement to any um effectiveness of Gray Davis as 305 00:19:01,320 --> 00:19:04,120 Speaker 1: a governor because I really don't know, but he definitely 306 00:19:04,200 --> 00:19:06,879 Speaker 1: was sort of left holding the bag and scratching his 307 00:19:06,920 --> 00:19:10,000 Speaker 1: head like what's going on here? Like We've got plenty 308 00:19:10,080 --> 00:19:14,000 Speaker 1: of energy, and it just all through the documentary people 309 00:19:14,000 --> 00:19:17,520 Speaker 1: are saying like this just isn't adding up in California, 310 00:19:17,680 --> 00:19:21,560 Speaker 1: and some of those tapes that they play of these traders, 311 00:19:21,600 --> 00:19:25,600 Speaker 1: like there was that that natural, uh wildfire that broke 312 00:19:25,640 --> 00:19:29,080 Speaker 1: out that jeopardize one of the pipelines, and these guys 313 00:19:29,119 --> 00:19:30,960 Speaker 1: are on, you know, on tape on the phone with 314 00:19:31,000 --> 00:19:34,439 Speaker 1: each other saying burn, baby, burn, because that's good for 315 00:19:34,480 --> 00:19:37,879 Speaker 1: business if it knocks something offline. And is you know, 316 00:19:37,960 --> 00:19:41,800 Speaker 1: making laughing at like uh, you know, old Grandma's like 317 00:19:41,880 --> 00:19:44,840 Speaker 1: sweating in the summer heat because they can't get air conditioning, 318 00:19:44,880 --> 00:19:48,960 Speaker 1: like the most vile, reprehensible kind of stuff in the 319 00:19:49,080 --> 00:19:51,480 Speaker 1: name of making the all my mighty dollar that you 320 00:19:51,480 --> 00:19:54,560 Speaker 1: could imagine. What's also interesting is they don't really go 321 00:19:54,600 --> 00:19:57,679 Speaker 1: into detail about it, but it's um. It appears to 322 00:19:57,760 --> 00:20:00,840 Speaker 1: have also been a coup to get rid of Gray 323 00:20:00,920 --> 00:20:04,800 Speaker 1: Davis and replace him with Arnold Schwarzenegger because ken Lay 324 00:20:04,880 --> 00:20:07,800 Speaker 1: held a meeting at the Peninsula Hotel in Los Angeles, 325 00:20:08,400 --> 00:20:12,760 Speaker 1: UM and he invited Arnold Schwartzenegger. This was long before 326 00:20:13,160 --> 00:20:17,440 Speaker 1: Arnold Schwartzenegger was known to have had like real political aspirations. 327 00:20:17,440 --> 00:20:20,439 Speaker 1: He wasn't governor yet wasn't running for governor over a 328 00:20:20,520 --> 00:20:24,280 Speaker 1: problem that Enron created. It was like that level of 329 00:20:24,440 --> 00:20:27,600 Speaker 1: In addition to also just making billions and billions of 330 00:20:27,600 --> 00:20:30,680 Speaker 1: dollars by strangling the state, they also managed to replace 331 00:20:31,080 --> 00:20:33,680 Speaker 1: the executive of the state as well to somebody who 332 00:20:33,760 --> 00:20:35,879 Speaker 1: is much more friendly to them. Yeah, and get rid 333 00:20:35,920 --> 00:20:38,040 Speaker 1: of in the Uh. Of course he didn't like knock 334 00:20:38,119 --> 00:20:40,639 Speaker 1: him off or anything. But in California you can you 335 00:20:40,680 --> 00:20:43,199 Speaker 1: can never recall. It seems to come up every I 336 00:20:43,240 --> 00:20:46,640 Speaker 1: don't know twelve years or so where Californians aren't happy 337 00:20:46,640 --> 00:20:49,720 Speaker 1: with the governor. And so if recall vote passes, you 338 00:20:49,720 --> 00:20:52,600 Speaker 1: can have a have just an election out of nowhere, 339 00:20:53,200 --> 00:20:57,200 Speaker 1: uh and replace that governor. UM. While this is going on, 340 00:20:57,320 --> 00:21:00,560 Speaker 1: you know, Ken Lay stands on a stage and says, 341 00:21:00,600 --> 00:21:05,160 Speaker 1: we're making money in spite of California, not because of California. 342 00:21:05,880 --> 00:21:10,520 Speaker 1: So just lying through their teeth on stage to their shareholders. Uh. 343 00:21:10,560 --> 00:21:13,320 Speaker 1: And all. You know, all these little schemes had little nicknames, 344 00:21:13,720 --> 00:21:16,639 Speaker 1: the one where they got energy out of California just 345 00:21:16,680 --> 00:21:19,080 Speaker 1: to make them buy it. Back was called Ricochet. There 346 00:21:19,119 --> 00:21:21,960 Speaker 1: was one called death Star, and they're on tape like 347 00:21:22,040 --> 00:21:24,159 Speaker 1: joking about like, hey, let's have a nice friendly name 348 00:21:24,200 --> 00:21:26,920 Speaker 1: for this one, like death Star. So they're just they're 349 00:21:26,920 --> 00:21:31,840 Speaker 1: playing games with people's livelihood essentially, and lives you can 350 00:21:31,880 --> 00:21:36,160 Speaker 1: make a case as well. Um, So three of those 351 00:21:36,200 --> 00:21:41,080 Speaker 1: traders played guilty. Jeffrey Richter, John Forney, and Timothy Belden 352 00:21:41,440 --> 00:21:45,640 Speaker 1: were three of those traders who manipulated California's energy market UM, 353 00:21:45,680 --> 00:21:49,560 Speaker 1: costing the state between forty and forty five billion dollars 354 00:21:49,560 --> 00:21:56,280 Speaker 1: in retrospect of unnecessary UM electrical prices and costs. All Right, 355 00:21:56,359 --> 00:21:58,880 Speaker 1: so in Ron is doing great, they're making a lot 356 00:21:58,920 --> 00:22:01,920 Speaker 1: of money. Um, And we should point out that this 357 00:22:02,000 --> 00:22:05,320 Speaker 1: is just you know, Ricochet was just one little scheme. 358 00:22:05,359 --> 00:22:10,680 Speaker 1: They had all sorts of schemes along the way to uh, 359 00:22:10,680 --> 00:22:14,760 Speaker 1: well we'll we'll get to those, um. Between two thousand one, 360 00:22:14,800 --> 00:22:17,560 Speaker 1: like as far as the stock market world was concerned, 361 00:22:17,600 --> 00:22:20,800 Speaker 1: and run was a darling. Uh Fortune named them I 362 00:22:20,800 --> 00:22:25,119 Speaker 1: think six years straight America's most innovative company, every single 363 00:22:25,200 --> 00:22:27,760 Speaker 1: year in a row. But what was going on behind 364 00:22:27,840 --> 00:22:33,240 Speaker 1: the scenes is these ideas and these investments and uh, 365 00:22:33,560 --> 00:22:36,040 Speaker 1: schemes that they had. You know, some of them made money, 366 00:22:36,080 --> 00:22:38,560 Speaker 1: but a lot of them didn't make any money at all, 367 00:22:38,600 --> 00:22:41,840 Speaker 1: and they just became really really good at hiding that fact. Yes, 368 00:22:43,080 --> 00:22:47,080 Speaker 1: that was the whole thing. Like they were very innovative. 369 00:22:47,200 --> 00:22:49,200 Speaker 1: They were ahead of their time in a lot of ways. 370 00:22:49,240 --> 00:22:53,639 Speaker 1: Like they got into building broadband high speed internet access 371 00:22:53,640 --> 00:22:56,480 Speaker 1: in like two thousand or two thousand one something like that, 372 00:22:57,240 --> 00:22:59,640 Speaker 1: and this was I looked it up. It wasn't until 373 00:22:59,680 --> 00:23:03,640 Speaker 1: two thousand seven that half of all US Internet users 374 00:23:03,680 --> 00:23:07,359 Speaker 1: had broadband, so this was way ahead it's time. And 375 00:23:07,400 --> 00:23:10,679 Speaker 1: then also they also got into the video on demand market. 376 00:23:10,680 --> 00:23:14,239 Speaker 1: They tried to partner with Blockbuster um and this was 377 00:23:14,600 --> 00:23:18,719 Speaker 1: these things were basically like the progenitor of Zoom and Netflix. 378 00:23:19,080 --> 00:23:21,080 Speaker 1: But these guys were trying this in two thousand and 379 00:23:21,119 --> 00:23:25,040 Speaker 1: two thousand one, so it's visionary. The problem is they 380 00:23:25,080 --> 00:23:28,040 Speaker 1: were ahead of their time. The infrastructure wasn't there that that, 381 00:23:28,280 --> 00:23:31,840 Speaker 1: the I think the customer base even wasn't there. So 382 00:23:31,880 --> 00:23:34,920 Speaker 1: there's stuff that they were doing wasn't making money, which 383 00:23:34,960 --> 00:23:37,240 Speaker 1: is not bad in and of itself. What was bad 384 00:23:37,320 --> 00:23:40,000 Speaker 1: was when they were covering it up and the schemes 385 00:23:40,040 --> 00:23:44,880 Speaker 1: that they used to cover it up. Are so um 386 00:23:44,920 --> 00:23:49,320 Speaker 1: involved in complex but also so fascinating that they would 387 00:23:49,359 --> 00:23:51,320 Speaker 1: they would have the audacity to do this because there's 388 00:23:51,359 --> 00:23:54,280 Speaker 1: no there's no fudging it, there's no like, oh, this 389 00:23:54,320 --> 00:23:59,119 Speaker 1: is kind of questionable. This was just fleecing all of 390 00:23:59,160 --> 00:24:02,040 Speaker 1: their investors, all of their employs, fleecing the entire world. 