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Lecture

Enron Movie

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Department
Philosophy
Course
PHIL 215
Professor
Brian Orend
Semester
Winter

Description
Tuesday, January 10, 2012 Enron: The Smartest Guys in the Room - A movie about how smart and education people can decide to do something ethically questionable and have it blow up in their faces - Jeffery Skilling: former Enron President and CEO - Ken Lay: CEO of Enron - Andrew Fastow: CFO - Financial - Cliff Baxter: committed suicide for the fall of Enron (two gun shots to the head) – 7 weeks after Enron bankruptcy Downfall of Enron: Ken Lay - 7 largest corporation valued at 7 billion dollars - 1985 Ken Lay founded Enron - View of deregulation of taking government out of energy business - Oil trading (like gambling) on whether or not the oil prices will go up or down o Enron always won o Gamblers gambled all of Enron’s money - Taking corporate funds and manipulating earnings Man With Big Ideas: Jeff Skilling - After other man got fired - Transform energy into financial instruments that can be traded as stocks and bonds - Mark to mark accounting treatment: Enron allowed to book potential profits even though actual cash has not been processed (allows manipulation to occur because Enron can say their profits are whatever they say they are) o Even an idea could be booked as profit - PRC: graded from 1-5, everyone had to be a 5 or else they get fired (aggressive culture) - Traders are extremely aggressive at Enron - Jeff Skilling, came across as a smart well put together man, but he was a risk taker. He gambled away his money before the age of twenty in the market Guys With Spikes - Ken Rice: deal maker of Enron - Cliff Baxter: - Lu Pi: CEO of EES Love Me, Love Me - Fixated on the stock price to inform the public that Enron was powerful and profitable - In reality profits were going down o India couldn’t afford for the energy that they were producing o Enron bought it out for millions - They then merged with PGE: to become the largest provider of natural gas and electricity o All PGE became Enron stock (people started doubling money because of it) Love For Sale - Sell bandwidth to other companies and make it a commodity - Enron’s stock rose by 34% in two days - They booked 50 million on a deal that didn’t go through yet (creating the illusion that they are profitable) Tuesday, January 10, 2012 - Fraud started going on but the CEO’s started selling their own stock (Jeff’s idea was wrong) The Emperor Has No Clothes - Stocks plummeted by 31% The Sorcerer’s Apprentice - Andy Fastow - Losing money every year, but the financial statements were showing profits - Enron was 30 billion in debt, but Fastow had to maintain a high stock price - Fastow using Enron’s stock as collateral for the stocks o Big national banks investors agreed to work with Enron - Banks were in the know of these wrongdoings Whabut did not say anything - Nigeria – Ask Why – Asshole - Enron never showed their balance sheets and cashflow statements o When asked about it by an analyst/investor, Skilling called him an asshole Kal lee for nyah - Blackouts in California started occurring - California was the place for Enron to test out the deregulation of electricity o Bizarre compromise (rules were hard and complicated to follow) - Tim Belden – great believer of free markets
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