ALSO BY KURT EICHENWALD THE INFORMANT SERPENT ON THE ROCK CONSPIRACY OF FOOLS Copyright © 2005 by Kurt Eichenwald All rights reserved No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without written permission from the publisher For information, address Broadway Books, a division of Random House, Inc BROADWAY BOOKS and its logo, a letter B bisected on the diagonal, are trademarks of Random House, Inc Visit our website at www.broadwaybooks.com First edition published 2005 Library of Congress Cataloging-in-Publication Data Eichenwald, Kurt, 1961– Conspiracy of fools : a true story / Kurt Eichenwald.—1st ed p cm Enron Corp.—Corrupt practices Energy industries—Corrupt practices—United States Lay, Kenneth L Business failures—United States I Title HD9502.U54E5736 2005 333.79′0973—dc22 2004058216 eISBN: 978-0-7679-1180-1 v3.1 To my parents, Elva Eichenwald and Heinz Eichenwald, Who encouraged me to fight my windmills And cheered me when I won Contents Cover Other Books by This Author Title Page Copyright Dedication Epigraph Author’s Note Prologue Book One - The Wine of Aspiration Chapter Chapter Chapter Chapter Chapter Book Two - Raptors Chapter Chapter Chapter Chapter Chapter Chapter Chapter Chapter 10 11 12 13 Book Three - The Probability of Ruin Chapter Chapter Chapter Chapter Chapter 14 15 16 17 18 Book Four - Shattered Chapter 19 Chapter Chapter Chapter Chapter 20 21 22 23 Epilogue Acknowledgments Notes and Sources Reason dreams of an empire of knowledge, a mansion of the mind Yet sometimes we end up living in a hovel by its side —Heinz R Pagels, The Dreams of Reason If I remember, I predicted fence integrity would fail —The character of Ian Malcolm, in Michael Crichton’s Jurassic Park AUTHOR’S NOTE This narrative account is based on more than a thousand hours of interviews with over a hundred participants in these events as well as a review of tens of thousands of dential corporate and government documents Those include FBI notes of interviews and testimony before federal grand juries, the SEC, and other federal bodies The dialogue comes from those documents and contemporaneous records—including personal diaries—or from the best recollections of participants This, then, is the full story of America’s biggest corporate scandal, one that, in the end, involved events that even now may seem difficult to believe But they’re all real THE CAST OF CHARACTERS and Their Primary Roles WITH THE ENRON CORPORATION, HOUSTON, TEXAS The Top Officers Kenneth Lay, chairman and CEO Jeffrey Skilling, president (1997–2001), CEO (2001) Rich Kinder, president (1989–1996) Greg Whalley, president (2001) In the Finance Division Andrew Fastow, chief financial officer (1998–2001) Michael Kopper, head of special projects Jeffrey McMahon, treasurer (1999–2000), CFO (2001–2002) Ben Glisan Jr., treasurer (2000–2001) Raymond Bowen Jr., treasurer (2001–2002) Jordan Mintz, general counsel Lea Fastow, assistant treasurer Michael Jakubik, vice president Jim Timmins, director, private equity Tim Despain, vice president Bill Brown, vice president The Internal Accountants Richard Causey, chief accounting officer David Woytek, vice president, corporate auditing Rodney Faldyn, vice president, transaction accounting group Ryan Siurek, member, transaction accounting group In Risk Assessment Richard Buy, chief risk officer Vince Kaminski, vice president of research Stinson Gibner, analyst Vasant Shanbhogue, analyst minutes 27 Some details of the full board meeting from Oct and 9, 2001, from the o cial minutes, as well as copies of the full presentations made by Enron Energy Services and Enron North America 28 A copy of Zajac’s Oct 9, 2001, e-mail regarding the results of the FIDO test was obtained by the author 29 Details of the struggle with nance during Kaminski’s absence from notes of the Wilmer, Cutler interviews with Kaminski on Dec 19, 2001, and Shanbhogue on Dec 20, 2001 30 Details of the Oct 10 “current topics” meeting from a videotape of the discussion Also see the agenda, dated Oct 10 and headed “Current Topics Agenda,” and the attendance sign-in sheet for the event 31 Some details of the discussion between Temple and Stewart from Stewart’s 302s from his Feb 8, 2002, FBI interview, and Temple from her Feb 13, 2002, interview Also see Stewart’s May 30, 2002, testimony in U.S v Andersen 32 A copy of Temple’s Oct 12 e-mail to Odom, “Document Rentention Policy,” was obtained by the author Also see the 302 and the SEC’s notes from the Jan 14, 2001, interview with Duncan 33 Duncan described the failed attempts to persuade Causey to drop the term “nonrecurring” from the press release in an Oct 15, 2001, memo to the le Also see the notes of the Wilmer, Cutler interview with Bob Butts, the Enron controller, on Jan 15, 2002, and Duncan’s Oct 13, 2001, e-mail to assorted Andersen o cials, “Press Release Verbage.” 