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Alex Gibney’s Enron:The Smartest Guys in the Room, based on investigative journalist Bethany McLean and Peter Elkind’s non-fiction book is a smart, spirited and essential chronicle of America’s largest white collar crime.


Former Enron CEO Jeff Skilling outside the company’s Houston headquarters.

In 2000 Enron was the world’s seventh largest corporation. In 2001 it became America’s largest corporate bankruptcy. In the months following Enron’s collapse, its key players — Chairman Ken Lay, CEO Jeff Skilling and Andrew Fastow, who masterminded the company’s fraudulent investment vehicles — were paraded across front pages nationwide as their stories, and indictments, unfurled. At the story’s end, pensions were wiped out, fines were assessed, books were written.

Yet even after this media barrage, massive confusion remains about the energy trading company. While most Americans can perhaps recite a vague explanation of what Enron did wrong — something having to do with phony deals, shell companies and stock manipulation — few can accurately discuss what the company actually did during its glory days as an exemplar of the New Economy.

“People don’t want to admit that they still don’t understand Enron,” comments Fortune reporter Bethany McLean, co-author with Peter Elkind of the book Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron. “People think it’s a story about all these complicated financial transactions and most people think, Ugh! But in reality it’s a story about people, and it’s understandable on a very human level.”

Expertly capturing the almost surreal quality of Enron’s corporate culture and the near insane behavior of its leaders, director Alex Gibney’s new film is a compelling human drama, a tale of hubris writ large. And if that were the end of it, I’d recommend Enron: The Smartest Guys in the Room simply for its entertainment and historical value. But when the Bush administration is out there touting Social Security privatization, when deregulation and reliance on the free market are promoted as economic panaceas and when some of the biggest players in Enron’s rigged games were held only minimally accountable, it’s clear that the lessons conveyed by this engrossing and necessary picture are ones we still need to learn.

I sat down with Gibney, a documentary producer and editor whose previous films include, as a producer, The Trials of Henry Kissinger and, as a director, Manufacturing Miracles, and Bethany McLean, whose reporting on Enron was instrumental in the company’s unraveling, in Fortune’s office in midtown Manhattan.


FILMMAKER: It’s interesting that after all this media attention most people still can’t explain what Enron did before it went under. I think there’s an inclination to feel stupid if you don’t understand. But after watching your movie, you realize that it is hard to understand what Enron did because there were a lot of logical incongruities at play there.

ALEX GIBNEY: They were good at that, actually. Jeff Skilling used to say to people, “You guys just don’t get it.” It was a great bluff.

BETHANY MCLEAN: People wouldn’t acknowledge that they didn’t understand [what Enron did]. They would say, “Oh yes, I get it too.” And that’s how the whole thing was perpetuated. You can make an interesting analogy between Enron and the 1990s stock market, because in a lot of ways perception was reality. If you created a buzz and a feeling that the stock would go up, that became its only form of reality, its own form of validation. People would look at a rising stock and say, “Wow, whatever they are doing must be brilliant — look at what the market says about their stock.” And that stock becomes a way to acquire other companies — Enron bought real businesses like Pacific General Electric. And it becomes a way to pay people — Enron employees were paid millions in stock options. It was like a modern-day form of alchemy, where you could make tons of money without taking any risk.

FILMMAKER: A lot of documentary filmmaking is about acquiring footage and “writing” the film later in post. But Alex, here you had a narrative template — the book — going in.

GIBNEY: In a way it’s still the same. I always kept the spirit of the book, but there was no way I was going to tell the vast story that was in the book. Inevitably, depending on whom you talk to, sometimes you have to completely change your narrative in order to accommodate them. It’s much harder in a documentary to impose your will on the material. The film will start to speak to you, tell you what you have to do based on what kinds of material you get and who ends up being compelling. For example, a lot of time was spent in the book on a woman named Rebecca Martin, who is a very interesting character. And ultimately, in this film, she doesn’t make much of an appearance. When we discovered these California trader audiotapes, however, they led us in a whole different direction. Relatively speaking, we spend a lot more time in California [in the movie] than Peter and Bethany did in the book.

