Conspiracy of Fools (16 page)

The sedan turned onto the final stretch of road leading to Matoshri, Thackeray’s suburban home. Outside, a phalanx of guards stood watch, protecting against potential reprisals against the Shiv Sena leader for the violence inflicted on Muslims by his followers.

“All right, Ken,” Mark said, wrapping up her briefing. “Just remember, everything today is scripted. There shouldn’t be any surprises.”

“Fine,” Lay replied.

The sedan pulled to a stop. Mark picked up a small bag containing an original Walt Disney animation; she knew Thackeray still had a love for his original career as a cartoonist. A gift of the animation, along with flowers she brought, would start things off on just the right tone.

Mark stepped out of the car first. She wore a formal
salwar kameez
—a traditional long dress with pants underneath—sandals, and no makeup. Lay followed, dressed in a formal business suit. A young woman answered the door. Once inside, Lay and Mark removed their shoes in a symbolic gesture of respect, and the young woman escorted them into a modest living room.

Minutes later, Thackeray appeared, wearing his trademark dark-rimmed glasses. Mark and Lay stood.

“Mr. Thackeray,” Mark said, “good to see you again.” Thackeray nodded. “Yes, hello.”

Mark motioned toward Lay. “I’d like to introduce you to Ken Lay, the chairman of Enron. We’re here to visit you today and hear your views about the Dabhol project.”

Mark presented her gifts to Thackeray’s apparent delight. Afterward, he invited everyone to sit. An assistant wandered into the room, dispensing cups of tea.

Mark almost held her breath. Lay was old-school, with a gregarious personal style that often led him to engage in animated banter. But deference was critical today. She had told Lay during the car ride that he needed to stay quiet. This would be Thackeray’s show. Thackeray sipped his tea, placing the cup on a small table beside his chair.

“Your company made mistakes,” he finally said. “You have come in telling us what to do, rushing through without respect. You have demanded terms in your favor and not in the favor of this country.”

Lay and Mark listened, saying nothing.

“We are not against Enron. We are against the Dabhol project in the form passed by the previous government. But the last few weeks you have come far. You have made clear your desire to work with us, to more fully take our interests into account. That is an important step.”

Thackeray looked Lay in the eyes. “We have to do something to improve the electricity situation in our country. I know this.”

For several minutes, Thackeray questioned how long it would take to get the power-plant deal back together. Then, glancing at a nearby table, he nodded toward a white-framed photograph of an older Indian woman.

“That is my wife, Meena,” Thackeray said. “I am in mourning for her. She died in September.”

“I’m so sorry,” Lay said softly.

Thackeray nodded, then continued. “We were at our home outside of Bombay, in the evening, and she had a heart attack. The doctor had given her medicine, but the power was out. We looked for the medicine, but it was too dark. We could not find it”

Lay expressed condolences again, understanding the message. Thackeray had learned from personal experience the human toll of his country’s electricity shortage.

The conversation continued for more than an hour, at which point Thackeray led the executives to the front of his house. Outside, reporters had
gathered; the fate of the plant was big news in Maharashtra, and everyone knew this meeting was key. At the doorway, Thackeray turned to Lay.

“What would you like us to say?” Thackeray asked. “How can I be helpful getting this project going again?”

Lay glanced at Mark, suppressing a smile. Those words sealed it; they had again transformed setback into victory. Now—in part because of the death of an elderly woman whose name was unknown to almost everyone at Enron—the project that had seemed doomed was back in business.

November 22 dawned clear and cool in Washington, D.C., the rising sun bathing the city’s landmarks in a golden glow. Inside the White House, Bill Clinton scanned a lengthy article in
The New York Times
. The previous day, it reported, the state of Maharashtra had reached a tentative pact allowing Enron to proceed with its Dabhol power project. Clinton thought the situation might call for additional attention from his Administration.

He picked up a pen, scribbling the letters “FYI” across the article. He then forwarded it to his chief of staff, Thomas “Mack” McLarty III, who once ran an Arkansas energy company. McLarty jumped on the assignment, contacting Lay to find out if the Administration could help. The government’s international apparatus was put into play, with Frank Wisner, the Ambassador to India, visiting government officials to stress the White House’s interest in seeing Enron treated fairly.