34 Details of Adlong’s morning on Oct 15 from the 302 of her Feb 5, 2002, interview with the FBI 35 Details of the nal discussion between Causey and Duncan from the Oct 15, 2001, memo to the le written by Duncan, “Enron Press Release Discussions.” Also see the Oct 16, 2001, e-mail from Temple to Duncan, “Re: Press Release Draft.” 36 Details of Smith’s morning and her reaction to the Enron release from Smith and Emshwiller, 24 Days, 105–9 Enron’s Oct 16 release was headed “Enron Reports Recurring Third Quarter Earnings of $0.43 per Diluted Share.” 37 Dialogue from the conference call from an official transcript 38 Some details of Emshwiller’s discussion with Palmer from Smith and Emshwiller, 24 Days, 109 39 Smith’s decision to fast-forward through the recorded version of the analyst call from Smith and Emshwiller, 24 Days, 114–15 40 The story by Emshwiller and Smith, “Enron Posts Surprise 3d-Quarter Loss After Investment, Asset Write-Downs,” appeared in The Wall Street Journal on Oct 17, 2001, C1 41 The call from the short seller to Emshwiller, and the way he reacted to it, are described in Smith and Emshwiller, 24 Days, 122 42 A copy of the Oct 17, 2001, fax from the SEC to Rogers and Fastow at Enron was obtained by the author Also see the 302 from the FBI’s Jan 14, 2002, interview with Duncan 43 Some details of the locations of Lay and Causey from Lay’s itinerary, headed “3rd Quarter Analyst Reviews; October 16–19, 2001; Itinerary for Ken Lay.” 44 The short seller call to Smith from Smith and Emshwiller, 24 Days, 129 45 Details of Enron’s reaction upon hearing Smith’s statements about McMahon from the Vinson & Elkins notes from the Oct 18, 2001, interview with McMahon Also see the Batson Report, vol 4, app C, 169 46 The Emshwiller and Smith article, “Enron CFO’s Partnership Had Millions in Pro t,” appeared in The Wall Street Journal on Oct 19, 2001, C1 47 Some details of the Oct 19 special board meeting from the official minutes CHAPTER 20 Some details of the managers’ meeting from the Wilmer, Cutler notes from Kaminski’s Dec 19, 2001, interview Details of Pitt’s speech before the AICPA from a videotape of the event Corgel’s e orts to bring Riley into the Enron mess at Andersen’s Houston o ce from the 302 of the FBI’s interview with Riley on Feb 14, 2002 Details of the special board meeting of Oct 22 from the o cial minutes Also see the Batson Report, vol 4, app D, 114, and the Senate hearings titled “The Role of the Board of Directors in Enron’s Collapse,” held before the Governmental A airs Committee’s Permanent Subcommittee on Investigations on May 7, 2002 A copy of the company-wide e-mail was obtained by the author Details of the preparation at Andersen for the Oct 23 conference call from the 302 of the FBI’s Feb 5, 2002, interview with Adlong Also see the Cash 302 from the Feb 5, 2002, interview and the SEC notes of the interview with Duncan on Jan 14, 2002 Dialogue from the conference call from the official transcript Enron’s stock performance from a price chart from Bloomberg, Oct 23, 2001 Duncan testi ed about his disappointment in the Oct 23 conference call during U.S v Andersen Also see the 302s of the FBI interview with Duncan on March 21 and April 5, 2002; Adlong on Feb 5, 2002; Roger Willard on Feb 6, 2002; Grutzmacher on Feb 15, 2002; Kate Agnew on April 4, 2002; and Bauer on Feb 2, 2002 Also see the undated, unsigned report prepared in 2002 by lawyers for Andersen, entitled “Summary of Document Destruction Facts.” 10 Dialogue at the employee meeting from a transcript of the event Also see an undated memo from Lay to Enron employees, “All Employee Meeting.” 