October 24, 2001—Houston, Texas

Ken Lay settled into his black Mercedes 600 SL, easing out of his reserved parking space at the Huntingdon condominiums. From the lot’s entrance, he turned right onto Kirby Drive, the tree-lined road that served as a main thoroughfare through River Oaks, Houston’s wealthiest and most prestigious neighborhood.

The eight-year-old convertible cruised past the mansions bordering the street, homes that testified to the financial success of the city’s oilmen and corporate barons. Many estates peeked out from behind manicured shrubs and wrought-iron gates, or were far from the road on a ridge sloping down to the Buffalo Bayou. But Lay made no effort to peer beyond those veils of privacy. As Houston’s most influential businessman, he had already been welcomed in most every River Oaks mansion that might interest him.

The neighborhood’s elegance melted into Allen Parkway, a winding stretch of road that offered the most direct route downtown. Ahead, the morning sun was a blazing orange ball, rising behind a glittering glass-and-aluminum tower that defined the architectural rhythm of Houston’s skyline. It was the headquarters of Enron—his Enron—the once-obscure pipeline company that in a matter of years had been transformed into a politically connected energy colossus. Enron was now at the epicenter of Houston’s life, a ubiquitous player in everything from the city’s politics to its sports teams. But for locals, the sprawling giant would probably just always be known as Ken Lay’s company.

Lay lowered his car visor and glanced at the dashboard clock. Shortly before seven, early for his commute. But already he knew this would not be a normal day. His company was under attack; Lay was sure of it. Stock traders who had bet that Enron’s share price would fall were whispering rumors— no, lies—about his company. The Wall Street Journal was publishing a drumbeat of articles suggesting Enron had played games with its finances. It infuriated him.

They just don’t understand.

By all rights, Lay shouldn’t even have been stuck with the mess. He had stepped down as chief executive the prior February, handing the reins to his handpicked successor, Jeffrey Skilling, the brains behind Enron’s spectacular growth. With market power came world influence, and—as Skilling’s profit 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 things done. By year’s end, he was supposed to be ensconced in a new job at Kohlberg Kravis Roberts & Company, the buyout firm, basking in the glory of the empire he had left behind.

Then, with almost no warning, Skilling had up and resigned. Just like that, only months after winning the job. Lay had suspected for weeks that something was wrong with his successor; he had even quietly told a few Enron directors that Skilling seemed emotionally overwhelmed by his new responsibilities. Still, he had never imagined the man would just leave. The bombshell had left Lay with little choice. He contacted KKR’s principals, passing up their offer, and headed back to his old post.

But nothing was the same. Inside Enron, Skilling’s departure unleashed a torrent of anger and demands for change; outside, it fanned suspicions that there were some terrible secrets harbored within the company.

Rapidly, the press had lit into the company’s chief financial officer, Andrew Fastow, criticizing him for holding a second job as manager of investment funds that did deals with Enron. The allegations of a conflict of interest angered Lay; he had listened to Fastow reluctantly take on the additional responsibilities, just to benefit the company. And it had. The Fastow funds provided partners that knew Enron’s business, that could transact deals quickly. As far as Lay was concerned, Fastow had gone the extra mile for Enron and now was getting tarred for his loyalty.

We had every protection in place. We disclosed it all. They just don’t understand.

Lay turned in to the Allen Center Garage, parking one space from the walkway to the Enron building. He hurried to the company’s sleek metallic lobby, approaching a security checkpoint installed after the September 11 attacks. Holding up a magnetic card, he hesitated until the green light flashed, and then pushed past to the elevator.

The huge, mahogany-paneled reception area on the fiftieth floor was quiet and empty. Lay strode through, past a multicolored statue of an elephant colleagues had acquired on one of their many trips to India. Using a card key, he released an electronic lock and pushed open the heavy wooden door to the executive offices. He saw Rosalee Fleming, his assistant, busy at her desk.