391 00:24:02,040 --> 00:24:05,120 Speaker 1: There was a handful of executives at and Ron who 392 00:24:05,119 --> 00:24:07,600 Speaker 1: were fleecing the entire world to the tune of tens 393 00:24:07,800 --> 00:24:11,080 Speaker 1: intens in tens of billions of dollars every year in 394 00:24:11,160 --> 00:24:17,000 Speaker 1: revenue that apparently didn't actually exist. Yeah, it's pretty clear 395 00:24:17,040 --> 00:24:19,720 Speaker 1: that at certain point they lost their way and that 396 00:24:19,880 --> 00:24:23,720 Speaker 1: they weren't as concerned about being a company that made money, 397 00:24:23,880 --> 00:24:26,560 Speaker 1: and the only thing that mattered was that as a 398 00:24:26,560 --> 00:24:31,280 Speaker 1: corporation was that they kept their stock price high because 399 00:24:31,320 --> 00:24:34,240 Speaker 1: that's where that's where all the money was they had 400 00:24:34,280 --> 00:24:36,359 Speaker 1: as long as they could keep that stock price high 401 00:24:36,640 --> 00:24:41,840 Speaker 1: and keep shareholders, especially their employees, encouraging their employees to 402 00:24:41,880 --> 00:24:44,520 Speaker 1: get you know, get paid in company stock, like use 403 00:24:44,600 --> 00:24:47,040 Speaker 1: every penny of your paycheck that you can to buy 404 00:24:47,040 --> 00:24:50,439 Speaker 1: this company's stock. Because and en Ron stock was was soaring, 405 00:24:50,480 --> 00:24:53,080 Speaker 1: it was doing really, really well, and all the while 406 00:24:53,520 --> 00:24:54,919 Speaker 1: it was you know, it's called pump and dump. They 407 00:24:54,920 --> 00:24:57,200 Speaker 1: would drive up the value of their stock and then 408 00:24:57,240 --> 00:24:59,520 Speaker 1: the upper echelon and you see this time and time 409 00:24:59,560 --> 00:25:02,960 Speaker 1: again in the corporate world, the CEOs and the CFOs 410 00:25:03,000 --> 00:25:05,720 Speaker 1: and the upper management of the one who then sell 411 00:25:05,760 --> 00:25:09,919 Speaker 1: off their stock and walk away with you know, some 412 00:25:10,040 --> 00:25:13,600 Speaker 1: of them hundreds of millions of dollars. Uh. And you 413 00:25:13,640 --> 00:25:16,159 Speaker 1: know some of the schemes that you talked about was 414 00:25:16,280 --> 00:25:19,920 Speaker 1: they found ways to move debt around. Uh. We mentioned 415 00:25:20,400 --> 00:25:23,080 Speaker 1: Fastyle was one of their hires, and he was hired 416 00:25:23,119 --> 00:25:25,600 Speaker 1: I think his late twenties, early thirties, and quickly rose 417 00:25:25,680 --> 00:25:29,720 Speaker 1: up the ranks to CFO. And he started a company 418 00:25:30,640 --> 00:25:35,320 Speaker 1: called L s M, which stood for Leah, Jeffrey and Matthew, 419 00:25:35,400 --> 00:25:38,600 Speaker 1: which are named after his wife and kids. Sort of ironically. 420 00:25:39,040 --> 00:25:41,920 Speaker 1: It was like such a sweet tribute to them. And 421 00:25:42,080 --> 00:25:44,880 Speaker 1: the only purpose of this company was to have all 422 00:25:44,960 --> 00:25:48,520 Speaker 1: kinds of sort of little sub companies that would absorb 423 00:25:48,800 --> 00:25:51,440 Speaker 1: the debt and where they could move debt around from 424 00:25:51,560 --> 00:25:54,919 Speaker 1: en Ron to make it invisible to the shareholders, so 425 00:25:54,960 --> 00:25:57,360 Speaker 1: they could prove on a balance sheet that you had 426 00:25:57,359 --> 00:25:59,560 Speaker 1: this money coming in. And the way of you know, 427 00:25:59,600 --> 00:26:02,560 Speaker 1: people in vesting in the company, but then you're hiding 428 00:26:02,840 --> 00:26:06,040 Speaker 1: the losses and so everyone thinks you're doing great. So 429 00:26:06,200 --> 00:26:08,959 Speaker 1: the way that I saw it explained, Investipedia actually has 430 00:26:09,000 --> 00:26:11,000 Speaker 1: a couple of really good articles about this that are 431 00:26:11,080 --> 00:26:13,679 Speaker 1: just wonky enough to like understand it, but also not 432 00:26:13,760 --> 00:26:15,520 Speaker 1: so wonky that you're just like, I have no idea 433 00:26:15,600 --> 00:26:18,320 Speaker 1: what I'm reading um. And the way they put it 434 00:26:18,359 --> 00:26:22,080 Speaker 1: was basically, if Enron had, like a good example is 435 00:26:22,119 --> 00:26:24,320 Speaker 1: they build a power station in India that was a 436 00:26:24,400 --> 00:26:28,119 Speaker 1: huge loss. It was just a generally bad idea, and 437 00:26:28,160 --> 00:26:30,520 Speaker 1: they sunk billions and millions of dollars into this power 438 00:26:30,600 --> 00:26:33,959 Speaker 1: station and without realizing any money whatsoever. I think they 439 00:26:34,000 --> 00:26:38,040 Speaker 1: abandoned it before it even came online. They would take 440 00:26:38,080 --> 00:26:41,600 Speaker 1: this and sell it to one of these special purpose 441 00:26:41,880 --> 00:26:46,320 Speaker 1: vehicles or special purpose entities, which was a tangentially related 442 00:26:46,359 --> 00:26:51,160 Speaker 1: company that the company Enron was not on the hook 443 00:26:51,320 --> 00:26:55,119 Speaker 1: to pay off its debts for right, and they would 444 00:26:55,200 --> 00:26:58,199 Speaker 1: take that, and then that special purpose vehicle would go 445 00:26:58,240 --> 00:27:02,400 Speaker 1: out and try to sell it, sell that terrible toxic 446 00:27:02,520 --> 00:27:10,560 Speaker 1: asset um, and they would use Enron stock as the collateral. Right. 447 00:27:11,280 --> 00:27:14,480 Speaker 1: And because Enron stock was just through the roof. Everybody 448 00:27:14,560 --> 00:27:16,280 Speaker 1: was saying, sure, we'll give you a loan. Sure we'll 449 00:27:16,320 --> 00:27:18,000 Speaker 1: give you some money for that terrible idea of a 450 00:27:18,000 --> 00:27:21,080 Speaker 1: power plant that you abandoned because you're backing in up 451 00:27:21,080 --> 00:27:24,240 Speaker 1: with Enron stock. And as long as the time that 452 00:27:24,240 --> 00:27:27,280 Speaker 1: that stock came do was far enough away, and as 453 00:27:27,320 --> 00:27:30,399 Speaker 1: long as Enron stock kept going up, this house of 454 00:27:30,440 --> 00:27:33,040 Speaker 1: cards could be held together. But that's not at all 455 00:27:33,080 --> 00:27:36,280 Speaker 1: how it worked. The upshot of it is that they 456 00:27:36,280 --> 00:27:39,600 Speaker 1: could take toxic assets, move them off of their books 457 00:27:39,640 --> 00:27:43,280 Speaker 1: to these special purpose entities, and then they would take 458 00:27:43,400 --> 00:27:46,760 Speaker 1: the money that the special purpose entities would go borrow 459 00:27:46,920 --> 00:27:50,480 Speaker 1: against like that that toxic asset, and they would count 460 00:27:50,600 --> 00:27:54,639 Speaker 1: that on their books as revenue. So they were hiding debt, 461 00:27:55,320 --> 00:27:59,560 Speaker 1: boosting their revenues to just ridiculous um heights for stuff 462 00:27:59,600 --> 00:28:02,200 Speaker 1: that just should not have been counted as revenue. Yeah, 463 00:28:02,240 --> 00:28:04,680 Speaker 1: and just to be clear, they didn't invent the special 464 00:28:04,680 --> 00:28:09,280 Speaker 1: purpose entity. And an SPE is not some evil creation 465 00:28:09,359 --> 00:28:12,159 Speaker 1: in and of itself. It is uh, it's an entity 466 00:28:12,200 --> 00:28:15,600 Speaker 1: that a lot of corporations and businesses use. Where it's 467 00:28:15,640 --> 00:28:18,560 Speaker 1: just it's sort of like has a very um narrow 468 00:28:18,600 --> 00:28:21,440 Speaker 1: purpose in that they create this thing when they might 469 00:28:21,920 --> 00:28:24,320 Speaker 1: use it to purchase an asset or move an asset, 470 00:28:24,680 --> 00:28:26,600 Speaker 1: so the company as a whole may not be on 471 00:28:26,640 --> 00:28:29,479 Speaker 1: the hook. Uh if anything goes wrong. It sort of 472 00:28:29,480 --> 00:28:32,399 Speaker 1: mitigates risks. So it's not some evil purpose in and 473 00:28:32,400 --> 00:28:35,800 Speaker 1: of itself. But they were manipulating these such and starting 474 00:28:35,840 --> 00:28:39,760 Speaker 1: all of these things under Fastiles guidance with his LSM 475 00:28:40,120 --> 00:28:42,760 Speaker 1: sort of sub corporation, and eventually l s M two. 476 00:28:42,840 --> 00:28:46,960 Speaker 1: I think, uh that they were making I think