11 The story read by Pitt was David S Hilzenrath, “SEC Chief: ‘Gentler’ Agency,” Washington Post, Oct 23, 2001, E1 12 Duncan testi ed about his e ort to push compliance with the Andersen document policy during his testimony in U.S v Andersen Also see the 302s of the FBI interviews with Duncan on March 21 and April 5, 2002; Adlong on Feb 5, 2002; Willard on Feb 6, 2002; Grutzmacher on Feb 15, 2002; Agnew on April 4, 2002; and Bauer on Feb 2, 2002; and the “Government’s In Limine Motion of Law,” led April 29, 2003, in U.S v Andersen Also see the testimony of Timothy McCann on April 11, 2002, before grand jury no 02-2 in the case Re: Investigation of Enron 13 A copy of the Oct 23 margin call from Bank of America was obtained by the author 14 Some details of the Whalley and Bowen meeting from both men’s schedules 15 Some details of the management committee meeting from entries in Lay’s schedule book 16 Details of the Duncan and LeMaistre call with Fastow from both men’s testimonies of May 7, 2002, before the Senate Governmental A airs Committee’s Permanent Subcommittee on Investigations A copy of their script, along with LeMaistre’s handwritten notes, was obtained by the author 17 The chaos that emerged as the reality of Enron’s nances was discovered was reconstructed from dential interviews with a number of participants in these events 18 Details of the Oct 24 board meeting from the o cial minutes Also see the Lay email of that day addressed to Enron worldwide, “Je McMahon Named CFO,” and the press release of the same day, “Enron Names Je McMahon Chief Financial Officer.” 19 Some details of Watson’s phone call with Lay from undated, unsigned notes of interviews compiled by Dynegy’s lawyers from an interview with Watson 20 A copy of Suki’s Oct 24, 2001, e-mail was obtained by the author Also see the Batson Report, vol 4, app F, 34 21 Some details of Riley’s arrival from the 302 of his FBI interview on Feb 14, 2002, and from the 302 of Duncan’s interview on Jan 14, 2002 22 A copy of Watkins’s Oct 24, 2001, e-mail to McMahon, “Your new CFO spot and the job I want,” was obtained by the author 23 Some details of the preparations for the Bergstrom-Horton lunch meeting from undated, unsigned notes compiled by Dynegy’s lawyers from an interview with Bergstrom 24 Some details of Riley’s encounter with Duncan while hearing the shredding from a 302 of Riley’s FBI interview on Feb 14, 2002 Also see his June 3, 2002, testimony in U.S v Andersen 25 The retention of Shred-It from copies of invoices issued for the Houston o ce’s shredding assignment Also see the Agnew 302 of the interview on April 4, 2002 26 Some details of the Plaza Club lunch from undated, unsigned notes compiled by Dynegy’s lawyers from an interview with Bergstrom 27 Enron’s announcement came in the release “Enron Continues as Market-Maker of Choice, Says CEO Lay; Transaction Volume Shows Strength of Core Businesses; Company Draws Down Credit Facility to Address Investor Concerns.” Some details of Emshwiller’s e orts on the Chewco story from Smith and Emshwiller, 24 Days, 168– 69 28 Some details of the discussions between Watson and Lay from undated, unsigned notes compiled by Dynegy’s lawyers from an interview with Watson CHAPTER 21 Some details of the Bauer discussions with Faldyn and Siurek from Bauer’s Nov 2, 2001, memo to the le, “Chewco Investigation.” Also see the 302 of Bauer’s Feb 2, 2002, interview with the FBI Mintz’s continuing e orts to move LJM2 out of the Enron o ces are documented in an e-mail he wrote a few weeks before, dated Oct 11, 2001, addressed to Derrick, and headed “LJM—Status Report.” A copy of Kopper’s separation agreement and release from Enron, dated July 23, 2001, was obtained by the author Some details of the board’s Oct 26 meeting from the official minutes Some details of Causey’s discoveries about Chewco from Bauer’s Nov 2, 2001, memo to the le and the 302 of Bauer’s Feb 2, 2002, interview with the FBI Also see the dential notes from Causey’s Jan 18, 2002, interview with sta ers from the House Energy and Commerce Committee’s Subcommittee on Oversight and Investigations Timing of the lockout from the Oct 23 all-employee e-mail See also Enron’s o cial press release, “Enron Explains Basic Facts About Its 401k Savings Plan,” Dec 14, 2001 Some details of the discussions between Watson and Lay from undated, unsigned notes compiled by Dynegy’s lawyers from an interview with Watson Some details of the Chewco meeting from Bauer’s Nov 2, 2001, memo to the le and the 302 of Bauer’s Feb 2, 2002, interview with the FBI Some details of McMahon’s conversations with Glisan from his Feb 7, 2002, testimony before the House Energy and Commerce Committee’s Subcommittee on Oversight and Investigations The article that infuriated Pitt was by Alex Berenson and Richard A Oppel Jr., “One Mighty Enron Strains Under Scrutiny,” New York Times, Oct 28, 2001, Sunday Business, 10 Details of Evans’s discussion with O’Neill from Eichenwald with Henriques, “Enron Buffed Image.” 