“Morning, Rosie,” Lay said.

“Good morning, Ken. Andy Fastow called a few minutes ago. He said that he needs to meet with you urgently.”

“All right. Let him know I’m here.”

Lay slipped off his suit jacket as he walked into his office. He pressed a panel in the wall, popping open a hidden closet, where he hung the jacket. Lay pulled out his chair, but before he could sit, Fastow appeared in the doorway.

“Good morning, Andy,” Lay said.

Fastow nodded.“We need to talk, Ken.”

“Well, come in. Sit down.”

Fastow shuffled toward a circular conference table bolted to the office floor. Lay reached inside his desk drawer and touched a button, sending a radio signal across the room to a release in the door. It shut automatically.

As Lay took his seat, he glanced across the table. Fastow looked awful, showing the strains of the last few days. Usually, he was neatly coiffed, everything about him fresh and tailored. But today his face sagged, his brow furrowed. He looked as if he hadn’t slept most of the night.

“I’ve got some information I need to share with you,” Fastow said. “Last night Ben Glisan met with some of the bankers, and they told him that they couldn’t proceed with a loan to us so long as I was chief financial officer.”

That was grim news. Glisan, Enron’s young treasurer, was a devotee of Fastow. If he couldn’t persuade the bankers to do business with the man, no one could.

It was a difficult moment. Lay had been fighting for days to keep Fastow in his job, fending off efforts by the company’s new president, Greg Whalley, to oust him. Lay respected Fastow, and the board almost revered him; he couldn’t just fire his CFO because of a few nasty newspaper articles. But this was different. If bankers wouldn’t do business with him, Enron itself was in peril.

“You know, Andy, we talked about this possibility,” Lay said.“ Certainly the board and I have been very supportive of you, both publicly and privately. But we’ve also said that if you ever lost the confidence of the financial community, we would have to rethink the whole thing.”

Fastow nodded, his eyes downcast.

“So I need to call a board meeting and see what they think we ought to do,” Lay said.“ I’ll do that as soon as I can, because, obviously, we’ve got a lot going on.”

Fastow was silent. “Well,” he said finally, standing as he spoke, “thank you for meeting with me, Ken.”

It pained Lay to watch Fastow trudge out of the room, back to a desk they both knew he would soon be vacating. Lay was certain that in no time, the squall about Enron would pass, but by then, it would be too late to save the career of this talented young executive. Fastow would be a victim. It just wasn’t right.

Lay had no idea that Fastow had failed to tell him the most devastating news of all—news he wouldn’t learn for years to come.

At almost that very moment across town, Ray Bowen was standing naked in his upstairs bathroom, checking the shower temperature with his hand.As he lifted his foot to step inside, the telephone rang. In the bedroom, his wife answered the line and put the call on hold.

“Hey, Ray!” she called.“It’s Jeff!”

This couldn’t be good, not at this hour. His boss, Jeff McMahon, head of Enron’s paper-market business, would only call this early with a problem. And Bowen knew Enron’s recent chaos had created plenty of those. Wrapping a towel around his waist, he stepped into a toilet room where he had installed a Panasonic phone system.

“Hey, Jeff. What’s up?”

“It’s bad, man,” McMahon said. “The shit really hit the fan last night.”

Bowen listened in disbelief as McMahon told the ugly story. Enron had reached the precipice of collapse. The markets for the billions of dollars in day-to-day credit that large companies need—to pay salaries, to meet obligations to vendors, to keep the lights on—had shut out Enron. The institutions that ponied up the cash in short-term loans known as commercial paper no longer believed the company was worth the risk. The marketplace—that living, breathing entity whose judgment its executives hailed as infallible—was passing its harsh, unemotional verdict: Enron could not be trusted to survive the week.

“How…how can that be?” Bowen stuttered.

“Don’t know, but that’s what I’m hearing.”

McMahon paused. “I think that’s it,” he said. “I think they’re going to fire Andy today.”

