Loading...

You're not connected to the Internet. Please check your connection.

Clips from Enron: The Smartest Guys in the Room (2005)

by the name of Andy Fastow.

"by the name of Andy Fastow."

Enron: The Smartest Guys in the Room (2005)

Andy Fastow was Enron's chief financial officer.

"Andy Fastow was Enron's chief financial officer."

Enron: The Smartest Guys in the Room (2005)

His job was to cover up the fact

"His job was to cover up the fact"

Enron: The Smartest Guys in the Room (2005)

that Enron was becoming a financial fantasyland.

"that Enron was becoming a financial fantasyland."

Enron: The Smartest Guys in the Room (2005)

Enron essentially was losing money on a cash basis,

"Enron essentially was losing money on a cash basis,"

Enron: The Smartest Guys in the Room (2005)

year after year.

"year after year."

Enron: The Smartest Guys in the Room (2005)

And yet it was reporting profits.

"And yet it was reporting profits."

Enron: The Smartest Guys in the Room (2005)

So it was defying laws of financial gravity.

"So it was defying laws of financial gravity."

Enron: The Smartest Guys in the Room (2005)

And the way he was doing it

"And the way he was doing it"

Enron: The Smartest Guys in the Room (2005)

was with something called structured finance.

"was with something called structured finance."

Enron: The Smartest Guys in the Room (2005)

And the maestro of all that at Enron was Andy Fastow.

"And the maestro of all that at Enron was Andy Fastow."

Enron: The Smartest Guys in the Room (2005)

Andy was very young.

"Andy was very young."

Enron: The Smartest Guys in the Room (2005)

He was hired by Jeff Skilling probably before he was even 30

"He was hired by Jeff Skilling probably before he was even 30"

Enron: The Smartest Guys in the Room (2005)

and he idolized Jeff Skilling.

"and he idolized Jeff Skilling."

Enron: The Smartest Guys in the Room (2005)

And he certainly wanted to please the boss.

"And he certainly wanted to please the boss."

Enron: The Smartest Guys in the Room (2005)

To please the Boss,

"To please the Boss,"

Enron: The Smartest Guys in the Room (2005)

Fastow had to figure out a way to keep the stock price up

"Fastow had to figure out a way to keep the stock price up"

Enron: The Smartest Guys in the Room (2005)

by hiding the fact that Enron was

"by hiding the fact that Enron was"

Enron: The Smartest Guys in the Room (2005)

thirty billion dollars in debt.

"thirty billion dollars in debt."

Enron: The Smartest Guys in the Room (2005)

People pressured by the need to keep the stock price up

"People pressured by the need to keep the stock price up"

Enron: The Smartest Guys in the Room (2005)

begin to cheat a little bit.

"begin to cheat a little bit."

Enron: The Smartest Guys in the Room (2005)

But then the next quarter comes along

"But then the next quarter comes along"

Enron: The Smartest Guys in the Room (2005)

and you have to cheat a little more to

"and you have to cheat a little more to"

Enron: The Smartest Guys in the Room (2005)

do the new cheating to make up for the old cheating.

"do the new cheating to make up for the old cheating."

Enron: The Smartest Guys in the Room (2005)

And before long,

"And before long,"

Enron: The Smartest Guys in the Room (2005)

you've created a momentum that now you can't stop.

"you've created a momentum that now you can't stop."

Enron: The Smartest Guys in the Room (2005)

Fastow created hundreds of special companies

"Fastow created hundreds of special companies"

Enron: The Smartest Guys in the Room (2005)

to perform a magic trick...

"to perform a magic trick..."

Enron: The Smartest Guys in the Room (2005)

prop up Enron's stock by making its debt disappear.

"prop up Enron's stock by making its debt disappear."

Enron: The Smartest Guys in the Room (2005)

To outsider investors

"To outsider investors"

Enron: The Smartest Guys in the Room (2005)

it looked like cash was coming in the door.