11 A copy of the Dynegy fax was obtained by the author 12 Some details of William Powers’s day from entries on his official schedule 13 Luna testi ed to his experiences with Thibault during his 2002 deposition in Newby v Enron et al., H-01-3624, filed in Federal District Court in Houston 14 Some details of the discussions between Bergstrom and Whalley from undated, unsigned notes compiled by Dynegy’s lawyers from an interview with Bergstrom 15 Details of Mordaunt’s admission to Derrick, and her subsequent interview on Oct 30, 2001, with Wilmer, Cutler, from notes the lawyers took 16 Some details of Stulb’s encounter with Duncan from Stulb’s testimony of May 22 and 17 18 19 20 21 23, 2002, in U.S v Andersen Some details of the discussion between Tarpley and Delainey from undated, unsigned notes compiled by Dynegy’s lawyers from an interview with Tarpley Details of the Andersen discovery of the Chewco side letter, and its rami cations, from Bauer’s Nov 2, 2001, memo to le; the 302 of Bauer’s Feb 2, 2002, interview with the FBI; the 302 of Cash’s Feb 8, 2002, interview; and the 302 of Duncan’s Jan 14, 2002, interview A copy of the side letter was obtained by the author, as was a listing that showed which box the document had been placed in Also see the notes from Causey’s Jan 18, 2002, interview with Congressional staffers Some details of the board meeting from the official minutes Some details of the merger discussions, including the disclosure of the Glisan scandal, from undated, unsigned notes complied by Dynegy’s lawyers from interviews with Fullenweider, Doty, Winters, and Watson Some details of the Enron board meeting from the official minutes 22 Copies of the two icting press releases were obtained by the author Also see the undated, unsigned notes compiled by Dynegy’s lawyers summarizing the ndings of their interviews with the company’s executives, bankers, and lawyers CHAPTER 22 Some details of what Carter saw from the SEC Web site, www.sec.gov, and from the 8-K led by Enron on Nov Also see the Nov 8, 2001, e-mail from Lay to Enron employees, “SEC Information/Earnings Restatement.” A copy of the Andersen subpoena, issued Nov 8, 2001, in the case In the Matter of Enron Corp., HO-9350, was obtained by the author, as was a letter of that day from John Loesch, SEC senior counsel, to Andrew Pincus, general counsel of Andersen, which delivered the subpoena Also see the Nov 9, 2001, e-mail from Nancy Temple to Caroline Cheng and others at Andersen, “Enron Subpoena”; Adlong’s response that same day to a copy she received of the Temple e-mail; Adlong’s e-mail that same day to the engagement team, “No More Shredding”; Temple’s handwritten notes from meetings that day; and the FBI 302s of interviews with Adlong on Feb 5, 2002; Temple on Feb 13, 2002; Cash on Feb 8, 2002; and the SEC notes from the interview with Duncan on Jan 14, 2002 Some details about the Dynegy merger from an internal Enron document, “Talking Points—11-9-01”; the joint press release issued Nov 9, “Dynegy and Enron Announce Merger Agreement”; and the document of that same day “Merger FAQ’s (Internal).” Some details of the Rawhide debacle from Enron’s Nov 19, 2001, 10-Q; annex to the Nov 14, 2003, report by Harrison Goldin, a court-appointed examiner in the Enron bankruptcy, led in the United States Bankruptcy Court in Manhattan; and the Batson Report, vol 3, 52 Some details from a tracking of the Enron daily stock price, as recorded on Bloomberg, for the period from Oct 26 through Nov 12, 2001 See also Enron’s Dec 14, 2001, release, “Enron Explains Basic Facts About Its 401k Savings Plan.” Some details of the aftermath of the merger from the undated, unsigned notes compiled by Dynegy’s lawyers summarizing the ndings of their interviews with the company’s executives, bankers, and lawyers Some details of the demands that Lay surrender his severance from Richard A Oppel Jr and Floyd Norris, “Enron Chief Will Give Up Severance,” New York Times, Nov 14, 2001, C5 Some details of the problems between the Enron and the Dynegy trading rooms from unsigned, undated notes compiled by Dynegy’s lawyers summarizing the ndings from an interview with Schatzman The change in position by Enron traders from the Dynegy lawyers’ interview notes with other traders; internal cash documents maintained with the Enron wholesaletrading division; and the 10-Q filed by Enron on Nov 19, 2001 10 