No kidding. Fastow had so mismanaged the books that nobody trusted Enron with an overnight loan? Of course he was gone. And if Lay let sentimentality get in the way of that obvious decision, then Whalley would pull the trigger.

“So what’s the plan?” Bowen asked.

“I need your help. Whalley wants you and me to come in and help him figure it out. Can you be there by eight?”

Fifty-five minutes later, McMahon was in the offices of his division on the fourth floor of Enron’s new building when he saw Bowen hurrying toward him.

“What do you think?” McMahon called out.

“We’ve gotta draw down the revolvers right away,” Bowen replied brusquely.

The revolvers. The billions of dollars in standing lines of credit that Enron had available from its major banks. That was disaster money, the financial equivalent of a nuclear fallout shelter. And Enron needed it now.

The two men hustled to the fiftieth floor of the main Enron building. They headed to Skilling’s old office, where Whalley had recently set up shop. A few others were already gathered there. Whalley’s door was closed, and his secretary told the men they needed to wait.

“Greg’s meeting with Andy Fastow,” she said. Minutes passed. Finally the doorknob clicked and Fastow emerged, flashing a nervous smile. Whalley pushed past and took command. “Okay,” he said.“We’re meeting upstairs. Go on up, and I’ll be there in a few minutes.”

The men rode a small internal elevator to the mezzanine level and made their way to a tiny conference room, crowding around an oblong table. Fastow and McMahon—who had long treated each other with an antipathy bordering on contempt—drifted to the seats farthest away from each other. Fifteen minutes later, Whalley blew into the room.

“Okay, let’s get going,” he said as he took his seat. “Let’s start with the organization first.”

Whalley shot a look at Fastow, pointing at him.

“Andy,” he said rapidly, “as we discussed, you’re no longer CFO, effective right now.” Fastow’s face fell. “Wait . . .” Ignoring Fastow, Whalley swept his arm across the table, pointing at McMahon.

“Jeff, you’re now CFO of this company.”

What was that? McMahon wasn’t sure he heard Whalley correctly. He was chief financial officer? Just like that? “Excuse me?” McMahon said. “I’m CFO?” “Yes, you’re CFO.” McMahon glanced across the table. Fastow was shaking his head, looking shocked.The moment was surreal.

Are other companies like this? You get promoted and the guy you replace gets fired, all in front of everybody?

“Wait a minute!” Fastow sputtered, anger in his voice. “That was not my understanding of the deal!”

Whalley held up a hand. “Andy, I don’t have time for this. I don’t know your arrangement; I don’t know the legal stuff. You get with Ken and work it out. But you’re not CFO. That decision’s made.”

That was it. Whalley turned away from Fastow.

“Okay, Jeff, commercial paper. What should we do?”

“Well,” McMahon said, “I need to assemble a team to figure out where we are. But I think there’s a good chance we’ll need to draw down the revolvers.”

Bowen jumped in. “People, from my experience, if a company has a cash crisis, it either draws its revolvers immediately or gets ready for the banks to come in and find lots of reasons to delay sending the cash.”

The group tossed around the idea. Fastow shook his head, leaning forward in his chair. “Wait a minute, Ray,” he said, looking at Bowen. “I really disagree with you. I think drawing down the revolvers will send a terrible message to the market.”

Fastow pressed a forefinger against the table.

“You do this,” he said forcefully, “and people are going to think there’s really something wrong at Enron.”

Three hours later, Fastow sat in a rich leather chair at the credenza behind his desk, typing an e-mail to his wife, Lea. They had planned to have lunch together that day, but now that was impossible. Too much needed to be done; he had to get some things settled. He finished typing his apologies to Lea and hit the “send” button.

Fastow pushed back from the credenza and stood. Ken Lay appeared in his office doorway, his face stern.

“I need to talk to you, Andy,” Lay said.

“Okay, Ken. Come on in.”