Final negotiations between Mark and Maharashtra had been intense, dispensing with the cautious structure of the first agreement. The original deal called for construction in two stages, with the first generating just 695 megawatts of power through the burning of fuel oil. India then had the option to commission the second phase—involving construction of the far more expensive liquefied-natural-gas facilities, which would generate an additional 1,300 megawatts.

Despite the project’s troubles, Enron decided to double its bet on India. The plant size was increased, from 2,015 megawatts to 2,184 megawatts, even while Enron agreed to cut $300 million from its original $2.8 billion budget. And no longer was the expensive, complex second phase simply an option. Instead, Enron committed to building it no matter what.

Back in Houston, the revived deal was seen by the Enron board as a grand slam. The increased risk was barely considered; India was still sure to be a big winner. After all, the international division’s projections said so.

The executives from international development trickled into a conference room on the mezzanine above the fiftieth floor. They rarely spent much time
in Enron’s headquarters, instead passing their days in the division’s offices across the street in Allen Center. But on this day, guests from corporate wanted to attend their staff meeting, so they elected to gather in the executive offices.

Everyone found a place, with Rebecca Mark on the far side of the room, ready to hash through recent and projected performance data in what was known as the QBR, or quarterly business review. Nearby, two executives from investor relations—Mark Koenig and Rebecca Carter—sat quietly, eager to hear the latest numbers.

For Koenig and Carter, being in the room was something of a coup. The international development group had always jealously guarded its information; sure, developers
agreed
to turn over details of their projects, but they rarely followed through. Koenig and Carter had complained to Kinder about the secretiveness but didn’t expect much help; Kinder had trouble getting the numbers himself.

There was a touch of buoyancy in the room as the last of the executives found their seats. “All right,” Mark announced. “Let’s get started.”

The division was doing wonderfully, she told the assembled executives. Koenig and Carter took notes as Mark rattled off the financial details.

For several minutes, Mark gave a rundown on how returns had been calculated on a particular project. Koenig and Carter sat quietly, trying hard to disguise their growing horror. Carter shot a glance at Koenig, distress in her eyes. Koenig tapped her under the table, warning her to keep quiet. He understood.

The rates of return were wrong
.

Oftentimes, Enron received management fees and other payments for operating power plants—an additional source of revenue, separate from the cash generated by selling electricity. But Mark was treating the fees as if they were a return of a portion of Enron’s initial investment. Under such a calculation, the more the fees, the lower the capital investment, and in turn the higher the returns. It was a method wide of the mark, resulting in artificially large rates of return.

Carter glanced around the room. No one was objecting.
Oh, God, Rebecca, no!
Carter thought.
Somebody’s got to tell her she’s wrong
. About an hour later, the meeting wound down. Koenig and Carter gathered their things and hustled out the door.

“My God,” Carter said. “Mark, did she really …”

“Yes. Yes.”

Koenig pushed the button for the elevator.

“But you can’t say anything, Rebecca,” Koenig said.

“Mark …”

“Rebecca, we’ll never be allowed back in their staff meetings again. You can’t say anything.”

Carter shook her head. “Well,” she said, “we better not let her talk to investors with this kind of crap.”

Christmas season, 1995. Time for the Fastows’ annual party and a stream of other Enron celebrations. But this season things felt far different from years before.

The thrill, the sense of mission, had faded. No longer did the place seem fun-loving; the workday was a hazy, frenetic rush. Too many executives were tired and bitter. The department had gone through yet another one of its seemingly endless series of reorganizations, this time renamed Enron Capital & Trade. Skilling had suffered his near-breakdown over the summer. Fastow’s playfulness had given way to the honing of his sharp edges. The team mentality had died amid a torrent of backstabbing as executives competed for a higher rung on the corporate ladder. Somehow, the matchup had shifted from
Enron versus the world
to just
Enron versus Enron
.