A copy of the draft 10-Q, as it existed on Nov 16, 2001, was obtained by the author 11 Some details of the McMahon call, the response from Doty, and the wider response to the nal copy of the 10-Q from the unsigned, undated notes compiled by Dynegy’s lawyers summarizing the ndings of their interviews with the company’s executives, bankers, and lawyers Speci c nancial information from comparisons between the final 10-Q, as filed on Nov 19, 2001, and the draft that existed on Nov 16, 2001 12 Some details of the luncheon meeting at the Coronado from unsigned, undated notes compiled by Dynegy’s lawyers summarizing the ndings of their interviews with Watson 13 Enron’s stock price from historical price information maintained by Bloomberg 14 Some details of the discussions between Enron and Dynegy, including the talk between Whalley and Bergstrom, from the unsigned, undated notes compiled by Dynegy’s lawyers summarizing the ndings of interviews with the company’s executives, bankers, and lawyers 15 Some details of Skilling’s Nov 27, 2001, interview with Wilmer, Cutler from the lawyers’ notes of the meeting 16 Some details of the collapse of the Enron-Dynegy merger from the unsigned, undated notes compiled by Dynegy’s lawyers re ecting interviews with the company’s executives, bankers, and lawyers 17 Daschle’s statements from a transcript of his Nov 29, 2001, press briefing 18 Dialogue at the Nov 30, 2001, White House press brie ng from the o cial transcript of the event 19 Some details of the Dec 1, 2001, board meeting from the official minutes 20 Details of the Enron bankruptcy ling from Eichenwald with Henriques, “Enron Buffed Image.” CHAPTER 23 Some details of the termination of Enron employees, and the aftermath, from David Kaplan and L M Sixel, “Enron Lays Off 4,000” Houston Chronicle, Dec 4, 2001, A1 Some details of Skilling’s polygraph from a Dec 4, 2001, report prepared by American International Security Corporation on subject “Jeffrey K Skilling.” A transcript of Skilling’s testimony before the SEC was obtained by the author Some details of the Dec 4, 2001, McMahon interview with the House sta ers from notes taken by Wilmer, Cutler lawyers who attended the discussion Details of the discussions before Congress from the o cial transcript of the Dec 12, 2001, hearings titled “The Enron Collapse: Impact on Investors and Financial Markets,” before two subcommittees of the House Financial Services Committee: the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises and the Subcommittee on Oversight and Investigations The unfamiliarity of the team that helped craft Berardino’s statements to the congressional panel was revealed in Berardino’s letter of Jan 21, 2002, to Representative Michael Oxley, chairman of the Financial Services Committee, in which he explained that he had made certain technical errors in his presentation about Chewco Those errors occurred, he said, because the o cials helping with his statements did not have the familiarity with Chewco that members of the Andersen team on the Enron account did Finally, a review of all of Duncan’s appearances before the Enron audit committee shows no instance in which he alerted the directors to possible illegal acts, and no documents led with the committee by Andersen maintaining such a claim However, the statement did accurately re ect Andersen’s opinion at the time, and it is possible that the opinion could have been shared informally with a member of the audit committee; that, however, would not rise to the level of official notification Details of the Boies press conference from Laura Goldberg and Ralph Bivens, “Enron’s Former CFO Surfaces,” Houston Chronicle, Dec 13, 2001, Business, 1; David S Hilzenrath, “Auditor Hints of ‘Illegal Acts’ at Enron,” Washington Post, Dec 13, 2001, E1; Jessica Sommar, “Enron Ex-CFO Hires Top Defense Lawyer,” New York Post, Dec 13, 2001, 42 Other details from photographs taken at the briefing Timing of the Berardino call from an entry in Lay’s schedule Some details of the Fastow/Kopper meeting from Kopper’s Sept 27, 2004 testimony in U S v Bayly et al 10 Some details of Glisan’s e orts to secure a cooperation deal, from Kurt Eichenwald, “Enron Executive Said to Be Aiding in Federal Inquiry,” New York Times, Feb 26, 2002, A1 Also see Glisan’s testimony of Oct 6, 2004, in U.S v Bayly et al 11 Some details of Andersen’s discovery of the e-mail destruction, and Berardino’s subsequent involvement, from Kurt