they 477 00:28:47,040 --> 00:28:53,680 Speaker 1: hit ninety dollars in August of two thousand. Uh, market 478 00:28:53,760 --> 00:28:57,160 Speaker 1: cap of the whole company, it's seventy billion, which made 479 00:28:57,160 --> 00:29:01,160 Speaker 1: it the seventh largest publicly traded company any in the 480 00:29:01,200 --> 00:29:06,000 Speaker 1: world at that point. Yeah. Um, so that's a market 481 00:29:06,000 --> 00:29:10,360 Speaker 1: cap of seventy billion. Remember in the first year that 482 00:29:10,480 --> 00:29:15,680 Speaker 1: posted losses of fourteen million. Within fifteen years, they posted 483 00:29:15,720 --> 00:29:22,200 Speaker 1: revenue of one hundred billion dollars billion dollars in fifteen in. Yeah, 484 00:29:22,240 --> 00:29:24,840 Speaker 1: in sales in fifteen years. That's what happened to that 485 00:29:24,920 --> 00:29:28,400 Speaker 1: company when they brought Jeffrey Skilling on board. Jeffrey Skilling 486 00:29:28,400 --> 00:29:31,680 Speaker 1: brought Andrew fast Ole onboard, and people just started going 487 00:29:31,800 --> 00:29:35,280 Speaker 1: nuts making money anyway they could. Yeah, The other thing 488 00:29:35,280 --> 00:29:38,560 Speaker 1: we should mention too is another uh sort of slick trick, 489 00:29:39,240 --> 00:29:42,880 Speaker 1: is that Skilling's idea and they got approval and I 490 00:29:42,920 --> 00:29:46,680 Speaker 1: wasn't clear how or where this approval comes from, but 491 00:29:46,800 --> 00:29:50,480 Speaker 1: to use something called mark to market accounting, which is 492 00:29:50,480 --> 00:29:55,360 Speaker 1: basically when you can where you can rate the financial 493 00:29:55,560 --> 00:30:00,400 Speaker 1: health of your company based on uh, that's the arise, 494 00:30:00,520 --> 00:30:04,840 Speaker 1: but just on a future earnings basically and not necessarily 495 00:30:04,840 --> 00:30:08,959 Speaker 1: what they're worth that day, so and to anticipated future 496 00:30:09,040 --> 00:30:12,640 Speaker 1: value instead of its purchase costs. UM, did you get 497 00:30:12,680 --> 00:30:14,520 Speaker 1: how that they were approved because it seemed like they 498 00:30:14,520 --> 00:30:16,920 Speaker 1: were all like super psyched that they got approval for 499 00:30:17,000 --> 00:30:19,320 Speaker 1: mark a market accounting. Yeah, that would have been the 500 00:30:19,440 --> 00:30:24,200 Speaker 1: sec the Securities and UM Securities Exchange Commission, UM, who 501 00:30:24,280 --> 00:30:27,920 Speaker 1: would have given that approval. And just like a special purposentity, 502 00:30:28,240 --> 00:30:31,960 Speaker 1: mark a market accounting is it's totally legitimate, it's recognizes 503 00:30:32,400 --> 00:30:37,680 Speaker 1: generally accepted accounting principle. But there's a lot of room 504 00:30:37,800 --> 00:30:43,520 Speaker 1: for temptation to just basically say this deal with Blockbuster, Um, 505 00:30:43,560 --> 00:30:45,320 Speaker 1: we haven't made a penny off of it, but we 506 00:30:45,360 --> 00:30:49,760 Speaker 1: can we can cite the future earnings from it now 507 00:30:50,240 --> 00:30:53,720 Speaker 1: now that we booked this deal and I think it 508 00:30:53,760 --> 00:30:57,920 Speaker 1: will probably we worth a billion dollars just a total 509 00:30:58,000 --> 00:31:00,560 Speaker 1: gas And you're not supposed to do it like that. 510 00:31:00,560 --> 00:31:03,320 Speaker 1: You're supposed to do it much more realistically and legitimately. 511 00:31:03,720 --> 00:31:06,280 Speaker 1: But they had enough leeway that they were able to 512 00:31:06,280 --> 00:31:09,000 Speaker 1: take mark to market accounting and use it to their 513 00:31:09,040 --> 00:31:11,280 Speaker 1: to their benefit in that way, and in doing that, 514 00:31:11,360 --> 00:31:15,880 Speaker 1: they pumped up their their revenues through the roof. Like 515 00:31:15,960 --> 00:31:18,120 Speaker 1: the deal would just be inked. They wouldn't have seen 516 00:31:18,120 --> 00:31:19,600 Speaker 1: a penny from it, and they would add it to 517 00:31:19,640 --> 00:31:22,600 Speaker 1: their balance sheets as revenue. Yeah, it would become part 518 00:31:22,600 --> 00:31:25,640 Speaker 1: of the ledger before like a real penny was made exactly, 519 00:31:25,640 --> 00:31:27,840 Speaker 1: and sometimes the pennies weren't made. And if the pennies 520 00:31:27,880 --> 00:31:30,720 Speaker 1: weren't made, don't forget, those debts would be moved to 521 00:31:30,760 --> 00:31:34,080 Speaker 1: a special purpose entity so they wouldn't have these toxic 522 00:31:34,120 --> 00:31:37,320 Speaker 1: assets on their books, even though they very much owned 523 00:31:37,680 --> 00:31:42,320 Speaker 1: and were indebted for these toxic assets. Still, yeah, I mean, 524 00:31:43,000 --> 00:31:46,040 Speaker 1: like I said, these were brilliant people and like they 525 00:31:46,040 --> 00:31:49,200 Speaker 1: had all their bases covered except for the fact that 526 00:31:49,440 --> 00:31:53,160 Speaker 1: we all know that a house of cards will eventually fall. Uh. 527 00:31:53,160 --> 00:31:57,200 Speaker 1: It's that hubrist thing that just blinds people into thinking 528 00:31:57,280 --> 00:31:59,920 Speaker 1: that it will always like when that when that kind 529 00:32:00,080 --> 00:32:03,480 Speaker 1: money is rolling in. I think it blinds certain people 530 00:32:03,560 --> 00:32:08,640 Speaker 1: so much that they don't understand a who it's hurting 531 00:32:08,680 --> 00:32:11,480 Speaker 1: at the time, or they don't care, or they think 532 00:32:11,480 --> 00:32:13,960 Speaker 1: it's always going to be rolling in like this, or 533 00:32:14,040 --> 00:32:17,240 Speaker 1: they think, hey, I'm gonna get mine now. Because there 534 00:32:17,240 --> 00:32:19,560 Speaker 1: were people in in Ron I mean there we'll talk 535 00:32:19,560 --> 00:32:22,760 Speaker 1: about whistleblower that eventually sort of came out and a 536 00:32:23,880 --> 00:32:26,560 Speaker 1: journalists who are poking around, But there were people that 537 00:32:26,680 --> 00:32:29,760 Speaker 1: started looking at this company, the darling of Wall Street 538 00:32:29,760 --> 00:32:32,760 Speaker 1: and saying something's not right here, like something's not adding up, 539 00:32:33,040 --> 00:32:37,160 Speaker 1: Like you can't even explain how your cash flows through 540 00:32:37,200 --> 00:32:39,760 Speaker 1: your business in a way that makes any kind of 541 00:32:39,760 --> 00:32:44,320 Speaker 1: coherent sense. And anytime they were confronted with this Skilling 542 00:32:44,360 --> 00:32:47,600 Speaker 1: and the his cronies would they would get very haughty 543 00:32:47,640 --> 00:32:49,480 Speaker 1: about it and just be like, well, what do you 544 00:32:49,520 --> 00:32:52,240 Speaker 1: mean we can't explain that? Like, sure we can, it's 545 00:32:52,280 --> 00:32:56,000 Speaker 1: really easy. You just can't understand. You just can't understand. 546 00:32:56,040 --> 00:32:59,720 Speaker 1: It makes your blood boil. Let's let's take a breaking 547 00:32:59,720 --> 00:33:02,440 Speaker 1: the I'm back and talk about the downfall. How about that? Yeah, 548 00:33:02,520 --> 00:33:27,280 Speaker 1: the downfall? Sk as skof should know, okay, Chuck. So 549 00:33:27,760 --> 00:33:30,680 Speaker 1: one question that people might be asking is how were 550 00:33:30,720 --> 00:33:34,320 Speaker 1: these guys allowed to use this accounting and get away 551 00:33:34,360 --> 00:33:37,479 Speaker 1: with it? Why were people even investing in buying shares 552 00:33:37,520 --> 00:33:41,080 Speaker 1: of this this company UM when it was just so 553 00:33:41,200 --> 00:33:45,520 Speaker 1: fraudulent and and just ridiculously fraudulent to not even subtly fraudulent. 