Production Format
Sony Cine Alta.
Editing System
Avid Film Composer.
Digital Intermediate Process
Film-out from Arri Laser onto Kodak Estar Negative at Technicolor New York.
Color Correction
Sony XPRI.
FILMMAKER: Alex, what did you feel as a filmmaker that you could do that the book couldn’t do?

GIBNEY: Of course there were the audiotapes. You read those on the printed page — that’s one thing. But when you hear those guys talking like they would in a frat house, joking about California, how they’re just going to take it down and laughing? It’s hearing them laugh hysterically that really gives you the visceral sense of it.

FILMMAKER: How about your collaboration with d.p. Maryse Alberti?

GIBNEY: She is really a visual stylist, and she pushed me. I mean, that’s not my strength, but she pushed me in that direction. There’s a great thing Bethany says at the end of the film about how [Enron executives] didn’t start out as bad people. They started out with dreams, but by the end the dark side was reflected back at them. Enron was a series of reflections, and we emphasize that in the visuals. For example, in the interviews we came up with a way of shooting that really annoyed some people. We would almost always push some sort of reflective surface into the foreground so in the wide shots you would see the subject, but you’d also see the subject reflected in the foreground. And sometimes we would tilt up from the reflection to the interview subject. You had this sense of layers of reality all the time. The other thing we did was try very hard to [interview] people in their habitat so you could see how wealthy they are. A lot of what interested me about Enron was that it was like a movie studio, like a propaganda machine. And so we looked at that to see how that worked, and played with archival footage and some other materials. You know, there are companies that look good — you go into their offices, their offices are clean, they talk a good game, and it looks like they’re going to be able to deliver. And that bit of illusion is something that Enron was great at. There’s something that we had to take out of the film [for time reasons] where they actually constructed a fake trading floor! They had all these people who were secretaries masquerading in effect as traders because [the real trading floor] wasn’t up and running yet. They wanted to show that it was up and running so they just faked it. And they had all the analysts march through it.

FILMMAKER: Tell me about the process of editing the film. What did you learn during the screening process with regards to your audience’s attention span and its comprehension of the financial issues?

GIBNEY: We found out there were places where people just got lost, so we had to make adjustments. But there were other things we discovered that we didn’t really reckon on. We were very insecure about the fact that we were doing a financial story, and early on I think we yukked it up a bit too much. People appreciated the humor, but what people liked about the film is that it was actually grabbing them in the gut in a way that even we didn’t think it would. So we shifted the tone of the film slightly, and it became darker. Also, the ending of the film was [originally] very different. There was one ending that we thought would be the greatest ending in the world, and everyone hated it.

McLEAN: I liked it!

GIBNEY: It was an [interview clip with ex-Enron employee] Amanda Martin. She was trying to reflect on her own role [in the scandal], but people weren’t really prepared to accept that kind of rigorous introspection from her because there was so much anger at the high and mighty for what had been done to [the ordinary] people.

FILMMAKER: How hard was it to get people involved in the case to talk to you?

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GIBNEY: It was very hard to get people to go on camera because [some had] legitimate financial concerns [about being dragged into a pending civil or criminal case]. Their fear went like this: “If somebody sees me in the movie talking about the subject, they’re going to want to depose me. If they depose me, then I’m going to have to protect myself, so I’m going to have to hire a lawyer to advise and coach me on the deposition.” You have the opposing council, and they are trying to get information from you, so you want your lawyer there, and that has a real tangible financial cost. It could be $50,000. I would often argue back, “Look, some of these people are actually quoted on the record in Bethany and Peter’s book. Is anyone going to notice you more than investigators reading the book?” But it was a difficult argument for me to overcome. Usually people came forward — it’s the old trick going back to Seymour Hersh and others — when they were pissed off. For one emotional reason or another they want to tell something. And by and large that’s what happened. Mike Muckleroy, the Valhalla guy, came forward when he saw Ken Lay on Larry King. He wasn’t talking to me, but when he saw Ken Lay come on Larry King and deny any responsibility, he got so furious that he called me up and said, “I’ll talk to you now.” And then there were a lot of people who felt that what went on at Enron was troubling to them and they needed to say something about it, and if I was going to treat it seriously, they wanted to be a part of that expression.