Fastow touched the button on his remote, closing his office door, while Lay sat at the conference table. As Fastow joined him, Lay eyed the man he had trusted for so long. In the hours since their first meeting that day, he had learned new information, disturbing details that had made Lay question his steadfast confidence in Fastow. But no matter. The problem was out of Lay’s hands now.

“Andy, I just left a meeting of the board. And based on the information you provided this morning, the board decided that we can’t continue with you as CFO. We’ve decided to put you on a leave of absence and make Jeff McMahon the new chief financial officer.”

Fastow didn’t flinch. Lay was surprised; no one had bothered to tell him that Whalley had already delivered the news with far less formality.

“I understand,” he said.

Before Lay could speak again, Fastow plowed ahead.

“We need to work out a severance agreement,” he said.

Lay shook his head. “We’re not ready for that, Andy.”

“It won’t take long. I won’t be unrealistic. I know I’m entitled to nine or ten million dollars. But I think for three or four million, we can all agree that I’m leaving and I’m not going to be a problem.”

What? Was this some kind of threat?

“Andy, we’re not doing it that way,” Lay said. “First of all, there’s a lot I need to do other than negotiate your severance. But I also need the board involved.” Fastow leaned in, his voice above a whisper. “Well, let’s just have a handshake on something now, you and me, just so it’s done.”

Lay almost recoiled in disgust.

“No, Andy. We’ll talk about it in a few days, but right now we’re not going to do anything.” Lay didn’t wait for a response. He rose to let Fastow know that the meeting had ended. “Andy, I think the sooner you exit the building, the better,” he said.“I’m sorry about what’s happened, but it’s necessary. Obviously, I wish you and Lea the best.”

Lay strode out of the room, confident he had done the right thing.With Fastow going, he felt a tinge of hope that Enron would soon right itself. Still, the news he had learned at that day’s board meeting, coupled with Fastow’s sordid scheming for a secret severance, left him shaken.

Had his chief financial officer, a man he had trusted implicitly, really been a snake all along?


The jazz guitarist shuffled toward the front of the small stage at the Jazid club, easing into a sensual blues solo. The bar was woody and intimate, illuminated by long-stemmed candles resting on a handful of marble-topped tables. On this night the place was packed, the crowd swaying to the rhythm of each soulful riff.

On one side of the room Jeff Skilling sat at a crowded table, downing a glass of white wine. None of the revelers spoke to him; none seemed to recognize him as someone who, weeks before, had been CEO of one of America’s top companies. And none realized that on this night, he was deteriorating, a man approaching a nervous breakdown.

There’s no way out of this.

Skilling ran it through his mind. Enron, his company—for years, his life— was imploding. Other traders were refusing to do business with it. Capital was evaporating. Confidence was shattered. Regardless of Lay’s happy talk about its prospects, Skilling knew his baby was dying.

Oh, fuck! There’s got to be something. Got to be. Outside equity, find investors. How? No time.Talk to the banks. Look ’em in the eye, tell them you’ll pay them back. Shit! It’s too late. Should have had the planes headed to New York last week. Fuck! Why aren’t they doing anything?

He breathed deeply. Again and again, he walked through Enron’s maze of financial problems in his mind, hoping to find some means of escape he had overlooked. But the answer was always the same. Enron was gone. It couldn’t be saved.

Skilling wiped a hand up his cheek, smearing a tear. Fatigue shadowed his red-rimmed eyes. He picked up his glass, then glanced at a passing waitress.

“One more,” he told her. “Pinot Grigio.”

Rebecca Carter, Skilling’s longtime girlfriend and recent fiancée, sat next to him with a growing sense of alarm. The two had met at Enron, and had both left the company in August. For weeks, things had been wonderful; Skilling had spent time with his kids, did some traveling. Just the day before, the couple had come to Florida to visit a friend. But with Enron’s sudden troubles on his mind, Jeff was coming apart. Carter had never seen him drink this much. What was it now? Eight glasses? Ten? She reached out and touched his shoulder.