554 00:33:46,120 --> 00:33:50,240 Speaker 1: And the answer is the the company was such a 555 00:33:50,280 --> 00:33:54,960 Speaker 1: Wall Street darling that financial analysts would not understand what 556 00:33:55,040 --> 00:33:58,160 Speaker 1: they were hearing on these earnings reports, but would still 557 00:33:58,160 --> 00:34:01,960 Speaker 1: give it a stamp of like buy um. The other 558 00:34:02,000 --> 00:34:04,920 Speaker 1: thing that really really helped was the banks. Wall Street 559 00:34:04,960 --> 00:34:08,120 Speaker 1: banks were very much complicit in this as well. And 560 00:34:08,160 --> 00:34:11,480 Speaker 1: then the thing that helped the most was Arthur Anderson, 561 00:34:11,840 --> 00:34:18,240 Speaker 1: the venerable eighty plus year old um accounting firm. Yeah, 562 00:34:18,400 --> 00:34:22,359 Speaker 1: that was the third party accountant to Enron. Was so 563 00:34:22,440 --> 00:34:27,480 Speaker 1: cozy that they actually hired all of Enron's internal auditing staff, 564 00:34:28,000 --> 00:34:31,160 Speaker 1: made them Arthur Anderson's staff, and then opened a hundred 565 00:34:31,200 --> 00:34:35,840 Speaker 1: and fifty person office for Enron in Enron's own in 566 00:34:36,160 --> 00:34:40,359 Speaker 1: Enron's headquarters, and Arthur Anderson office in Enron's headquarters made 567 00:34:40,440 --> 00:34:45,440 Speaker 1: up a former Enron auditors. That's who was watching the show, 568 00:34:45,680 --> 00:34:49,680 Speaker 1: and so Arthur Anderson had such a good reputation that 569 00:34:49,800 --> 00:34:52,160 Speaker 1: because they were signing off on this, because the Wall 570 00:34:52,200 --> 00:34:55,080 Speaker 1: Street analysts are saying yeah to buy, people were just like, 571 00:34:55,320 --> 00:34:57,920 Speaker 1: I'm buying, I'm buying. And it kept the stock prices 572 00:34:57,960 --> 00:35:01,000 Speaker 1: going up and up and up because nobody was paying 573 00:35:01,480 --> 00:35:04,960 Speaker 1: attention enough. Yeah, there was one person in the dock 574 00:35:05,080 --> 00:35:07,879 Speaker 1: that said that kind of crystallize it, which was like, 575 00:35:08,520 --> 00:35:11,520 Speaker 1: I'm paraphrasing, but he was talking about the fact that 576 00:35:11,560 --> 00:35:14,160 Speaker 1: when this kind of stuff pops up in corporations, like, 577 00:35:15,160 --> 00:35:18,520 Speaker 1: it's not like this. The in runs are everywhere. There 578 00:35:18,600 --> 00:35:22,040 Speaker 1: is all kinds of mouthfeasance, for sure in the corporate world. 579 00:35:22,040 --> 00:35:25,720 Speaker 1: But he basically said, somewhere along the way, it doesn't 580 00:35:25,760 --> 00:35:29,240 Speaker 1: get this big because a legal team says you can't 581 00:35:29,239 --> 00:35:32,160 Speaker 1: do this, or your accountants say you can't do this, 582 00:35:32,320 --> 00:35:34,799 Speaker 1: or the bank say we can't get involved in this. 583 00:35:35,400 --> 00:35:38,200 Speaker 1: And in Ron seemed to be one of those sort 584 00:35:38,239 --> 00:35:43,319 Speaker 1: of unicorns where every person along the way just zip 585 00:35:43,400 --> 00:35:46,000 Speaker 1: their mouth shut even though the numbers weren't adding up, 586 00:35:46,000 --> 00:35:49,680 Speaker 1: and was complicit in this right um. And there was 587 00:35:49,719 --> 00:35:52,000 Speaker 1: a trader that was interviewed in the documentary who said 588 00:35:52,120 --> 00:35:56,120 Speaker 1: like it was ironic that um and Ron's slogan was 589 00:35:56,160 --> 00:35:58,759 Speaker 1: asked why, like why why does something happen like that? 590 00:35:58,800 --> 00:36:00,640 Speaker 1: Why can't we do it that way? And that this 591 00:36:00,719 --> 00:36:03,160 Speaker 1: trader said, I didn't ask myself why, I because I 592 00:36:03,200 --> 00:36:06,600 Speaker 1: didn't want to know. I suspected things were weird or ryan. 593 00:36:06,680 --> 00:36:09,000 Speaker 1: I just didn't want to know because it was my job. 594 00:36:09,080 --> 00:36:11,080 Speaker 1: I was making tons of money. And I think you 595 00:36:11,080 --> 00:36:13,560 Speaker 1: could probably get that excuse out. It's just about anybody 596 00:36:13,560 --> 00:36:17,360 Speaker 1: who was complicited in this large or small um. But 597 00:36:17,480 --> 00:36:20,160 Speaker 1: Arthur Anderson that was the one that really really helped 598 00:36:20,160 --> 00:36:22,840 Speaker 1: things along. And as we'll see, they didn't manage to 599 00:36:22,880 --> 00:36:25,520 Speaker 1: survive the scandal. Yeah, they were Oh man, there was 600 00:36:25,560 --> 00:36:28,040 Speaker 1: that one part of the documentary where they were talking 601 00:36:28,040 --> 00:36:32,719 Speaker 1: about uh fast Ols, you know, shell companies, and he 602 00:36:32,800 --> 00:36:34,879 Speaker 1: was in a meeting that was secretly taped and they're 603 00:36:34,880 --> 00:36:37,919 Speaker 1: basically like, well, wait a minute, it looks like you're 604 00:36:37,920 --> 00:36:42,120 Speaker 1: on the buying and selling sides of these transactions. And 605 00:36:42,160 --> 00:36:46,200 Speaker 1: he was like, yeah, basically, but I've always got Ellen 606 00:36:46,280 --> 00:36:50,719 Speaker 1: Jay's interest at heart, and the whole time he's skimming money. 607 00:36:50,800 --> 00:36:53,680 Speaker 1: And they believed that skilling and lay knew that, like, hey, 608 00:36:53,840 --> 00:36:56,600 Speaker 1: I'm sure that fast Ours is skimming money off the 609 00:36:56,600 --> 00:36:59,480 Speaker 1: top for himself, but who cares because this guy is 610 00:36:59,520 --> 00:37:02,279 Speaker 1: taking care of business for us exactly. And I think 611 00:37:02,360 --> 00:37:06,000 Speaker 1: he skimmed about thirty five million dollars for himself from 612 00:37:06,080 --> 00:37:08,799 Speaker 1: he stole from Mron and they looked the other way 613 00:37:08,840 --> 00:37:12,560 Speaker 1: because the stuff he was doing was so unethical, so 614 00:37:12,680 --> 00:37:16,560 Speaker 1: illegal that he basically earned it as far as they 615 00:37:16,560 --> 00:37:19,120 Speaker 1: were concerned to have his hand in the in the 616 00:37:19,120 --> 00:37:22,319 Speaker 1: cookie jar like that. So, um, I think you kind 617 00:37:22,320 --> 00:37:24,239 Speaker 1: of mentioned there were some people who were like, wait, 618 00:37:24,280 --> 00:37:27,080 Speaker 1: what's going on here. One of the first people was 619 00:37:27,320 --> 00:37:30,560 Speaker 1: Bethanie McClain, the journalists who ended up writing the Smartest 620 00:37:30,560 --> 00:37:33,759 Speaker 1: Guys in the Room. She is awesome. She started out 621 00:37:33,760 --> 00:37:36,840 Speaker 1: writing a story for Fortune magazine back in March of 622 00:37:36,840 --> 00:37:41,239 Speaker 1: two thousand one titled is Enron Overpriced? And she was 623 00:37:41,400 --> 00:37:44,560 Speaker 1: one of the first people to publicly say how is 624 00:37:44,680 --> 00:37:47,759 Speaker 1: Enron making its money? But she wasn't the first to 625 00:37:47,840 --> 00:37:51,000 Speaker 1: hit on this. Um. There's another guy named Jim Chanos 626 00:37:51,480 --> 00:37:56,279 Speaker 1: of um Kinkos um Securities, I think maybe, and I 627 00:37:56,320 --> 00:37:59,960 Speaker 1: think he's in the documentary, but he started shorting Enron 628 00:38:00,400 --> 00:38:05,360 Speaker 1: in two thousand because he noticed very simply their cost 629 00:38:05,400 --> 00:38:08,440 Speaker 1: of capital, so the cost of doing business was more 630 00:38:08,840 --> 00:38:13,000 Speaker 1: than the return on investment, which automatically means that they 631 00:38:13,040 --> 00:38:17,040 Speaker 1: were not a profitable company, which totally was contradicted by 632 00:38:17,080 --> 00:38:20,399 Speaker 1: all of their earnings reports and filings. And he saw 633 00:38:20,440 --> 00:38:23,360 Speaker 1: this and he said, this is this is this is 634 00:38:23,400 --> 00:38:26,399 Speaker 1: not right, and I'm going to start making money off 635 00:38:26,440 --> 00:38:29,840 Speaker 1: of the future downfall of this company and made hundreds 636 00:38:29,840 --> 00:38:32,520 Speaker 1: and hundreds of millions of dollars shorting and Ron stock 637 00:38:32,600 --> 00:38:37,160 Speaker 1: starting in two thousand. Yeah. The whistle blower two was 638 00:38:37,400 --> 00:38:42,560 Speaker 1: um An executive. Main name Sharon Watkins, and she pops 639 00:38:42,640 --> 00:38:44,520 Speaker 1: up a lot in the documentary obviously is key to 640 00:38:44,560 --> 00:38:49,040 Speaker 1: the story. Uh. She didn't whistle blow while this was 641 00:38:49,080 --> 00:38:51,120 Speaker 1: all going on. It was sort of after the ship 642 00:38:51,200 --> 00:38:55,240 Speaker 1: started sinking. Uh. But we'll talk a little bit about 643 00:38:55,320 --> 00:38:57,840 Speaker 1: how that all happened where she ended up. Um but 644 00:38:58,200 --> 00:39:02,879 Speaker 1: what happened in August one. Uh Skilling had replaced lay 645 00:39:02,960 --> 00:39:05,880 Speaker 1: as CEO in February of that year, and in August 646 00:39:05,880 --> 00:39:09,800 Speaker 1: fourte Skilling out of nowhere, and he had just taken 647 00:39:09,800 --> 00:39:12,359 Speaker 1: the reins, you know, a handful of months before he 648 