"it looked like cash was coming in the door."

Enron: The Smartest Guys in the Room (2005)

In fact Enron was just stashing its debt in Fastow's companies

"In fact Enron was just stashing its debt in Fastow's companies"

Enron: The Smartest Guys in the Room (2005)

where investors couldn't see it.

"where investors couldn't see it."

Enron: The Smartest Guys in the Room (2005)

It was black magic. It really was.

"It was black magic. It really was."

Enron: The Smartest Guys in the Room (2005)

You were pulling some rabbits out of a hat.

"You were pulling some rabbits out of a hat."

Enron: The Smartest Guys in the Room (2005)

They could bury debt; they could bury losses.

"They could bury debt; they could bury losses."

Enron: The Smartest Guys in the Room (2005)

Many of the companies had exotic names:

"Many of the companies had exotic names:"

Enron: The Smartest Guys in the Room (2005)

Jedi, Chewco Raptors.

"Jedi, Chewco Raptors."

Enron: The Smartest Guys in the Room (2005)

LJM was Fastow's most ambitious creation.

"LJM was Fastow's most ambitious creation."

Enron: The Smartest Guys in the Room (2005)

It would work magic for Enron

"It would work magic for Enron"

Enron: The Smartest Guys in the Room (2005)

and it would allow Fastow to conjure

"and it would allow Fastow to conjure"

Enron: The Smartest Guys in the Room (2005)

45 million dollars for himself.

"45 million dollars for himself."

Enron: The Smartest Guys in the Room (2005)

Andy, in many ways,

"Andy, in many ways,"

Enron: The Smartest Guys in the Room (2005)

was someone we all knew didn't have a strong moral compass.

"was someone we all knew didn't have a strong moral compass."

Enron: The Smartest Guys in the Room (2005)

It's almost like Jeff Skilling said,

"It's almost like Jeff Skilling said,"

Enron: The Smartest Guys in the Room (2005)

'okay, we're hitting some troubled times.

"'okay, we're hitting some troubled times."

Enron: The Smartest Guys in the Room (2005)

Let's set up Andy so we can fill the earnings' holes

"Let's set up Andy so we can fill the earnings' holes"

Enron: The Smartest Guys in the Room (2005)

when we need to',

"when we need to',"

Enron: The Smartest Guys in the Room (2005)

knowing that Andy would probably skim a little bit

"knowing that Andy would probably skim a little bit"

Enron: The Smartest Guys in the Room (2005)

off each transaction for himself.

"off each transaction for himself."

Enron: The Smartest Guys in the Room (2005)

There's a 'Body Heat' kind of angle to this,

"There's a 'Body Heat' kind of angle to this,"

Enron: The Smartest Guys in the Room (2005)

you know, where Skilling is Kathleen Turner

"you know, where Skilling is Kathleen Turner"

Enron: The Smartest Guys in the Room (2005)

and Andy is William Hurt.

"and Andy is William Hurt."

Enron: The Smartest Guys in the Room (2005)

You know, in the end,

"You know, in the end,"

Enron: The Smartest Guys in the Room (2005)

he got suckered into helping all the executives

"he got suckered into helping all the executives"

Enron: The Smartest Guys in the Room (2005)

meet their earnings.

"meet their earnings."

Enron: The Smartest Guys in the Room (2005)

What I wish, I, you know, in retrospect?

"What I wish, I, you know, in retrospect?"

Enron: The Smartest Guys in the Room (2005)

I wish I'd never heard of LJM.

"I wish I'd never heard of LJM."

Enron: The Smartest Guys in the Room (2005)

Is it your contention that you knew of it

"Is it your contention that you knew of it"

Enron: The Smartest Guys in the Room (2005)

and it was appropriate?

"and it was appropriate?"