FILMMAKER: How did you go about selecting the music, which is not your conventional documentary underscore?

GIBNEY: I did a TV series a long time ago based on David Halberstam’s book The Fifties, where I tried to use the music of that time as a toe-tapping Greek chorus. employed that [approach] here too. There are some Tom Waits songs, including one at the beginning that nobody can even tell is a song called “What’s He Building in There?” And then there’s Billie Holliday’s “God Bless the Child,” which is a beautiful lilting tune, but it’s maybe the most vicious song about power ever written. “Dear Mr. Fantasy” — that was the Fastow theme. And then there’s Marilyn Manson’s version of “Sweet Dreams,” which I would say is the Skilling theme. In the trader section I could have gone a different way with the music because [the material is] very ominous and disturbing, but I chose music in that section which tries to get you into the vibe of the traders themselves. I used an Oingo Boingo song, “Capitalism,” a Los Straitjackets song, “California Sun,” and I used this Tom Waits song called “Temptation.” Instead of using music to say, “This is bad, this is evil,” I went the other way and said, “Let’s go for a ride with these guys.” It was more ironic, but it also kind of puts you in their place. The song about the bubble, “Love Fool,” that poppy song by the Cardigans, somehow seemed to have that vibe, that complete brainless optimism that characterized the Internet-bubble era.

FILMMAKER: One of the most tantalizing tidbits in the movie is your mention of a meeting at the Peninsula Hotel in Los Angeles in which Ken Lay lobbies for energy deregulation and against price caps and brings a pregubernatorial Arnold Schwarzenegger with him. Will we ever really know what happened at that meeting?

GIBNEY: I don’t know. I suspect what happened — I mean, I don’t think anybody knew yet that he was going to be governor, or even if they knew they were going to run him for governor. But he was a rising political star who was going to support Lay’s position. What would interest me is to know if in that meeting there was any discussion about pinning the blame for the crisis on Davis.

FILMMAKER: Bethany, I imagine that there is a complicated relationship between the business press and the business world. How does the complexity of that affect your ability to report?

McLEAN: The business press got criticized a lot in the wake of Enron for not being sufficiently critical, but it’s a really difficult relationship because corporate America employs armies of highly paid public relations people, and it’s their job to turn the press into an extension of their advertising campaigns. It is really, really difficult to get underneath that. I mean, in any major company — in any minor company! — every employee is told you can’t talk to the press without clearing it with the PR department on pain of death. I may be exaggerating a little bit, but on pain of getting fired! The story most [Enron] employees would have told you is so radically different than the story Enron put out there as the Enron Story, but I don’t know how much you can blame the press for not being able to get that. It’s not as if there were people who were willing to talk. I’d say of 100 phone calls [I made about Enron], 95 percent were mostly positive.

FILMMAKER: If 95 percent of the calls were positive, what made you stick with the story?

McLEAN: I worked on Wall Street right out of college and spent a couple of years in a [mergers-and-acquisitions] department learning how to look at a business and see how a business made money. One of the really apparent things about Enron was that you actually couldn’t figure it out. There were all sorts of financial things that didn’t add up. The game in the 1990s was to report steadily growing earnings per share, and as long as you could do that your stock would go up. It’s still to some extent the game, but Enron had no cash flow. It was just incredibly odd; the cash flow story told a totally different picture than the earnings story did, and nobody was able to explain this huge discrepancy.