00:39:12,800 --> 00:39:15,840 Speaker 1: uh Skilling quits out of nowhere, he resigns. Uh, he 649 00:39:15,920 --> 00:39:20,279 Speaker 1: stided personal reasons, And what was going on was the 650 00:39:20,880 --> 00:39:24,839 Speaker 1: you know, the Titanic sprung a leak, and as they 651 00:39:24,840 --> 00:39:27,640 Speaker 1: described in the documentary, he was one of the first 652 00:39:27,760 --> 00:39:31,360 Speaker 1: rats to to try and get off the sinking ship. Yeah. 653 00:39:31,480 --> 00:39:35,760 Speaker 1: And it's like, if you are a CEO of a 654 00:39:35,880 --> 00:39:39,600 Speaker 1: huge company, you don't just leave like that. That is 655 00:39:39,640 --> 00:39:42,719 Speaker 1: an enormous red flag. There's like a whole process and 656 00:39:42,760 --> 00:39:46,640 Speaker 1: procedure for finding your replacement, grooming them, introducing him to 657 00:39:46,680 --> 00:39:49,000 Speaker 1: the to the rest of the world. Um, you don't 658 00:39:49,040 --> 00:39:51,520 Speaker 1: just leave like that. And that was such a red 659 00:39:51,560 --> 00:39:54,520 Speaker 1: flag that that whistle blower, UM, what's her name is, 660 00:39:54,560 --> 00:40:00,319 Speaker 1: Sharon Watkins. She um wrote an anonymous letter Delay basically saying, Hey, 661 00:40:00,680 --> 00:40:03,160 Speaker 1: there's a lot of fishy stuff going on around here, 662 00:40:03,520 --> 00:40:08,399 Speaker 1: and now that Skilling suddenly departed, Um, like everyone's going 663 00:40:08,440 --> 00:40:10,560 Speaker 1: to start having questions in this whole house of cards 664 00:40:10,640 --> 00:40:14,759 Speaker 1: is going to fall and um, Lay apparently didn't do 665 00:40:14,840 --> 00:40:17,480 Speaker 1: much about it, and she came to Lay later on 666 00:40:17,560 --> 00:40:20,279 Speaker 1: and said, I'm the person who wrote that anonymous letter, 667 00:40:20,320 --> 00:40:24,720 Speaker 1: and I'm really concerned about this, and ended up trying 668 00:40:24,760 --> 00:40:26,960 Speaker 1: to keep it in the company because I think I 669 00:40:27,000 --> 00:40:30,400 Speaker 1: get the impression that she thought it was something, especially 670 00:40:30,400 --> 00:40:33,600 Speaker 1: now that Skilling was gone, that could be resolved internally. 671 00:40:33,680 --> 00:40:39,239 Speaker 1: I think she really underestimated the extensiveness of the corruption 672 00:40:39,760 --> 00:40:43,239 Speaker 1: and um yeah at the company and thought it was 673 00:40:43,280 --> 00:40:46,360 Speaker 1: a few people when really it was a large cadre 674 00:40:46,400 --> 00:40:49,439 Speaker 1: of people who all were complicit in this. And UM, 675 00:40:49,719 --> 00:40:52,799 Speaker 1: I get the impression that's why she didn't really um 676 00:40:52,840 --> 00:40:56,800 Speaker 1: blow the whistle publicly at that point. Um. But apparently 677 00:40:56,920 --> 00:41:00,200 Speaker 1: ken Ley, once he found out that it was Aaron 678 00:41:00,239 --> 00:41:03,319 Speaker 1: Watkins um consulted legal counsel to figure out how to 679 00:41:03,360 --> 00:41:07,520 Speaker 1: fire her legally. Yeah. Uh. The same day that uh, 680 00:41:08,000 --> 00:41:11,279 Speaker 1: Skilling resigned on August fourteenth, the broadband division that we 681 00:41:11,320 --> 00:41:14,440 Speaker 1: talked about earlier reported a hundred and thirty seven million 682 00:41:14,480 --> 00:41:17,920 Speaker 1: dollar loss analysts, and we should point out to as 683 00:41:17,920 --> 00:41:21,200 Speaker 1: far as the analysts go, they were always installing friendly 684 00:41:21,200 --> 00:41:24,720 Speaker 1: analyst and only working with friendly analysts. But they finally 685 00:41:24,760 --> 00:41:28,000 Speaker 1: got the clue they dropped their ratings for the stock. Uh. 686 00:41:28,080 --> 00:41:31,319 Speaker 1: The end came very very swiftly for en ron Um. 687 00:41:31,480 --> 00:41:35,880 Speaker 1: On October twelve, Arthur Anderson's I mean you still remember 688 00:41:35,880 --> 00:41:38,000 Speaker 1: all the shredding jokes on Late Night TV that ran 689 00:41:38,040 --> 00:41:43,000 Speaker 1: for months and months. Arthur Anderson's legal counsel said, everybody 690 00:41:43,120 --> 00:41:46,879 Speaker 1: shred everything, destroy every file that you have on en Ron. 691 00:41:47,320 --> 00:41:52,200 Speaker 1: And in one day they shredded literally one ton of paper. Yeah, 692 00:41:52,239 --> 00:41:55,360 Speaker 1: and that was just one day. They apparently shredded around 693 00:41:55,360 --> 00:41:58,680 Speaker 1: the clock from October twenty two to November eight, and 694 00:41:58,760 --> 00:42:01,760 Speaker 1: that was just one ton one day. They shredded literal 695 00:42:01,920 --> 00:42:05,520 Speaker 1: tons of documents, just shred, shred, shred. If you're an 696 00:42:05,520 --> 00:42:08,040 Speaker 1: executive at Anderson, you were probably working a late night 697 00:42:08,120 --> 00:42:12,120 Speaker 1: shift shredding alongside everybody else. Um. It was like that. 698 00:42:12,440 --> 00:42:14,320 Speaker 1: And it was apparently at a time where you could 699 00:42:14,480 --> 00:42:19,879 Speaker 1: legally do that and not be you know, indicted for it. Um. 700 00:42:19,920 --> 00:42:22,279 Speaker 1: But that was not a good look when it came 701 00:42:22,320 --> 00:42:26,840 Speaker 1: out that Arthur Anderson was the auditors of this company 702 00:42:27,000 --> 00:42:30,200 Speaker 1: were shredding tons of documents, and the SEC got w 703 00:42:30,200 --> 00:42:32,000 Speaker 1: into this and they said that they're going to start 704 00:42:32,040 --> 00:42:36,359 Speaker 1: investigating finally the special purpose entities that fast Out had 705 00:42:36,520 --> 00:42:40,000 Speaker 1: had set up, and so Enron fired fast Out that 706 00:42:40,080 --> 00:42:44,239 Speaker 1: same day. And I think that was in November or 707 00:42:44,320 --> 00:42:49,000 Speaker 1: late October of two thousand, two thousand one, and um, 708 00:42:49,239 --> 00:42:53,279 Speaker 1: right after that on November eight and Ron said, Hey, everybody, 709 00:42:54,560 --> 00:42:56,960 Speaker 1: do you remember all of our all that money we 710 00:42:57,000 --> 00:43:00,799 Speaker 1: said we made going back to We're gonna need to 711 00:43:00,880 --> 00:43:04,120 Speaker 1: restate our earnings. One of one of the first things 712 00:43:04,160 --> 00:43:07,200 Speaker 1: they did was they reported a six hundred and eighteen 713 00:43:07,239 --> 00:43:11,600 Speaker 1: million dollar loss for Q three of two thousand one 714 00:43:13,000 --> 00:43:15,920 Speaker 1: Q one. They pro they posted a four hundred and 715 00:43:16,000 --> 00:43:19,759 Speaker 1: six million dollar profit Q two, four hundred and four 716 00:43:19,800 --> 00:43:23,240 Speaker 1: million dollar profit, Q three a six hundred and eighteen 717 00:43:23,239 --> 00:43:26,840 Speaker 1: million dollar loss. So they finally came clean. They finally said, 718 00:43:27,120 --> 00:43:31,720 Speaker 1: this accounting is off, and this is how radically it's off. Yeah, 719 00:43:32,000 --> 00:43:34,920 Speaker 1: I mean that is uh if a company is restating 720 00:43:35,520 --> 00:43:39,359 Speaker 1: their earnings for that period of time right at all, 721 00:43:39,440 --> 00:43:41,600 Speaker 1: Like mistakes can happen, but that's a that's a real 722 00:43:41,800 --> 00:43:47,799 Speaker 1: bad sign. Um. They almost got a lifeline in I 723 00:43:47,800 --> 00:43:50,040 Speaker 1: guess late October of that year when they tried to 724 00:43:51,000 --> 00:43:55,920 Speaker 1: merge with a company called Dyna g Incorporated, and that deal, 725 00:43:56,840 --> 00:44:00,200 Speaker 1: that deal fell apart on November they backed out of 726 00:44:00,239 --> 00:44:03,719 Speaker 1: the deal Dyna Gy did and then what what is this? 727 00:44:03,800 --> 00:44:07,759 Speaker 1: Four days later on December two, in Ron filed for 728 00:44:07,840 --> 00:44:12,400 Speaker 1: the largest Chapter eleven bankruptcy in US history up to 729 00:44:12,440 --> 00:44:16,680 Speaker 1: that time, sixty five point five billion dollar company UM 730 00:44:16,680 --> 00:44:19,400 Speaker 1: filed for bankruptcy. That just did not happen. If you 731 00:44:19,480 --> 00:44:22,279 Speaker 1: had that that kind of money, you could have a 732 00:44:22,320 --> 00:44:24,759 Speaker 1: fire sale and sell off stuff for way less than 733 00:44:24,800 --> 00:44:27,319 Speaker 1: you paid for it, but you could still survive. And 734 00:44:27,360 --> 