The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron (81 page)

  Rhythms deal and, 191–97

  risk-control alien to, 140

  SEC investigation and, 371–72

  self-compensation schemes of, 134

  Southampton scheme of,
see
Southampton Place partnership

  structured finance deals of,
see
Special purpose entities

 
Wall Street Journal
article and, 370–71

Fastow, Carl, 134

Fastow, Jeffrey, 139, 189, 365, 380

Fastow, Joan, 134

Fastow, Lea, xiv, 134–35, 152, 166, 168, 334, 361, 377, 380, 414–15

  at Enron, 137, 139

  on Enron art committee, 365

  government charges against, 412

  as heiress, 138, 365

  and SPEs, 167, 170, 189

Fastow, Matthew, 189, 365, 380

Fastow, Peter, 364, 365, 371

Fastow Family Foundation, 170, 196, 206, 365

Fat Boy, 269, 274, 276, 335

FBI, xxi, 5, 408, 418, 422

Federal Energy Regulatory Commission (FERC), 167, 223–24, 270, 271, 273–74, 276–80, 335

Federal Power Commission, 6

Fergus, Gary, 275–76

Fewell, Melanie, 301–2

Feygin, Anatol, xvi, 341

fiber-optic system, 185, 187–88, 288

Fidelity, 319, 340

Fifth Amendment, xxiii, 416

Financial Accounting Standards Board (FASB), 142, 144, 323

First Boston,
see
Credit Suisse First Boston

First Call, 231

First City National Bank, 30, 73

FirstPoint Communications, 185

First United Methodist Church, 385, 423

First Union, 202, 343

Fitch, 238, 323, 380, 394, 403

Fleischer, David, xvi, 179, 229, 243, 259, 314, 323, 325, 375

Florida, 254

  as major market, 10, 11

Florida Gas Company, 6–8, 10, 11, 19, 25, 46

Fluckiger, Kellan, 278

Forbes,
32, 72, 83, 94, 98, 234

Fortune,
xxiv, 83, 94, 105, 111, 116, 239, 253, 278, 291, 321–23, 332

  50 Most Powerful Women in Business, 253

Fortune 500, 137, 326

forwards, 37

Foster, Joe, 402–3

Fountainhead, The
(Rand), 214

France, 248–49, 256

fraud, 276, 410–20, 422

Freeman, Charles, 388

Freeman, David, 281

free market, 2, 3, 48, 74, 89, 167, 172, 216, 264, 267

freight trading, 225, 396

FRENDS, 136–37

Frevert, Mark, xiv, 359, 361–62, 391

Fried Frank Harris Shriver & Jacobson, 329

Friends of Enron, 166, 167, 189, 364

front-end loaded earnings, 230

Frontline,
281, 428

fuel-supply contracts, 158

Furst, Robert, xvii, 200, 207–8, 381

GAAP (general accepted accounting principles), 142–43, 160, 161, 163, 408

Garcia, Kim, 180

Garten, Jeffrey, 83

gas, 50, 131, 172, 177, 178, 240

 
see also
natural gas

Gas Bank, 33–37, 137, 212

Gas Daily,
227

Gates, Bill, 230

Gathmann, Bill, 152

Gaza Strip, 258

GE Capital, 180

General Electric, 46, 53, 67, 74, 81, 132, 133, 230, 314

George (robotrader), 216–17

Gerstner, Lou, 31, 32

Get Shorty, 270, 274, 282

Gibney, Alex, 426

Gieselman, Scott, xvii, 378–79, 387

Giga information group, 244

Glass-Steagall Act, 162

Glisan, Ben, xiv, 152–53, 156, 159, 161, 168, 169, 212, 237, 260, 279, 304–7, 315, 340, 346, 366, 371, 375, 377, 388, 394, 400, 412, 413–14, 420–21

  as Fastow confidant, 152, 154

  LJM and, 196–97, 198, 211, 306, 307, 309, 311, 364, 412

  performance review of, 154

Global Crossing, 188

Global Finance,
see
Enron Global Finance

Global Galactic agreement, 205

Global Water Reporter,
247

Goldman Sachs, 50, 109, 126, 164, 179, 222, 229, 234, 243, 259, 314, 321, 323, 325, 375, 378–79, 387, 401, 427