“Jeff, can we please just leave?”

“No.” He didn’t even look at her.

“Jeff . . .”


“Jeff, you need to stop drinking.”

No.” Skilling was stone-faced, unflinching.

The wine kept coming, as many as fifteen glasses. Skilling sat stock-still, tranquilizing his frayed emotions, growing angry. He was thinking of the ones he blamed for the troubles. It was the international division, he thought. They were the ones who wasted billions on lousy projects. They were the ones who tied up Enron’s capital. Skilling tossed them out when Enron stock was soaring; the longtime international chief, Rebecca Mark, had made tens of millions of dollars selling her shares.

I kicked them out and saved them, he thought bitterly. They destroyed Enron’s wealth, and I made them rich.

Hours passed as Skilling veered between despondency and fury. Finally he’d had enough.

“Let’s get out of here,” he said suddenly, grabbing Carter’s hand.

Skilling stumbled out to the street, and Carter wrapped an arm around him, struggling to hold him up in the crisp October evening. The couple brushed past crowds as they staggered down Washington Street toward their hotel.With each tormented step, Skilling fell deeper into incoherence.

“It’s going down,” he mumbled rapidly, his voice hollow and detached. “It’s going down.” Carter tugged at his arm to keep him moving, astonished. “Jeff, come on. You’re talking about Enron.”

“It’s all going down . . . ”The words trailed off.

For ten minutes they lurched along, until the elegant Delano Hotel loomed ahead, its gleaming white facade serving as a beacon. Carter maneuvered her fiancé up the terrazzo steps and into the hotel’s high-ceilinged lobby.

“Come on,” she said.“Let’s just go to bed.”

Skilling jerked away from her.

“No fucking way,” he growled.

He stumbled across the lobby, collapsing on a sofa. Catching sight of the bar in the back, he motioned for a waitress to bring him a drink. Carter sat next to him, closing her eyes as he downed another glass of wine. Finally, she gave in to her fury and frustration.

“Damn it, Jeff!” she said, standing up. “This is stopping right now! You’re not going to kill yourself tonight. We are going upstairs and we’re going to bed.”

Chastened, Skilling placed his wineglass on a table, following Carter meekly to the elevators. But his mind was churning. He had no control anymore. He was giving up.

Carter dragged him into their room, and Skilling fell onto the bed. Lying sideways, he sobbed uncontrollably. He tried to speak, but his words came out as gibberish; he pulled his knees into a fetal position. Carter brought her hands to her head. What the hell is going on?

“Jeff, what’s happening? You’re scaring me.”

She sat beside him, stroking his back, murmuring reassurances that Skilling didn’t want to hear. Minutes ticked by, until finally he crushed the pillow.

“It’s not going to be okay!” he shouted. “It’s all going down!”

He sat up, pushing Carter back as he moved.

“Everything I worked for my whole life is gone, just destroyed! Everything is gone!”

Skilling shook his head, tears streaming down his face. The enormity of it all suddenly crashed down on him.

“You don’t understand what’s going to happen!” he cried in a raspy voice. “Everyone’s going to get hit by this! I’ll never be able to show my face in Houston again! I mean, just the impact on all the people. Everything I’ve worked for is cratering!”

Reaching out to him, Carter muttered some soothing words. Skilling breathed deeply and tried to think. It’s too late. His world was gone, he would be a pariah. Everyone close to him would be caught in the wreckage. Rebecca. He couldn’t marry her. He couldn’t.

Skilling pulled away, a look of terror in his face. He was wide-awake now, wild-eyed and breathing rapidly.

“Rebecca, you need to go,” he said.

“Jeff …,” Carter said, reaching for him again.

Skilling recoiled.“Get the fuck away from me!”

Carter stood, astonished. “What?”

“Get the fuck out of here! Get away from me!”