00:44:29,600 Speaker 1: that just goes to show you, like just how fraudulent 735 00:44:29,680 --> 00:44:32,520 Speaker 1: this company was. They couldn't have a fire sale and 736 00:44:32,600 --> 00:44:35,160 Speaker 1: make up that kind of UM. That kind of the 737 00:44:35,320 --> 00:44:38,440 Speaker 1: debt that they owed I think was seventy two billion 738 00:44:38,440 --> 00:44:41,080 Speaker 1: dollars I think in debt that they finally UM were 739 00:44:41,120 --> 00:44:43,480 Speaker 1: found to have owed. And at the time it was 740 00:44:43,520 --> 00:44:45,719 Speaker 1: the biggest UM. In two thousand and eight we saw 741 00:44:45,760 --> 00:44:49,839 Speaker 1: what big really was. Lehman Brothers for example, UM had 742 00:44:50,000 --> 00:44:53,000 Speaker 1: six hundred and thirty nine billion dollars in assets when 743 00:44:53,000 --> 00:44:55,719 Speaker 1: it filed for bankruptcy and went under. But at the 744 00:44:55,800 --> 00:44:59,440 Speaker 1: time and Ron was like eye popping as far as 745 00:44:59,480 --> 00:45:04,320 Speaker 1: bankruptcy these went for corporations. Can you imagine the wave 746 00:45:04,480 --> 00:45:10,040 Speaker 1: of relief that swept through dyna Gy Incorporated. Yeah, when 747 00:45:10,160 --> 00:45:14,520 Speaker 1: the particular bankruptcy a few days later after they backed out. Yeah, 748 00:45:14,520 --> 00:45:17,640 Speaker 1: that one just off hand conversation at the vending machine 749 00:45:17,680 --> 00:45:22,560 Speaker 1: over a packet of checks mix like save Dynagy forever. 750 00:45:22,960 --> 00:45:25,160 Speaker 1: You know, this seems like a bad deal to me. 751 00:45:25,239 --> 00:45:28,440 Speaker 1: Crunch Crunch right, and Dynagy, by the way, went on 752 00:45:28,480 --> 00:45:34,200 Speaker 1: to become Apple. Uh So the fallout from this, uh, 753 00:45:34,239 --> 00:45:38,080 Speaker 1: there are a lot of victims. Twenty thousand employees. Twenty 754 00:45:38,280 --> 00:45:44,040 Speaker 1: thousand employees lost their job. And how how long did 755 00:45:44,080 --> 00:45:45,520 Speaker 1: they have to get out? What? What is saying the 756 00:45:45,880 --> 00:45:47,759 Speaker 1: day I think they had the day? I think it 757 00:45:47,800 --> 00:45:49,440 Speaker 1: was less than that. I feel like it was hours 758 00:45:49,520 --> 00:45:52,960 Speaker 1: or something. Basically, pack your s and get out of 759 00:45:53,000 --> 00:45:57,560 Speaker 1: here everybody. And like literally this huge tall building has 760 00:45:57,719 --> 00:46:00,720 Speaker 1: thousands of people just leaving all day with anchors boxes 761 00:46:00,800 --> 00:46:03,480 Speaker 1: with their contents of their desk in it, like the 762 00:46:03,560 --> 00:46:08,680 Speaker 1: ultimate movie troupe Um. Every employee that had been told 763 00:46:08,760 --> 00:46:12,319 Speaker 1: for years and years, hey, you gotta invest everything you 764 00:46:12,360 --> 00:46:16,560 Speaker 1: can in that for because en Ron is I mean, 765 00:46:16,600 --> 00:46:19,439 Speaker 1: look at the stock we're going places and that money 766 00:46:19,440 --> 00:46:24,040 Speaker 1: will be safe there. They obviously lost almost everything. There 767 00:46:24,080 --> 00:46:26,239 Speaker 1: was a you know, the rank and file employees that 768 00:46:26,320 --> 00:46:28,800 Speaker 1: was one in the documentary that said he had about 769 00:46:28,920 --> 00:46:32,120 Speaker 1: close to three fifty dollars in stock that he ended 770 00:46:32,200 --> 00:46:37,120 Speaker 1: up dumping for twelve hundred dollars. Uh. They froze the 771 00:46:37,200 --> 00:46:41,000 Speaker 1: stock accounts of the ranking file while upper management was 772 00:46:41,040 --> 00:46:45,520 Speaker 1: actively still cashing out. Yeah, that was a really scummy move. 773 00:46:45,719 --> 00:46:49,279 Speaker 1: They I'm sure, purposefully changed for one K providers in 774 00:46:49,280 --> 00:46:51,880 Speaker 1: the midst of all this. And when you do that, 775 00:46:52,080 --> 00:46:55,280 Speaker 1: it's there's a minimum thirty day freeze as you transfer 776 00:46:55,360 --> 00:47:00,800 Speaker 1: assets over, so these poor employees couldn't sell their shares. 777 00:47:00,840 --> 00:47:04,799 Speaker 1: Like you said, Wow, the executives were making tens and 778 00:47:04,800 --> 00:47:09,240 Speaker 1: tens of millions of dollars worth of of option trades. Yeah, 779 00:47:09,480 --> 00:47:11,400 Speaker 1: I mean, it's just mind boggling. That to me is 780 00:47:11,400 --> 00:47:14,440 Speaker 1: probably the worst part of the whole thing. Well, and 781 00:47:14,520 --> 00:47:17,680 Speaker 1: you know, tie with that, their severange package averaged about 782 00:47:17,760 --> 00:47:22,280 Speaker 1: four thousand, five dollars for the average employees, while management 783 00:47:22,320 --> 00:47:26,280 Speaker 1: bonuses totaled more than fifty five million. And that's just bonuses, 784 00:47:26,400 --> 00:47:30,799 Speaker 1: that's not cashing out stocks. Uh. And Livia, who helped 785 00:47:30,880 --> 00:47:34,720 Speaker 1: us put this together, great job on this article, pointed 786 00:47:34,760 --> 00:47:37,560 Speaker 1: out something like other fallout like you never even think about, 787 00:47:37,600 --> 00:47:40,160 Speaker 1: which was en Ron was a very big investor and 788 00:47:40,200 --> 00:47:44,400 Speaker 1: donor and local nonprofits in Houston, and all of a sudden, 789 00:47:44,480 --> 00:47:46,439 Speaker 1: all that money is cut off and like the Red 790 00:47:46,440 --> 00:47:49,439 Speaker 1: Cross chapter had to cut its budget from twelve million 791 00:47:49,480 --> 00:47:53,360 Speaker 1: dollars to nine million dollars in one year, largely because 792 00:47:54,000 --> 00:47:56,600 Speaker 1: the money dried up from en Ron. So the fallout 793 00:47:57,239 --> 00:47:59,400 Speaker 1: was far and wide. And that's not even mentioning, like 794 00:47:59,440 --> 00:48:03,240 Speaker 1: we're talking about the employees who had stock in the company, 795 00:48:03,400 --> 00:48:06,840 Speaker 1: like every other human being that had just stock in 796 00:48:06,880 --> 00:48:09,040 Speaker 1: and Ron had nothing to do with it, lost all 797 00:48:09,080 --> 00:48:13,000 Speaker 1: their money. Yeah. I mean the stock price was at 798 00:48:13,080 --> 00:48:15,840 Speaker 1: ninety at one point and it dropped down to I 799 00:48:15,880 --> 00:48:21,160 Speaker 1: think forty something since in like a year. Basically. Um So, Yeah, 800 00:48:21,239 --> 00:48:25,000 Speaker 1: the the employees in particular, and the retirees who had 801 00:48:25,040 --> 00:48:28,120 Speaker 1: already left and whose pension funds were just totally evaporated, 802 00:48:28,480 --> 00:48:31,160 Speaker 1: meaning you're gonna have to go get a job as 803 00:48:31,200 --> 00:48:34,920 Speaker 1: a Walmart Greater now because you can't afford anything. Um. 804 00:48:34,960 --> 00:48:37,759 Speaker 1: They are definitely the greatest victims of all this. I 805 00:48:37,800 --> 00:48:41,920 Speaker 1: saw um ken Lay's lawyer afterward, Portray Kenley is the 806 00:48:41,960 --> 00:48:44,879 Speaker 1: greatest victim of all of it, because he apparently lost 807 00:48:44,920 --> 00:48:50,359 Speaker 1: a few hundred million dollars um and he um, I did. 808 00:48:50,520 --> 00:48:53,319 Speaker 1: He didn't say it himself, but he definitely tried to say, like, 809 00:48:53,880 --> 00:48:56,120 Speaker 1: I lost so much money, There's no way I could 810 00:48:56,120 --> 00:48:59,440 Speaker 1: have known what was going on, and that fell on 811 00:48:59,520 --> 00:49:02,200 Speaker 1: deaf or and that same defense was used by Jeffrey 812 00:49:02,200 --> 00:49:04,400 Speaker 1: Skilling too. I didn't know what was going on, and 813 00:49:04,440 --> 00:49:06,359 Speaker 1: so what they tried to do was pin the whole 814 00:49:06,360 --> 00:49:10,000 Speaker 1: thing on Andrew fast Out, who had been fired, who 815 00:49:10,080 --> 00:49:13,960 Speaker 1: had skimmed thirty something million dollars himself, so had proven 816 00:49:14,360 --> 00:49:17,880 Speaker 1: demonstrated he was a criminal. They made it. They tried 817 00:49:17,920 --> 00:49:21,120 Speaker 1: to play like he was a rogue CFO that had 818 00:49:21,160 --> 00:49:23,840 Speaker 1: done all of this under the very nose of Jeffrey 819 00:49:23,840 --> 00:49:26,880 Speaker 1: Skilling and Ken Lay and that they hadn't known. And 820 00:49:26,920 --> 00:49:32,319 Speaker 1: the public, Congress, the courts, juries, everybody said, you have 821 00:49:32,520 --> 00:49:35,520 Speaker 1: to be kidding us. Yeah, And and they were right. 