Enron: The Smartest Guys in the Room (2005)

Arthur Andersen and our lawyers

"Arthur Andersen and our lawyers"

Enron: The Smartest Guys in the Room (2005)

had taken a very hard look at this structure

"had taken a very hard look at this structure"

Enron: The Smartest Guys in the Room (2005)

and they believed it was appropriate.

"and they believed it was appropriate."

Enron: The Smartest Guys in the Room (2005)

If the theory is that Fastow went rogue somewhere deep

"If the theory is that Fastow went rogue somewhere deep"

Enron: The Smartest Guys in the Room (2005)

in the jungles of Enron

"in the jungles of Enron"

Enron: The Smartest Guys in the Room (2005)

and was the sole agent of the apocalypse,

"and was the sole agent of the apocalypse,"

Enron: The Smartest Guys in the Room (2005)

I just don't buy it.

"I just don't buy it."

Enron: The Smartest Guys in the Room (2005)

Skilling, Lay, and the Enron board

"Skilling, Lay, and the Enron board"

Enron: The Smartest Guys in the Room (2005)

had signed off on Fastow's LJM funds.

"had signed off on Fastow's LJM funds."

Enron: The Smartest Guys in the Room (2005)

They saw the benefits of letting Fastow

"They saw the benefits of letting Fastow"

Enron: The Smartest Guys in the Room (2005)

do deals with himself.

"do deals with himself."

Enron: The Smartest Guys in the Room (2005)

It is in Enron's best interest,

"It is in Enron's best interest,"

Enron: The Smartest Guys in the Room (2005)

because Enron needs the capital, number one.

"because Enron needs the capital, number one."

Enron: The Smartest Guys in the Room (2005)

In a secret video tape that surfaced after the bankruptcy,

"In a secret video tape that surfaced after the bankruptcy,"

Enron: The Smartest Guys in the Room (2005)

Fastow can be seen selling LJM

"Fastow can be seen selling LJM"

Enron: The Smartest Guys in the Room (2005)

to a group of Merrill Lynch bankers.

"to a group of Merrill Lynch bankers."

Enron: The Smartest Guys in the Room (2005)

He pitches them on the benefits of investing in a fund

"He pitches them on the benefits of investing in a fund"

Enron: The Smartest Guys in the Room (2005)

that only buys assets from Enron.

"that only buys assets from Enron."

Enron: The Smartest Guys in the Room (2005)

Remember, I'm not sellling the assets to myself.

"Remember, I'm not sellling the assets to myself."

Enron: The Smartest Guys in the Room (2005)

They own the assets. They're selling them to LJM2.

"They own the assets. They're selling them to LJM2."

Enron: The Smartest Guys in the Room (2005)

Fastow knew what kind of deal he was offering as Enron's CFO.

"Fastow knew what kind of deal he was offering as Enron's CFO."

Enron: The Smartest Guys in the Room (2005)

He could guarantee profits for LJM.

"He could guarantee profits for LJM."

Enron: The Smartest Guys in the Room (2005)

I think this is an extraordinary opportunity.

"I think this is an extraordinary opportunity."

Enron: The Smartest Guys in the Room (2005)

He has a sort of Cheshire Cat grin on his face as he talks

"He has a sort of Cheshire Cat grin on his face as he talks"

Enron: The Smartest Guys in the Room (2005)

about all the ways that the fund is gonna profit.

"about all the ways that the fund is gonna profit."

Enron: The Smartest Guys in the Room (2005)

And he talks about the informational advantages

"And he talks about the informational advantages"

Enron: The Smartest Guys in the Room (2005)

that he is gonna have in his dual role as Enron's CFO

"that he is gonna have in his dual role as Enron's CFO"

Enron: The Smartest Guys in the Room (2005)

and as the head of these funds.

"and as the head of these funds."

Enron: The Smartest Guys in the Room (2005)

Isn't there a question of conflict of interest?

"Isn't there a question of conflict of interest?"

