[Vision2020] Film About Enron

[Tbertruss at aol.com]

All:

Did our media serve us as a watchdog for corruption and fraud in the 
corporate world regarding the Enron disaster?  And we are being told that the media is 
liberal and leftist?  If so, how could Enron get away with what it was doing, 
with all those liberal leftist journalists dying to bring the greedy 
capitalists down by exposing their corruption and fraud?  Interesting how this article 
mentions "pre-scandal" Wall Street.  As if corruption and scandal has not 
always been a part of Wall Street?

Read below.

Ted Moffett


http://moneycentral.msn.com/content/invest/extra/P116763.asp


Film review

Enron: From Wall Street darling to disaster movie
 
The documentary, 'Enron: The Smartest Guys in the Room,' doesn't really dig 
up any new dirt on the Enron scandal, but it still manages to be a sobering and 
sometimes startling reminder of just how out of control the heady bubble days 
were.

By Kim Khan

The documentary "Enron: The Smartest Guys in the Room" (playing in selected 
cities) will likely serve as a big, red, flashing warning light for potential 
stock-market investors. But even seasoned players -- and, one hopes, more than 
a few financial journalists -- will take pause as they watch one of the most 
admired companies in the Fortune 500 go bust in less than two months.

The film, directed by Alex Gibney and based on the book of the same name by 
Fortune reporters Bethany McLean and Peter Elkind, offers little new to those 
familiar with Enron's downfall. But the narrative is smooth and the film serves 
as an excellent reminder of just how out of control things could get in 
pre-scandal Wall Street.

A Wall Street darling:

For investors, the most interesting part of the documentary is Enron's rise, 
not its fall. The film stresses that one of Enron's chief goals was to make 
Wall Street fall in love with the company. And it wasn't hard to do. By 
manipulating earnings to show stellar growth and rewarding broker-dealers with 
lucrative investment-banking deals, Enron was popular with the buy side, sell side 
and retail side alike.

The press has to take responsibility for some of that. Seeing shot after shot 
of magazine and newspaper articles celebrating the unstoppable Enron machine 
is disconcerting, considering nobody before McLean's February 2000 article 
really tried to figure out how Enron made money.
    
How Enron slipped by for so long is a little more understandable when we're 
reminded of the hype of the bull market, which the movie does with several 
clips of financial news providers, including CNBC. At least Enron looked like it 
could be making money, by trading energy and selling natural gas -- unlike some 
of the more ephemeral dot-com companies of the period.

Of course, Enron couldn't resist tapping into the Web windfall either, and 
the film does a good job examining its foray into trading broadband. (The 
company also tried to set up a market for trading weather -- possibly even a 
worse-sounding idea than the XFL.) 

The revenue stream of the 'strong buy' rating
The reputation of Wall Street analysts again takes a beating and it's pretty 
clear if it weren't for the spotlight-grabbing star power of tech analysts 
like Henry Blodget, some of those covering Enron would be household names, as 
well. Gibson interviews one analyst fired from Merrill Lynch for not capitulating 
to pressure from Enron executives to slap a "strong buy" rating on the stock. 
Once the analyst is gone, Merrill is rewarded with $50 million in 
investment-banking business by Enron CFO Andy Fastow.

The person who really comes out looking best in "The Smartest Guys" is not 
even mentioned once: New York Attorney General Eliot Spitzer. Although there's 
been some backlash against Spitzer, especially in his zealous pursuit of AIG's 
Hank Greenberg, he's the one who finally took on analyst conflict of interest 
and abuses in the mutual fund industry and at specialist firms.

Spitzer calls AIG a black-box company, something Enron CEO Jeff Skilling 
acknowledged his company was.

"But it is a black box that's growing the wholesale business by about 50% in 
volume and profitability," Skilling told employees at a company meeting in 
February 2001. "That's a good black box."

The merits of Spitzer's charges against AIG can be argued, but accounting 
irregularities have been found. And there's no dispute that there are publicly 
traded companies whose finances are simply incomprehensible to the average 
investor. With nothing but the word of the company and auditors to go by most of 
the time, retail investors can probably use all the help they can get.

Robbing 'Grandma Millie' blind
The film's most compelling segments come from recorded telephone 
conversations between Enron energy traders and from the company's own archives.

Traders manipulating California's power grid and artificially boosting prices 
gloated about fleecing "Grandma Millie" and cheered a wildfire that took out 
power cables. While the vicious comments from traders elicited the biggest 
number of gasps from the audience where I watched the movie, anybody who has been 
around traders or a trading desk won't be astonished.

Traders are there to make money and take pride in using the phrase "by any 
means necessary." They're not particularly concerned about who's on the losing 
end of the trade, as derivatives blowups like the one that bankrupted Orange 
County, Calif., clearly demonstrate. Enron traders exploited the loopholes in 
California deregulation and then set about to create false shortages. There's 
likely still some grudging admiration on Street trading desks for the Enron 
traders' sheer audacity.

The videos from Enron's own collection will also cause a few squirms. At one 
meeting, execs answer with an emphatic "yes" and laugh maniacally when asked 
if employees should put all their 401(k) money into Enron stock. 

Enron also made a satire of its own mark-to-market accounting, where Skilling 
said they were moving to "hypothetical future value accounting" so they could 
add a "kazillion dollars" to the bottom line. It also seems like a 
double-bluff on Skilling's part, as if he were preparing a legal defense.

"Would I be dumb enough to joke about this on video if I knew it was actually 
going on?" he asks.

We'll see at the trial of Skilling and Ken Lay in 2006.
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