822 00:49:35,920 --> 00:49:38,560 Speaker 1: In the end. Fastile pleading guilty to two counts of 823 00:49:38,600 --> 00:49:42,319 Speaker 1: wire frauds and securities fraud uh in return for being 824 00:49:42,400 --> 00:49:46,160 Speaker 1: a witness against Skilling and Lay I think had a 825 00:49:46,280 --> 00:49:48,440 Speaker 1: tenure sentence for what was going to be a much 826 00:49:48,520 --> 00:49:52,719 Speaker 1: larger sentence, ended up serving five years. Uh, and then 827 00:49:53,239 --> 00:49:57,839 Speaker 1: got out into and started, you know, getting paid as 828 00:49:57,840 --> 00:50:02,520 Speaker 1: a speaker to corporations about business ethics. UH. You know, 829 00:50:02,680 --> 00:50:05,799 Speaker 1: to his credit, I guess twenty years on he he 830 00:50:05,880 --> 00:50:10,560 Speaker 1: came out officially and apologized for everything seems to really 831 00:50:11,040 --> 00:50:14,000 Speaker 1: have turned the corner. UH and learned a lesson, although 832 00:50:14,040 --> 00:50:16,239 Speaker 1: you never knows what is going on in someone's heart 833 00:50:17,000 --> 00:50:20,799 Speaker 1: from the outside. UM. Arthur Anderson completely went away, the 834 00:50:20,800 --> 00:50:26,200 Speaker 1: oldestcounting form accounting firm in the country. UH. Never recovered, 835 00:50:26,560 --> 00:50:30,360 Speaker 1: completely folded and went out of business. UH. The Sarbanes 836 00:50:30,400 --> 00:50:34,160 Speaker 1: Oxley Act was enacted basically because of Enron in two 837 00:50:34,200 --> 00:50:38,240 Speaker 1: thousand two, which was UH. And I remember I remembered 838 00:50:38,360 --> 00:50:40,759 Speaker 1: years ago when we were working in our early days 839 00:50:40,760 --> 00:50:43,239 Speaker 1: at how stuff works, there was a lot of like 840 00:50:43,280 --> 00:50:47,560 Speaker 1: Sarbanes Oxley talk. Uh. Do you remember that stuff? Yeah, 841 00:50:47,600 --> 00:50:50,560 Speaker 1: because they came up with the Frank Dodd Um Act 842 00:50:50,800 --> 00:50:55,759 Speaker 1: to to basically undo or combat against future stuff from 843 00:50:55,800 --> 00:50:58,480 Speaker 1: the two thousand and eight financial crisis. This was the 844 00:50:58,520 --> 00:51:02,560 Speaker 1: same thing six years here, Like Enron was had such 845 00:51:02,560 --> 00:51:04,840 Speaker 1: a huge effect that they passed the law that basically, 846 00:51:04,880 --> 00:51:08,799 Speaker 1: point for point outlawed all the stuff that Enron had done. 847 00:51:08,960 --> 00:51:11,440 Speaker 1: They did the same thing with the Dodd Frank Actor. 848 00:51:11,520 --> 00:51:14,200 Speaker 1: They tried to UH. And of course, you know, certain 849 00:51:14,239 --> 00:51:17,879 Speaker 1: people say Sarbanes oxually has no real teeth anymore because 850 00:51:17,960 --> 00:51:22,080 Speaker 1: they're not even funding the oversight that they promised. Other people, 851 00:51:22,520 --> 00:51:25,359 Speaker 1: you know, the die hard free marketers will say it's 852 00:51:25,360 --> 00:51:29,400 Speaker 1: actually too restrictive. Uh, we're not able to be competitive 853 00:51:29,440 --> 00:51:32,120 Speaker 1: anymore because you've got all these rules now to make 854 00:51:32,160 --> 00:51:35,399 Speaker 1: sure we're not defraunding people of billions of dollars. Yeah, 855 00:51:35,440 --> 00:51:40,719 Speaker 1: you're making it hard to exploit people. So um, there 856 00:51:40,800 --> 00:51:43,560 Speaker 1: was actually convictions like this is crazy. And one of 857 00:51:43,560 --> 00:51:45,839 Speaker 1: the heartening things, Chuck is if you watch like these 858 00:51:45,840 --> 00:51:50,719 Speaker 1: congressional hearings on this um, people from both sides of 859 00:51:50,719 --> 00:51:55,120 Speaker 1: the aisle are grilling these guys. No one was apologizing 860 00:51:55,160 --> 00:51:57,719 Speaker 1: to them for their you know, their colleague from the 861 00:51:57,719 --> 00:52:00,640 Speaker 1: other side of the aisle asking you know me questions. 862 00:52:01,120 --> 00:52:04,680 Speaker 1: Everyone was mad at these guys. The whole world hated 863 00:52:04,719 --> 00:52:08,239 Speaker 1: Jeffrey Skilling and Ken Lay and Andrew fast Out. He 864 00:52:08,360 --> 00:52:11,960 Speaker 1: was smug up there man answering those questions in the 865 00:52:11,960 --> 00:52:14,560 Speaker 1: face of all that, he was still so smug about it. 866 00:52:14,880 --> 00:52:17,600 Speaker 1: I looked up whether he ever apologized, and I could 867 00:52:17,640 --> 00:52:20,880 Speaker 1: not find it. I don't think Jeffrey Skilling ever apologized. 868 00:52:20,920 --> 00:52:24,440 Speaker 1: To think, he went throughout his entire time in prison 869 00:52:24,480 --> 00:52:27,600 Speaker 1: basically saying like he was a victim, that this was unfair, 870 00:52:28,320 --> 00:52:30,800 Speaker 1: but he was imprisoned. He was an executive that was 871 00:52:30,840 --> 00:52:34,040 Speaker 1: in prison. That just does not happen lately. Um. He 872 00:52:34,080 --> 00:52:38,759 Speaker 1: was convicted of nineteen counts frog conspiracy, insider trading. He 873 00:52:38,880 --> 00:52:41,640 Speaker 1: got twenty four years in prison and ended up serving twelve, 874 00:52:42,440 --> 00:52:48,200 Speaker 1: which is I mean, yeah, that sucks, but no, for sure, 875 00:52:48,280 --> 00:52:51,880 Speaker 1: that's a long time to do in the clink. Um. 876 00:52:51,960 --> 00:52:54,840 Speaker 1: And then ken Lay he was convicted on ten counts, 877 00:52:55,200 --> 00:52:57,120 Speaker 1: but he wasn't able to be sentenced because he died 878 00:52:57,160 --> 00:53:00,479 Speaker 1: of a heart attack six weeks after being convicted. Um, 879 00:53:00,480 --> 00:53:04,640 Speaker 1: and I think his his conviction was vacated. Yeah, skilling 880 00:53:05,680 --> 00:53:09,680 Speaker 1: uh now is out and works uh and an oil 881 00:53:09,719 --> 00:53:14,640 Speaker 1: and gas analytics startup. Uh. It seems that other people, Um, 882 00:53:14,719 --> 00:53:16,520 Speaker 1: I think we Yeah. I mentioned that Fastile was on 883 00:53:16,560 --> 00:53:21,520 Speaker 1: the speaker circuit um the whistleblower. Um. Miss Watkins was 884 00:53:21,640 --> 00:53:25,400 Speaker 1: named Times UH Person of the Year in two thousand two, 885 00:53:26,280 --> 00:53:29,680 Speaker 1: and I believe is also now a paid speaker and 886 00:53:30,040 --> 00:53:34,560 Speaker 1: executive in residence at Texas State University. And then there 887 00:53:34,680 --> 00:53:38,320 Speaker 1: was a matter of because I was like, uh, Olvia 888 00:53:38,360 --> 00:53:40,120 Speaker 1: didn't get to it. But I was like, well, surely 889 00:53:40,120 --> 00:53:44,600 Speaker 1: there was some sort of um making it right for 890 00:53:44,680 --> 00:53:47,920 Speaker 1: these people. Who lost all this money? Right? Uh? And 891 00:53:47,960 --> 00:53:51,720 Speaker 1: there were lawsuits that came out and settlements that came out. 892 00:53:52,520 --> 00:53:55,120 Speaker 1: Different people ended up being paying different things. I think 893 00:53:55,120 --> 00:53:58,680 Speaker 1: it was a seven point two billion dollar settlement from 894 00:53:58,719 --> 00:54:02,280 Speaker 1: inn Ron Um. I believe the banks were on the hook. 895 00:54:03,200 --> 00:54:04,600 Speaker 1: I can tell if the banks were on the hook 896 00:54:04,640 --> 00:54:06,520 Speaker 1: for some of that or if it was a separate thing. 897 00:54:08,040 --> 00:54:10,600 Speaker 1: I don't know. I saw that they squeezed a total 898 00:54:10,640 --> 00:54:13,040 Speaker 1: of twenty billion out of and Ron before they like 899 00:54:13,160 --> 00:54:16,719 Speaker 1: let it go. Okay, I don't know, but I did 900 00:54:16,719 --> 00:54:18,759 Speaker 1: see the banks were definitely on the hook, but just 901 00:54:18,800 --> 00:54:20,759 Speaker 1: for being complicit. I don't know if that was in 902 00:54:20,880 --> 00:54:24,480 Speaker 1: addition though either Yeah, I think, uh yeah. It says 903 00:54:24,560 --> 00:54:27,160 Speaker 1: right here that the bulk of the settlements, almost seven 904 00:54:27,200 --> 00:54:30,799 Speaker 1: billion of it, came from JP Morgan, Chase City Group, Uh, 905 00:54:30,840 --> 00:54:35,120 Speaker 1: the Canadian Imperial Bank of Commerce, Oh yeah, Lehman Brothers 906 00:54:35,200 --> 00:54:38,200 Speaker 1: chipped in. Bank of America chipped in. The Big five 907 00:54:38,239 --> 00:54:42,120 Speaker 1: auditing firm Arthur Anderson. Of course we talked about they 908 00:54:42,200 --> 00:54:46,160 Speaker 1: chipped in. I think, well, I don't see how they 909 00:54:46,160 --> 00:54:47,720 Speaker 1: could have chipped in it they went out of business, 910 00:54:47,719 --> 00:54:49,920 Speaker 1: but I guess they chipped in before they went out 911 00:54:49,960 --> 00:54:54,080 Speaker 1: of business all right. So, um, you know, if you 912 00:54:54,160 --> 00:54:56,840 Speaker 1: hear the story, especially if you're used to us in 913 00:54:56,880 --> 00:55:00,000 Speaker 1: our podcast, you might be like, well, guys, you didn't 914 00:55:00,040 --> 00:55:03,399 Speaker 1: really get to the other side of the story. There 915 00:55:03,680 --> 00:55:06,600 Speaker 1: is no other side of the story. This is one 916 00:55:06,640 --> 00:55:11,400 Speaker 1: of those rare stories that is basically black and white. 