Enron: The Smartest Guys in the Room (2005)

There is never any question that

"There is never any question that"

Enron: The Smartest Guys in the Room (2005)

I will be on both sides of the transaction.

"I will be on both sides of the transaction."

Enron: The Smartest Guys in the Room (2005)

I will always be on the LJM side of the transaction.

"I will always be on the LJM side of the transaction."

Enron: The Smartest Guys in the Room (2005)

He was general partner of LJM, while at the same time,

"He was general partner of LJM, while at the same time,"

Enron: The Smartest Guys in the Room (2005)

being CFO of Enron.

"being CFO of Enron."

Enron: The Smartest Guys in the Room (2005)

You know, that's a whole 'nother ball of wax

"You know, that's a whole 'nother ball of wax"

Enron: The Smartest Guys in the Room (2005)

when you want to talk about that conflict of interest.

"when you want to talk about that conflict of interest."

Enron: The Smartest Guys in the Room (2005)

Because no human being should be put in a situation where,

"Because no human being should be put in a situation where,"

Enron: The Smartest Guys in the Room (2005)

you know, every single transaction,

"you know, every single transaction,"

Enron: The Smartest Guys in the Room (2005)

they decide whether they're looking

"they decide whether they're looking"

Enron: The Smartest Guys in the Room (2005)

after Enron's best interests or their limited partners.

"after Enron's best interests or their limited partners."

Enron: The Smartest Guys in the Room (2005)

Because this LJM partnership existed

"Because this LJM partnership existed"

Enron: The Smartest Guys in the Room (2005)

solely to do business with Enron.

"solely to do business with Enron."

Enron: The Smartest Guys in the Room (2005)

As you would expect,

"As you would expect,"

Enron: The Smartest Guys in the Room (2005)

Andy as Chief Financial Officer of Enron,

"Andy as Chief Financial Officer of Enron,"

Enron: The Smartest Guys in the Room (2005)

is heavily banked, so to speak.

"is heavily banked, so to speak."

Enron: The Smartest Guys in the Room (2005)

And as a result,

"And as a result,"

Enron: The Smartest Guys in the Room (2005)

"there are five or six of the name brand banks"

Enron: The Smartest Guys in the Room (2005)

who have stepped up and said they'll commit to this.

"who have stepped up and said they'll commit to this."

Enron: The Smartest Guys in the Room (2005)

Commit they did. And why not?

"Commit they did. And why not?"

Enron: The Smartest Guys in the Room (2005)

Fastow was letting them gamble with Enron's chips.

"Fastow was letting them gamble with Enron's chips."

Enron: The Smartest Guys in the Room (2005)

Fastow was using Enron's stock

"Fastow was using Enron's stock"

Enron: The Smartest Guys in the Room (2005)

as collateral for a lot of these things.

"as collateral for a lot of these things."

Enron: The Smartest Guys in the Room (2005)

They were betting their own company on the transactions.

"They were betting their own company on the transactions."

Enron: The Smartest Guys in the Room (2005)

With the prospect of returns

"With the prospect of returns"

Enron: The Smartest Guys in the Room (2005)

that would exceed two thousand percent,

"that would exceed two thousand percent,"

Enron: The Smartest Guys in the Room (2005)

96 individual bankers invested in LJM.

"96 individual bankers invested in LJM."

Enron: The Smartest Guys in the Room (2005)

And America's major banks put up as much as $25 million each.

"And America's major banks put up as much as $25 million each."

Enron: The Smartest Guys in the Room (2005)

It's sort of the Who's Who of Wall Street:

"It's sort of the Who's Who of Wall Street:"

Enron: The Smartest Guys in the Room (2005)

JP Morgan Chase CS First Boston Citibank

"JP Morgan Chase CS First Boston Citibank"

Enron: The Smartest Guys in the Room (2005)

Merrill Lynch, DeutscheBank...

"Merrill Lynch, DeutscheBank..."

Enron: The Smartest Guys in the Room (2005)

Show more clips