Author Q&A

1. Kurt, what attracted you to the Enron story?

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Enron, I was probably the last person persuaded that it was a good book. I was very hesitant about it for a while until I finally realized that there was a spectacular narrative arc to the story—that you were talking about people at the pinnacle of power who very arrogantly went along doing very foolish things, at times very criminal things, and seeing their mistakes celebrated by the market, by the government, by investors, by everybody. And it all comes crashing down. It is almost Greek mythology in the way the narrative arc unfolds. And the more I learned about it, the more I realized this thing was a Grisham book, this thing was a story of greed and power unbridled and it went through this fabulous tale where you got to see these people rise up and fall down and so the challenge there was to figure out how to tell the story in a way that would give people that roller coaster excitement, give them that feel of being in the story, give them that sense of excitement that would leave them wanting to flip the page and not quite turn out the light yet and in the end I hope that’s what I did.

2. Do you feel the behavior of Arthur Andersen was more the exception or the rule when considering the few remaining accounting giants?

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The answer to that is sort of two fold. I think Andersen was in a unique position in that the firm had had a lot of internal battles in previous years and had, in fact, recently just lost its rather lucrative consulting practice and was setting up a new one. That created a mindset, I believe, of trying to keep big business. Enron was the biggest business they had. Ultimately, today I think most accounting firms recognize that they do this kind of stuff at their peril. The death of Arthur Andersen—Arthur Andersen got the death penalty. I think when you go through the book and see what happened, Arthur Andersen deserved the death penalty. They were not public accountants. They were not acting on behalf of public interest. And I think that failure—they paid a very heavy price for it, but I think it’s a price that was ultimately deserved. It was a company that had experienced these kind of violations in the past, and didn’t do enough to make sure that didn’t happen again.

Whether the other firms were better or worse during the 1990s … I would just say, I was writing a lot about corporate fraud, and it wasn’t always Andersen that came up. I saw a lot of the other firms who did a lot of squirrelly things as well. I just think they are all much more frightened now about the prospect of becoming an Arthur Andersen.

3. Based on the evidence you have collected, can you comment on whether you believe Lay and/or Skilling deserve to be convicted of crimes and should go to jail?

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One of the things I think is sort of a sign of the arrogance of the press is we tend to believe that the information we gather is the kind of stuff that allows us to reach those kind of conclusions. Ultimately, all I can do is say, “this person has an involvement in these events,” “this person does not have an involvement in those events,” “this person may or may not have an involvement in the third events.”  The nature of corporate fraud is that you can have the exact same actions committed by an individual and unless you are able to determine what his intent was, what he was meaning to do, you can have those same actions in one instance be completely legal and in another be a crime. I am not going to venture out and say, “I know, in my opinion this person committed a crime, in my opinion this person did not.” That’s really up to a jury.

What is clear is that the case against Lay is much narrower than anybody would believe given the run-up of reporting about it, and the accusations in Congress, and the pounding of the table about his knowledge of the special purpose entities that were manipulating the company’s income state balance sheet. Because, ultimately, Lay isn’t being charged with any of that. The Enron task force investigated him very extensively and they charged him only with crimes relating to certain statements he made in the last 12 weeks of the company’s life. And most of that time, and actually during all of that time not a single one of these transactions was done. So that case is narrower than people think it is. The Skilling and Causey side of the case is sort of the broad piece, the one that gets into those transactions.

What they did, how they did it, the book lays out those facts, it tells where everyone was. I kind of look at it as an impressionistic painting. Everyone can look at it and make their own judgments about what they think the intents were. I don’t think that’s my job.