At a little past seven on the night of his division’s big party, Skilling puffed on a cigarette in his living room, waiting for Susan. Since abandoning his plans to work part-time, he had lost weight on a starvation diet and taken up chain-smoking. He felt better about himself, but life at home had deteriorated even more. He and Susan were barely speaking, at best going through motions of civility. Skilling wasn’t even spending time with his kids. Instead, he dedicated almost every available moment to work.

He poured himself a glass of wine and lit another cigarette. It was time to go, but Susan still hadn’t come out of the bedroom. Thirty minutes passed. Forty-five. An hour. Skilling, by then on his third glass of wine, stewed in anger. Susan had never hidden her dislike of these holiday parties, but this year Skilling had taken on that problem weeks before. His people were important to him, he had told her; she was going to go to the party and be nice. Now, he felt sure, Sue was obtaining her silent revenge.

Finally, past 8:15, Sue walked into the living room.

“I can’t do anything with my hair,” she announced.

Skilling ground out his cigarette.

“Okay, fine,” he said. “I’m not going.”

“Oh yes you are.”

“No,” he said, standing. “I’m going out drinking.”

Skilling headed to his car, and Susan followed. In silence, he drove over to Westheimer Road, near Loop 610, and pulled into a shopping center. He maneuvered toward Grotto, an Italian restaurant, and parked.

“I’m going in,” he said. “I’m staying here.” Skilling shrugged. “Fine.”

He climbed out and stalked inside the restaurant, heading straight for the bar. After a number of drinks he returned to the car, where Sue still waited. “Okay,” he said. “Now I’m going someplace else.”

The scene from the Grotto repeated itself, with Skilling drinking as his wife waited in the parking lot. When he lumbered back, he was fairly drunk, and Sue was angry.

“We have to go to the Christmas party,” she said.

“No, I’m not going to let you go there and cause problems. I’m not going to let you screw that up.”

“You have to go to the party.”

Skilling gripped the steering wheel, rage and alcohol overtaking him. He closed his eyes for a second. Then he stared through the windshield, resolved. “Sue, I’ve had it. I’ve just had it.” He took a breath. “I want a divorce.”

THE WHITE MAZDA NAVAJO
turned onto an inclined driveway off Westheimer Road, heading toward the purple-and-white stucco facade of Armando’s Mexican restaurant. A valet watched the vehicle slow to a stop before hustling over to the driver-side door. Andy Fastow popped his seat belt and stepped out, handing over the keys as Lea emerged from the passenger side. He escorted her to the restaurant’s wooden door and swept inside.

Minutes later, Ken Rice—with his wife, Teresa—pulled his red Porsche off Westheimer into Armando’s, hitting the sloping driveway with a thud; he winced as metal scraped asphalt. Leaving the car with the valet, the Rices strolled inside. Andy Fastow waved from the bar.

It was January 1996, the first time the Fastows and the Rices had gone out together socially. Despite years of working in the same building, Rice and Fastow had only crossed paths a few times, and neither had come away with kind thoughts. Fastow considered Rice overindulged and overpaid, while Rice called Fastow an ambitious prick behind his back, a man who only invested time with colleagues if he thought they could help his career. But days before, Fastow had stunned Rice—and aroused his suspicions—by phoning with an invitation to dinner.

The couples met in the bar; all four were dressed chic-casual, with plenty of sweaters and knit shirts. The men shook hands. Rice introduced Teresa, then greeted Lea; the two already knew each other from the office.

“Listen,” Fastow said. “They’ve got our table ready. You want to go over there?”

The couples left the bar and found the hostess. On either side, diners crowded tables in two small annexes—one painted blue, the other red. The hostess ignored the side rooms, leading the couples through a dimly lit central area with a decor faintly reminiscent of a French château. Their table was alongside a wall; the wives sat on one side together, the husbands on the other.

As the couples chatted, a waiter appeared. “Would you care for a libation?” he asked.

It was the classic Armando’s pretension, but that, after all, was part of its appeal. There were orders for margaritas all around, and soon the table was loaded with drinks, baked chips, chicken enchiladas, and seafood.