Eichenwald, “Miscues, Missteps, and the Fall of Andersen,” New York Times, May 8, 2002, C1 12 Some details of the Oval Office meeting from Ron Suskind, The Price of Loyalty (Simon & Schuster, 2004), 203–7 13 Details of Bush’s meeting in the Oval O ce with reporters from a White House transcript, “Remarks by the President in Meeting with His Economic Team,” Jan 10, 2002 648 Details of the Jan 10, 2002, press briefing from the official transcript 14 Andersen’s Jan 10, 2002, press release was headed “Andersen Noti es SEC, Justice Department, Congress That a Signi cant but Undetermined Number of EnronRelated Documents Were Disposed Of.” The follow-up press release that day was headed “Additional Andersen Statement on Enron-Related Documents.” 15 Ann Richards’s statements from a transcript of the Jan 30, 2002, broadcast of Larry King Live on CNN 16 Details of Adlong’s conversation with Duncan from a transcript of her testimony in March 2002 given as part of an inquiry by class-action lawyers suing Enron to determine the scope of Andersen’s document destruction See also Kurt Eichenwald, “Andersen Misread the Depths of the Government’s Anger,” New York Times, March 18, 2002, A 17 The Washington Post article, by Peter Behr, ran on p A1 on Jan 12, 2002 18 Details of Duncan’s rst meeting with the government on Jan 14, 2002, from the 302 prepared by the FBI agents in attendance, and by the SEC notes of the interview prepared as a memo for the le by Beth Lehman from the agency Copies of Duncan’s agreements with both the SEC and the Justice Department, which allowed for his cooperation on this day, were obtained by the author 19 Details of the Jan 14, 2002, letter from Tauzin and Greenwood to Lay from the original document 20 Some details of the response to the Tauzin and Greenwood letter, and the comment from Johnson, from several news articles, including Don Van Atta Jr with Alex Berenson, “Enron’s Chairman Received Warning About Accounting,” New York Times, Jan 15, 2002, A1; and James Kuhnhenn, “Enron’s Chairman Was Warned of Impending Crash, Memo Shows,” Knight Ridder, Jan 15, 2002 21 Some details of the events surrounding the Duncan dinner where he learned of his termination by Andersen from a 302 of his March 21, 2002, interview with the FBI 22 Some details of Fastow’s Jan 15, 2002, meeting from the Wilmer, Cutler notes of the interview 23 Some details of Lay’s Jan 16, 2002, meeting from the Wilmer, Cutler notes of the interview 24 Some details of the Castaneda allegations from a transcript of the ABC news report that ran on the program World News Now, Jan 22, 2002 See also Peter Behr, “Manager Says Enron Documents Shredded,” Washington Post, Jan 22, 2002, A1; and Paul Duggan and Susan Schmidt, “Firm Calls Agency After Allegations of Data Shredding,” Washington Post, Jan 23, 2002, A1 25 The news reporting on the Baxter suicide at times appeared to suggest that he might have been a victim of foul play in an e ort to silence him Such innuendo was picked up on numerous Internet sites, and became part of the mythology of Enron that has been widely accepted as fact But the episode serves solely to underscore how easily falsehoods enter into the public consciousness Every detail related in this book was available in the voluminous records, made public shortly after the investigation concluded but apparently only skimmed by most who obtained them The fact that Head saw Baxter alone, driving his car, minutes before his death is revealed in the le for case 02-000599 with the Sugar Land Police Department That case le contains scores of individual documents running close to a thousand pages—from witness reports to descriptions of police actions to crime-scene photographs and autopsies—that leave no doubt that Baxter was a suicide The pain in icted on the Baxter family from the swirling cloud of rumor following his death marks one of the despicable consequences of a society all too willing to believe conspiracy theories over documentation, and a media that fails to review complex yet solid records to inform the public of the truth EPILOGUE The Powers Report was formally released on Feb 2, 2002; despite the criticisms leveled at Powers in the run-up to the document’s public disclosure, it stands as one of the most masterful, hardhitting reports to ever be issued from an internal corporate investigation As a testament to its success, the voluminous other reports that have been issued—from bankruptcy examiners, congressional committees, and