“Jeff . . .”

“Leave me alone! I don’t want to see you!”

Carter stared at her fiancé, her eyes welling up. Nothing, not a sound or movement, interrupted the moment.

Grimacing, Skilling stood and flailed his arms. “Get the fuck out! Go back to Houston! I don’t want you here!”

Hesitation. Carter shuddered, then silently turned to leave. The door clicked closed behind her. Skilling stayed motionless for a moment, then crumpled into the bed. He pulled his knees to his chest again, his body shaking.

“Oh, God!” he wailed, crushing a pillow to his face.

It was the scandal that seemed to come out of nowhere, the scandal that changed everything. In the fall of 2001, the Enron Corporation—a politically powerful company whose business was only vaguely understood even by its own competitors—imploded, falling so far from its pedestal that its once-respected name transformed in a matter of weeks into shorthand for corporate wrongdoing.

The implications of the Enron debacle were so vast that even years in hindsight, they are still coming into view. It set off what became a cascading collapse in public confidence, sealing the final days of an era of giddy markets and seemingly painless, riskless wealth. Soon Enron appeared to be just the first symptom of a disease that had somehow swept undetected through corporate America, felling giants in its wake from WorldCom to Tyco, from Adelphia to Global Crossing. What emerged was a scandal of scandals, all seemingly interlinked in some mindless spree of corporate greed.

As investors fled the marketplace, terrified of where the next eruption might emerge, trillions of dollars in stock values vanished, translating into untold numbers of second jobs, postponed retirements, lost homes, suspended educations, and shattered dreams.

But nothing was quite what it appeared. The Enron scandal did not burst out, fully grown, from the corporate landscape in a matter of days. Across corporate America, widespread corner cutting, steadily falling standards, and compromised financial discipline had been festering for close to a decade. Warnings about funny numbers, about unrealistic expectations, about the coming pain of economic reality, went unheeded as investors celebrated corporations pursuing reckless or incomprehensible business strategies that helped their stock prices defy the laws of gravity.

It was in that environment, and only that environment, that the Enron debacle could emerge. It was not simply the outgrowth of rampant lawbreaking. The true story was more complex, and certainly more disturbing. For crime at Enron—and, no doubt, there was crime—was just one ingredient in the toxic stew that poisoned the company. Shocking incompetence, unjustified arrogance, compromised ethics, and an utter contempt for the mar-ket’s judgment all played decisive roles. Ultimately, it was Enron’s tragedy to be filled with people smart enough to know how to maneuver around the rules, but not wise enough to understand why the rules had been written in the first place.

No single person bore responsibility for the debacle; no single person possibly could. Instead, the shortcomings of a handful of executives—along with a community of bankers, lawyers, and accountants eager to win the company’s fees; a government willing to abide absurdly lax rules; and an investor class more interested in quick wealth than long-term rewards—merged to create an enterprise destined to fail. But in the end, for all the mind-numbing accounting ploys and financial maneuvers that came to light in Enron’s wake, the underlying cause of the collapse was fairly simple: the company spent much of its money on lousy businesses. And the market exacted its revenge.

The repercussions were ugly. Arthur Andersen, the once-revered accounting firm, evaporated overnight as its role in the debacle led to a subsidiary scandal of its own. A President and members of his Administration, already struggling with a new threat to national security, found themselves on the defensive because of their close association with Enron. The new chairman of the Securities and Exchange Commission saw his dream job slip through his fingers amid the recriminations. And members of Congress, reacting to their constituents’ fear and anger, pushed through what proved to be the most dramatic revision since the Great Depression in the laws protecting investors.

This, then, is more than the 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 America in upheaval at the turn of the twenty-first century, a country torn between its worship of fast money and its zeal for truth, between greed and high-mindedness, between Wall Street and Main Street. Ultimately, it is the story of the untold damage wreaked by a nation’s folly—a folly that, in time, we are all but certain to see again.