917 00:55:11,480 --> 00:55:16,719 Speaker 1: It was just there's no redemption, there's no explaining it away, 918 00:55:16,760 --> 00:55:20,440 Speaker 1: there's no apologizing for it. It's just it was just 919 00:55:20,480 --> 00:55:23,359 Speaker 1: as wrong as it appears. So that's why we didn't 920 00:55:23,360 --> 00:55:25,960 Speaker 1: include the other side of the story in this one. Yeah, 921 00:55:26,000 --> 00:55:28,600 Speaker 1: I don't think there's anyone out there who's who's going 922 00:55:28,640 --> 00:55:31,359 Speaker 1: to bat for Enron. If there's somebody, there's somebody, and 923 00:55:31,360 --> 00:55:35,200 Speaker 1: they will leave it on our Apple reviews right, totally 924 00:55:35,200 --> 00:55:40,920 Speaker 1: will didn't get a fair shake from these totally Hitler 925 00:55:41,040 --> 00:55:44,480 Speaker 1: or Satan. You got anything else? I got nothing else. 926 00:55:45,120 --> 00:55:47,440 Speaker 1: Uh well, I don't have anything else either. If you 927 00:55:47,480 --> 00:55:50,240 Speaker 1: want to know more about Enron, go watch the Smartest 928 00:55:50,239 --> 00:55:52,719 Speaker 1: Guys in the Room. Definitely will leave you wanting more. 929 00:55:53,080 --> 00:55:56,839 Speaker 1: And there's plenty to read about, including some great contemporary 930 00:55:56,960 --> 00:55:59,919 Speaker 1: articles all over the Internet. And since I said content 931 00:56:00,000 --> 00:56:06,520 Speaker 1: a prairie instead of contemporanius, it's time for listener mail. Uh. 932 00:56:06,560 --> 00:56:08,359 Speaker 1: This is a little wordy, but it's it's We don't 933 00:56:08,400 --> 00:56:10,799 Speaker 1: often do UM shoutouts and tributes, but this was a 934 00:56:10,840 --> 00:56:14,359 Speaker 1: really special one, so we're doing it. Hey, guys, this 935 00:56:14,400 --> 00:56:18,279 Speaker 1: is from Gavin, recent college graduate and history enthusiast, and 936 00:56:18,320 --> 00:56:21,439 Speaker 1: Gavin says, I've been listening since I was fifteen, over 937 00:56:21,480 --> 00:56:24,520 Speaker 1: seven years now. My mom was the one who introduced 938 00:56:24,560 --> 00:56:26,680 Speaker 1: me to the show, and we've both been listeners ever since. 939 00:56:27,080 --> 00:56:29,239 Speaker 1: I'm pretty sure she listens every episode that you guys 940 00:56:29,280 --> 00:56:32,000 Speaker 1: put out. My mom was also the person who imparted 941 00:56:32,000 --> 00:56:35,000 Speaker 1: a thirst for knowledge and learning in me as a child. 942 00:56:35,560 --> 00:56:37,279 Speaker 1: I've had great many teachers in my life, and I'm 943 00:56:37,360 --> 00:56:39,640 Speaker 1: very thankful for them, but my mom has always been 944 00:56:39,640 --> 00:56:42,320 Speaker 1: my greatest encouragement and my role model as a student 945 00:56:42,360 --> 00:56:45,200 Speaker 1: and as a person. Over the past four years in 946 00:56:45,239 --> 00:56:47,960 Speaker 1: college and directly after, I got really busy, moved twelve 947 00:56:48,000 --> 00:56:51,040 Speaker 1: hours from home, and it meant I stopped listening to podcast, 948 00:56:51,120 --> 00:56:55,319 Speaker 1: including you guys. I know, more importantly, also lost touch 949 00:56:55,360 --> 00:56:58,080 Speaker 1: with my mom. I didn't completely ghost or anything, but 950 00:56:58,160 --> 00:57:00,360 Speaker 1: I still did not reach out to her nearly as 951 00:57:00,440 --> 00:57:03,080 Speaker 1: much as I wanted to or needed to. But often 952 00:57:03,160 --> 00:57:04,880 Speaker 1: when I eventually would, she would ask me if I 953 00:57:04,920 --> 00:57:07,840 Speaker 1: listen to stuff you should know recently, and she'd have 954 00:57:07,880 --> 00:57:10,560 Speaker 1: an episode to recommend because I think you'd really enjoyed 955 00:57:10,640 --> 00:57:13,480 Speaker 1: this one. Luckily, now have a job where I'm having 956 00:57:13,480 --> 00:57:16,320 Speaker 1: more flexible hours, and over that time, I've picked stuff 957 00:57:16,320 --> 00:57:19,320 Speaker 1: he should know, back up, re energize my love for knowledge, 958 00:57:19,320 --> 00:57:21,560 Speaker 1: and learned that my mom has given me that was 959 00:57:21,640 --> 00:57:24,439 Speaker 1: my mom had given me years ago. All this to say, 960 00:57:24,480 --> 00:57:26,920 Speaker 1: you guys mean a lot to me and my mother. Uh, 961 00:57:26,960 --> 00:57:28,480 Speaker 1: And I thank you for that. You've helped me stay 962 00:57:28,480 --> 00:57:30,720 Speaker 1: connected to her in a way that I would not 963 00:57:30,800 --> 00:57:34,000 Speaker 1: have been able to do otherwise. I'd just like to 964 00:57:34,040 --> 00:57:37,080 Speaker 1: take this chance to thank my mom. I know you're listening, Mom, 965 00:57:37,480 --> 00:57:40,160 Speaker 1: I know we'll talk about this episode later, And thank 966 00:57:40,160 --> 00:57:42,520 Speaker 1: you for encouraging me and understanding that I love you 967 00:57:43,000 --> 00:57:46,800 Speaker 1: even when I'm not great at communicating it. And boy, 968 00:57:46,840 --> 00:57:50,040 Speaker 1: this one's really pulling at the heartstrings. Every time I 969 00:57:50,040 --> 00:57:51,880 Speaker 1: pick up a book or listen to a podcast or 970 00:57:51,880 --> 00:57:54,320 Speaker 1: write a paper, I think of you, Mom, and I 971 00:57:54,360 --> 00:57:56,960 Speaker 1: know that I always will. I love you, And this 972 00:57:57,040 --> 00:58:02,040 Speaker 1: is the only way I know how to tell you properly. Uh. Kevin, 973 00:58:02,040 --> 00:58:03,680 Speaker 1: you can pick up the phone and saying this stuff 974 00:58:03,720 --> 00:58:07,520 Speaker 1: my friend. Uh, he's back to you. Guys, you got 975 00:58:07,560 --> 00:58:09,800 Speaker 1: a great show. I hope we have many more years 976 00:58:10,120 --> 00:58:13,960 Speaker 1: of remaining learning and growing together. And that lovely, lovely 977 00:58:14,000 --> 00:58:19,680 Speaker 1: sentiment is from Gavin in fayette Ville, Tennessee. That was amazing, Kevin, hatsop, Chuck. 978 00:58:19,800 --> 00:58:23,200 Speaker 1: I totally get why you chose that shout out to 979 00:58:23,240 --> 00:58:25,200 Speaker 1: be the one to break the rule. Yeah, it should 980 00:58:25,200 --> 00:58:29,200 Speaker 1: have been along Mother's Day, around Mother's Day, but well 981 00:58:29,280 --> 00:58:31,640 Speaker 1: we can replay it around Mother's Day first select how 982 00:58:31,640 --> 00:58:36,000 Speaker 1: about that instead it's the end run episode, right. Uh. 983 00:58:36,120 --> 00:58:37,960 Speaker 1: If you want to be like Gavin and just be 984 00:58:38,040 --> 00:58:40,960 Speaker 1: a super great person, but not request to shout out, 985 00:58:41,120 --> 00:58:43,680 Speaker 1: just be a super great person, we want to hear 986 00:58:43,840 --> 00:58:47,000 Speaker 1: from you. Also, while I'm thinking of it, go check 987 00:58:47,040 --> 00:58:51,360 Speaker 1: out our social feeds. They used to suck, now they're great. Also, 988 00:58:51,520 --> 00:58:52,840 Speaker 1: if you want to get in touch with this, like 989 00:58:52,880 --> 00:58:55,360 Speaker 1: I said, you can hit us up via email at 990 00:58:55,440 --> 00:59:01,400 Speaker 1: stuff podcast at iHeart radio dot com. Stuff you Should 991 00:59:01,440 --> 00:59:03,880 Speaker 1: Know is a production of I Heart Radio. For more 992 00:59:03,920 --> 00:59:06,720 Speaker 1: podcasts my heart Radio, visit the i heart Radio app, 993 00:59:06,920 --> 00:59:09,840 Speaker 1: Apple Podcasts, or wherever you listen to your favorite shows, 994 00:59:12,680 --> 00:59:12,720 Speaker 1: h