The other thing that was really unique to Enron was the degree of promotion that went on there. Some people would say that a CEO’s main job today is selling the stock price, not even running the business. And the 1990s was a promotional decade, but Jeff Skilling was just odd. People describe the meetings that Enron held for analysts and investors as revival meetings. In Enron’s final year he was out there telling people that Enron should be at $126 a share, about 50 percent higher than it was at the time. For a CEO to put a specific target price on his company’s stocks, that’s odd.

GIBNEY: I think one of the reasons that a lot of people in the financial community believed in Enron was because Enron was pitching something that they all wanted to believe. They were real apostles for the totally deregulated free market system. They were saying it works exactly as the economists at University of Chicago designed it. Just let it run, and it’ll run by itself and it’ll run great. It didn’t work out that way.

FILMMAKER: It’s hard to walk away from the movie believing that all the blame belongs to Skilling, Lay and Fastow. There was an awful lot of complicity on the part of the investment banks and the accountants.

GIBNEY: Enron couldn’t have done it alone. But it was a weird complicity because everybody disclaimed any responsibility. If you have everybody involved, then nobody’s responsible. That was the beauty of the system. That was something that came back at me from The Trials of Henry Kissinger. Seymour Hersh talks about Kissinger and the assassination of the Chilean general. He says that nobody would even go into a briefing with Kissinger and mention anything about any specific action. That’s not the way it works. Kissinger communicates his displeasure with a particular individual, and that’s all that needs to be said. And the details of what happens, he doesn’t want to know and they don’t want to tell him. I think that’s how it happened with [Andy] Fastow too. Nobody wanted to know the details of what Fastow was doing, but the board gave him permission to create these things. It was a whole system of diffusing accountability. You can see Skilling in those hearings. He’d say, “Arthur Anderson signed off, the lawyers signed off, they all signed off.” It’s like, “I don’t need to take responsibility.”

FILMMAKER: That’s the part that left me enraged, because you see the reforms that haven’t happened and you see the people still standing who on a certain level are guilty.

GIBNEY: I agree. By and large I think the bankers got off pretty easy. If you look at it from a business standpoint, from a risk-reward ratio, all of these banks were fined, but the fines generally were roughly equivalent to the fees they made. That’s a risk-reward ratio you’ll take any day. It is kind of shocking.

FILMMAKER: Bethany, did you originally suspect that there was that level of institutional complicity at work?

McLEAN: I was too naïve at that point. Back then, if you had asked me when I wrote my first story about Enron, Is the company going to go bankrupt? I would have said no! That there could be accountants, bankers, lawyers and the board of directors [and the company could still go under] — I wouldn’t have believed it. I think that we’re all a lot less naïve than we were then, but I’m not sure that’s entirely a good thing. In a way it’s good to believe in the system.

FILMMAKER: Why do you say that?

McLEAN: I think our capital markets to a large degree work on faith. They work on the faith that things are at least relatively transparent, that people are telling you the truth, and that the safeguards and checks and balances work the way they’re supposed to. The accountants do their job, and when they sign off on financial statements, the financial statements can be relied upon. I think if you take away that faith, you take away a lot of the power of the American market.

FILMMAKER: At the moment with Social Security reform, the individual investor, or individual citizen, is suddenly being thrust into the mind-set that they may have to know more about the capital markets in order to plan for their retirement.

McLEAN: And maybe that’s one way that it is a really good thing for the debunking to happen, because during the 1990s individual investors were sold a bill of goods that they were on equal footing with big Wall Street firms, that the stock market was as open to individuals as it was to big firms. And the Enron story makes it really clear that’s not true. People know things that they’re not telling you. Big investors know things that you as an individual investor will never know. You’ll never have access to that vast well of gossip on Wall Street about which stocks you should short because they’re dangerous. The institutional community knows, but you with your little Social Security account, will anyone ever tell you that [information]?

GIBNEY: No way.

McLEAN: And so I guess in a way you can argue that it’s good that we lost that naïveté, but it’s still a shame! It would be nice if it were the way it’s supposed to be, right?


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