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Pipe Dreams: Greed, Ego and the Death of Enron by Robert Bryce


Rating: (Recommended)


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Me First

If you’re looking for a readable and plausible explanation of what happened at Enron, why, and how, pick up a copy of Robert Bruce’s Pipe Dreams: Greed, Ego and the Death of Enron. Early on, Bryce makes it clear that the corporate rot, as with fish, started at the top in Enron. Among the lessons from this book include that the selection of the wrong measure for success produces the wrong outcome. In Enron’s case revenue was the wrong measure. Uneven rewards can lead to individual success and corporate failure. The sum of the parts can be less than the whole.

Bryce does a fine job helping readers understand the character of each individual at the top of Enron. Here’s an excerpt about the climate of marital misconduct (p. 146-7):

A Wall Street analyst who covered Enron for years said the sexual shenanigans at Enron became an important part of his take on the company and its financial statements. The analyst said when someone like Skilling, who has a wife and three kids and is heading a major company, starts sleeping around, "it addresses the character of the man.”

This is a guy who felt he could get away with anything. You saw it in his personal life and his business life."                                   

Skilling's affair with Carter (the two married in early 2002.) was just a facet of the boys' club at Enron. Several women who worked at Enron said Skilling and the young traders who dominated the company viewed women as a commodity that could be bought and sold just like gas, electricity, or any of the other products Enron was trading. And since Houston's strip clubs are among the best in the country, it was only natural that Enron's boy geniuses visited them with regularity.

Joints like Rick's Cabaret, Treasures, and The Men's Club were the most popular venues. Enron executives like Lou Pai reportedly visited them regularly. In fact, Pal's passion for strippers began costing Enron so much money that Ken Lay had to lay down the law. Around 1995 after Pai reportedly submitted an expense report with huge strip club expenditures, Lay sent out a famous companywide memo that said Enron would no longer reimburse expenses from the strip clubs.   

But that apparently didn't stop Pai. Numerous sources inside Enron say that late one night in the mid-1990s, Pai brought a pair of women of ill-repute to Enron's headquarters. Pai took them upstairs to one of the conference rooms and allegedly had sex with them on the conference table. (Pai has denied ever taking prostitutes into the building. Lawyers for Pai's wife, Lanna Pai, refused to comment.)

In addition to the affairs occurring among the company's top managers, lower-level employees were also booking up for romantic adventures. And in many cases, it made perfect sense: Enron was a hothouse environment filled with lots of intelligent, driven young people who worked very long hours and therefore had few opportunities to mingle with members of the opposite sex outside of the workplace. Some of those liaisons ended in marriage, of which there were several among the lower and middle tiers at Enron. And the affairs at those company levels were not conducted maliciously. Nor were those workers supposed to be setting an example for the entire company. Ken Lay, Jeff Skilling, and their highest-ranking lieutenants were.

One headhunter in Houston who worked for a number of energy firms (including Enron) said the sexcapades at Enron even affected how other companies approached hiring. The headhunter remarked that in the late 1998, he was doing a top-level executive search for Dynegy. After he met with Dynegy's top managers to clarify the skills the company wanted in the new person, the headhunter was pulled aside by Dynegy's CEO, Chuck Watson. "I want to tell you something," Watson confided to the headhunter. "On our executive team, the most important thing is ethics and integrity. All of the executives on this floor are still married to our first wives. Bring us people who fit our ethics and integrity."

Although Ken Lay paid lip service to ethics and integrity, he had been compromised by his own past. As one former top-level Enron executive said, "Leaders cast shadows." And the shadow that Lay cast at Enron was that of a man who couldn't, or wouldn't, do anything to put a stop to the sexual misconduct.

One source close to Lay recalled that several employees complained directly to him about the oversexed atmosphere at Enron. In at least three instances, Enron employees wrote Lay and asked him to put a stop to the Ken Rice—Amanda Martin affair. The source said one letter "came through the office mail threatening legal action if some steps were not taken" to deal with the problem. But Lay was reluctant to do anything about it, according to the source.

So the sexcapades continued. And they became another facet of Enron's corrupt leadership—one that went hand in hand with the company's corrupt bookkeeping practices. "The marital misconduct created an atmosphere where things had to be covered up," ….

There’s a certain morbid fascination in reading about what happened at Enron, and Bryce helps present the accounting issues and management gaps with clarity. Pipe Dreams reveals the “me first” attitude at the top of Enron, and the deeply rooted arrogance and greed among very bright people who thought they were the best at everything they did.

Steve Hopkins, December 23, 2002


ă 2003 Hopkins and Company, LLC


The recommendation rating for this book appeared in the January 2003 issue of Executive Times


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