the like— have never achieved the clarity and ultimate simplicity of the Powers report, and have not added signi cant new details that brought a di erent understanding to the reasons behind the Enron bankruptcy Details of the appearances and statements before the House Energy and Commerce Committee’s Subcommittee on Oversight and Investigations from the transcripts to the hearing titled “The Findings of Enron’s Special Investigative Committee with Respect to Certain Transactions Between Enron and Certain of Its Current and Former O cers and Employees,” Feb 5, 2002; “Financial Collapse of Enron,” Feb 7, 2002; and “Financial Collapse of Enron Corp.,” Feb 14, 2002 A detailed rendition of the events surrounding Andersen’s e orts to forestall indictment—and the government’s decision to charge the rm—from Eichenwald, “Andersen Misread the Depths of the Government’s Anger.” Also see Eichenwald, “Miscues, Missteps, and the Fall of Andersen”; and Duncan’s 302 from his FBI interview, conducted by Weissmann, on April 5–6, 2002 The fall of Harvey Pitt was chronicled by Labaton, “Praise to Scorn.” The criminal complaint against the bankers—Bermingham, Darby, and Mulgrew— was led on June 27, 2002, in Federal District Court in Houston The a davit in support of the complaint by Special Agent Simpson laid out the details signaling to Kopper that he faced a high probability of indictment The three bankers were subsequently indicted in Houston on Sept 12, 2002, and as of this writing are facing extradition from England to stand trial Kopper’s guilty plea was witnessed by the author Some of his statements to prosecutors are detailed in the criminal charges against him along with his cooperation agreement, led on Aug 20, 2002, in Federal District Court in Houston Other details of his statements from the a davit of Special Agent Omer Meisel, led on Oct 2, 2002, in support of the criminal complaint against Fastow The author witnessed Fastow’s surrender and guilty plea The criminal information against Larry Lawyer was led in Federal District Court in Houston on Nov 26, 2002 The rst wide-scale broadband indictment—brought against Enron executives Ken Rice, Joe Hirko, Kevin Hannon, Kevin Howard, Scott Yeager, Rex Shelby, and Michael Krautz—was filed in the Houston court on April 29, 2003 The superseding indictment in U.S v Fastow was led in the Houston court on April 30, 2003 Glisan’s plea agreement and admission of guilt to count ve of his original indictment were led in the court on Sept 10, 2003 The indictment of Lea Fastow was led on April 30, 2003, and she ultimately entered into a plea agreement with the government, which was filed on Jan 14, 2004 The author witnessed Andy Fastow’s change of plea, and details of the hearing come from personal observation Dialogue comes from a transcript of the proceeding on Jan 14, 2004 10 The superseding indictment, naming Skilling and Causey as defendants, was led under seal in the Houston court on Feb 18, 2004 Some details of Skilling’s encounter with Glisan from Mary Flood, “Skilling Colleague Passed by on Chain Gang,” Houston Chronicle, Feb 21, 2004, Business, The author witnessed Skilling’s arraignment, and details come from personal observation Dialogue comes from a transcript of the proceeding on Feb 19, 2004 11 Details of Lay’s being escorted by the FBI agents into court, including the dialogue, from a videotape of the event shot by KPRC, Channel news in Houston Some details of Lay’s time in jail from Mary Flood, “Lay Describes Time in Cell, Reveals Hope for Future,” Houston Chronicle, July 10, 2004, 12 Lay’s arraignment and his subsequent press conference were witnessed by the author, and the details come from personal observation Dialogue from a transcript of the hearing of July 8, 2004 The press conference dialogue is from a videotape by KPRC in Houston and transcript of the event ... tale of one company’s fall from grace It is, at its base, the story of a wrenching period of economic and political tumult as revealed through a single corporate scandal It is a portrait of an... revolvers The billions of dollars in standing lines of credit that Enron had available from its major banks That was disaster money, the nancial equivalent of a nuclear fallout shelter And Enron needed... machine rumbled along—Lay had emerged as a confidant of presidents, a media celebrity, and, at least in Houston, a household name When Lay bowed out, he was celebrated as a man of vision who got