Enron: The Smartest Guys in the Room Page #11

Jeffery Skilling

outside and inside

during his appearance

at Commonwealth Club.

One of the protestors even

brought a blueberry pie

and delivered it herself.

Police!

A hundred and thirty two

million dollars is what he made.

We had a fifty percent hike

in utility rates.

Consumers in California

are angry.

And they should be.

And if we had anything

to do with this,

then we are the stupidest

people in the world.

I work for an organization.

Every day people call saying

they can't pay their

electricity bills!

You made millions of dollars

off of California...

Get out! Go to jail.

When the tidal

wave of public anger

started to grow

Ken Lay flew out here

and convened

a meeting of friends

and I guess he had a little

more foresight than we did.

He, he invited

Arnold Schwarzenegger.

Brought them together

at the Peninsula Hotel

and had a lunch meeting.

The notes from that meeting

really still have never surfaced,

but we know that

Ken Lay's pitch was

we've got to stay the course

with deregulation and

the market will correct itself

and everything will

turn out fine.

Now at... at the time

we didn't understand

really why he was so concerned.

But now we do.

The fact is that

Ken Lay was out here

because he understood that

Enron itself was

a house of cards

And if deregulation

were to collapse,

then Enron itself

would collapse.

But Ken Lay had a trump card.

In the midst of the energy

crisis his friend,

George W. Bush,

became president

I, George Walker Bush,

do solemnly swear.

I, George Walker Bush,

do solemnly swear.

Ken Lay's going to be

Secretary of Energy.

Get out of here.

How great would that be for

all the players in the market?

Lt'd be great.

I'd love to see Ken Lay be

Secretary of Energy.

Ken Lay did have easy access

to the Bush administration.

On April 17th,

he met with Vice

President Dick Cheney,

and strongly argued

against the imposition of

Federal price caps

in California.

We're doing everything

we can to help in California

on the short term basis.

There's not a lot you can do.

You can't manufacture kilowatts

in the West wing of

the White House.

We're fighting with both hands

tied behind our back.

We no longer have

the power to stop this.

If the federal government

doesn't help us,

we're a dead duck.

At the time,

Gray Davis was a likely candidate

to run for president.

Ken Lay knew that might give

his friend George Bush

a political reason

to oppose California's

appeals for federal

price controls.

They know full well

my administration's belief

that price controls will not

solve the problem.

His view was that

the Federal government

really shouldn't get involved.

This is California's problem.

And I'm saying,

'with all due... due respect,

Mr. President, our law said

the Federal government

regulates this,

so it is your problem.

And you make appointments to the

Federal Deregulatory Commission.

So, we had a polite,

but spirited discussion on that.

And he says,

'I just can't be of help

to you on that. '

As I said from the very beginning

of my administration,

we'll work to help California,

in any way we can.

And the best way we can is

to be good citizens.

FERC, the federal agency which

regulates energy in America,

refused to intervene.

What was FERC doing and why

was it not taking action?

The chairman of FERC

was Pat Wood,

the man Ken Lay had personally

recommended for the job.

It was easy for FERC

to do Enron's bidding

because all it had

to do was do nothing

which they did very well.

Federal Regulators are

being pressured to act

by the now Democratic

controlled Senate where here...

A Democratic Senate forced FERC

to impose regional price caps.

That ended the energy crisis,

but not the political one.

Did Ken Lay and George Bush

have a political agenda to

blame the energy crisis

on Gray Davis?

Oh hello.

It's one of those

'only in California' stories.

The state's unpopular Governor,

Gray Davis,

beset by an ailing economy

and thirty eight billion

dollar budget deficit,

faces possible recall.

And rumored as a possible

replacement for Davis,

movie star

Arnold Schwarzenegger.

The Terminator?

We'll see whether

he's back or not.

Gray Davis has

terminated opportunities

and now it's time

we terminate Gray Davis!

No Recall! No Recall!

Could I predict

a phony energy crisis

as a result of deregulation?

Yes. Could I predict that

Arnold Schwartzerneger

would be our Governor

as a result of deregulation?

Never would have

come up with that.

That's like a bad

science fiction movie.

Apparently we have

all been wrong,

it is pronounced Caly-forn-ya.

Ladies and gentlemen,

the Governor of the great

state of California,

Arnold Schwarzenegger!

We could just hear rumbles

all the way up and down

Main Street here

and all throughout the city

that things were

very difficult at Enron.

One guy who a year before had

come to me and said,

I'm working for Enron,

and was very excited

but within a year

was waking up every night

with nightmares.

'I've got no life left

and I feel like I'm being

consumed by this company. '

As doubts began to surface

about the company

and the erratic

behavior of its CEO

Enron's stock began to fall.

I remember one of

the most poignant meetings

I'd ever had with Jeff.

I had left Enron

and I had come over to

talk about whether or not

I would return to Enron.

And I said, 'Jeff,

you've got a real problem.

The traders,

they will cut your throat,

if they think it will get them

to the trough sooner. '

Jeff was silent.

And he looked out the window

and he looked back

at me and he said,

'Yeah Amanda,

you're most likely right. '

By the end,

the traders ran Enron.

You know, the inmates had

taken over the asylum.

All through the summer,

the stock continued to decline.

There was a buzz that a major

announcement was

going to take place.

But we all thought that

Ken Lay was leaving

Enron and that he had been

asked by the Bush administration

to join his administration.

But that wasn't

the case at all.

It was Jeff Skilling

announcing that

he was stepping down

as the CEO.

And that took everyone

by surprise.

No one could believe that.

CEO's generally,

don't just resign

out of the blue

without a well orchestrated PR

campaign beforehand

to pave the way

so there's no disruptions,

there's no questions,

there's no front page stories,

which is, of course,

exactly what happened.

It was at that point

that I knew,

the architect of

the disaster knows that

it's crumbling and the rat is

leaving the sinking ship.

Two days later

I met with him and Ken Lay

because I had

informed the company

that I was going to

downgrade the stock

on Skilling's resignation.

I asked Jeff Skilling,

'are there any more

shoes to drop.

Have we seen the worst of it. '

And I was concerned

about the energy crisis

that was occurring

in California.

Well, Skilling convinced me

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