Goldman family, 417

Gorbachev, Mikhail, 240

Gordon, Rick, xvii, 234–35, 313

Gore, Al, 88

grain futures, 226

Gramm, Phil, 87, 96, 280

Gramm, Wendy, xiv, 96, 280

Grasso, Richard, 395

Gray, Rod, xiv, 95, 250, 253, 255

greater fool theory, 74

Greater Houston Partnership, 86

Greenspan, Alan, 240, 385

Greenwich NatWest, 194

Gross, Richard, xvii, 353

growth portfolio managers, 232

Grubman, Jack, 231, 234

Grubman, Richard, xvii, 325–26, 374

Grutzmacher, Patricia, 148

Guam, 74, 251

Guatemala, 74

Guinness Brewery, 364

Gulf & Western, 10

Gulf States Oil and Refining, 16

Hadar, Miriam, 134–35

Haedicke, Mark, xiv, 275–77, 309, 335, 405

Hain, Mary, 273, 274, 275

Hall, Stephen, 276, 277

Halliburton, 87

Hamel, Gary, xiv, 226, 239

Hannon, Kevin, xiv, 42–43, 57, 122, 288, 296, 415

  indictments against, 412

Harding, John, xiv, 18–19

Harrison, William, 395

Harvard Business School, 31, 32, 45, 46, 51, 52, 57, 71, 73, 76, 391, 416

  case studies of, 222–23, 239

Harvard Law School, 419

Hawaii, 125–0, 293

HealthSouth, 413

heat-rate swaps, 207

Hecker, James, xvi, 148–49, 362, 383

Heckmann, Richard, 248–49

hedge funds, 219, 319–21, 325, 385

hedging, 37, 131, 300, 305–6, 307–8

Hendrick, Max, III, 357, 360–61

Henry Pratt, 30

Hermann, Bob, 128

Herring, Joanne, 10

Herring, Robert, 10

Herrold, Beau, 424

Herrold, Linda Phillips,
see
Lay, Linda

Highfields Capital, 325

high-tech investments, 324

Hinds, Michael, LJM and, 196, 304

Hirko, Joe, xiv, 185, 186, 243, 287–88

  indictments against, 412

historical-cost accounting, 39–40

HMOs, 184

HNG InterNorth, 11–13

hog futures, 226

Hogin, David Ralph, 17

Hoglund, Forrest, xiv, 101, 108–9, 245

hold ratings, 234, 321

Holder, Eric, 428

Holman, Hugh, 244

Hopley, John, 117

Horton, Stan, 391, 401

Hotelero del Atlántico, 78

“Hotel Kenneth-Lay-a,” 148–49, 362

House Energy and Power Subcommittee, 173

Houston, Tex., xxi, 4, 7, 8, 10, 12–13, 15, 406, 409, 411, 415–16, 418, 422–23

Houston Astros, 86, 423

Houston Chronicle,
9, 33, 350–51, 429

Houston Fire Department, 33

Houston Forum, 417

Houston Natural Gas (HNG), 10–13, 108, 128

  InterNorth merger with, 16, 17, 25, 46, 47, 73, 162, 395

Houston Pipeline, 56

Howard, Kevin, xiv, 294, 295–97, 415

  indictment against, 412

Hueston, John, 419, 420, 422

Hulme, Ron, xiv, 240, 244

Human Rights Watch, 81–82

Humble Oil, 5, 6

Humphrey, Gene, 60, 137–38, 202

Hunt family, 1

Hurt, Harry, III, xvii, 94, 318–19

HVAC (heating, ventilation, air conditioning), 183

hydrocarbons, 108

hydroelectric power, 221, 271–72

IBM, 31, 178

ICI, 48, 49

Illinois, 252

ImClone, 413

Independent System Operator (ISO), 266, 267, 268, 270, 271, 274, 276–78

India, 74, 79–83, 109, 240, 315, 342, 345, 353

Indonesia, 74, 260

In Search of Excellence,
31, 121

Inside FERC,
227

insider trading, 410–11, 414, 416

Institute for Advanced Study, 202

Institute for Policy Studies, 88

Institutional Investor,
83, 136, 232

institutional investors, 176, 231, 232, 243–44, 252, 326, 340

Interior Department, U.S., 6–7, 24

Internet, 70, 92–93, 184, 187–88, 223, 243, 256, 284–85, 288, 308, 343, 367

  collapse of, 309, 331, 412

  mania of 1990s, 185, 186, 222, 288

  providers, 191, 332

  start-ups, 251

  stocks, 185, 231, 315

InterNorth, 11–13, 15, 16, 33, 61, 96, 108, 350

  HNG merger with, 16, 17, 25, 46, 47, 73, 162, 395

investment bankers, 166, 190, 230, 234, 251, 252

  personal investments of, 165, 167

investment banks, 133, 162, 164, 233, 387, 407

  Enron’s fees to, 162–63

  Enron Tiers for, 164–65, 194, 294

  Global Finance compared to, 151–52, 165

  investment grade credit ratings, 236, 239, 341, 374, 394–95, 402

IPOs, 191, 233

IRS, 20, 129, 170, 358

“Is Enron Overpriced?,” 323

Isla, 18, 19, 21, 23

ISO (Independent System Operator), 266, 267, 268, 270, 271, 274, 276–78

Italy, 158

Jacobs, Irwin, 11, 12, 13, 162

Jaedicke, Robert, xiv, 20–21

Janus, 232, 340

J-Block, 50–51, 103–4, 111, 176, 375

J. C. Penney, 304

JEDI, 67, 127, 132, 138, 141, 168–69, 189, 190, 355, 364, 383–84

JEDI II, 176, 316

Jefferies & Company, 175

Jesus Christ, 424

Jobs, Steve, 230

Joint Committee on Taxation, 241

Jones, Lincoln, 51

Jordan, Carl, 358

Joyce, Mary, 373

J. P. Morgan, 159, 202, 230, 233

J. P. Morgan Chase, 159, 160, 301, 341, 387, 388, 389, 393, 395, 402–3, 404–5, 407, 410

junk bond ratings, 14, 224, 236, 237, 256, 394–95, 400, 403

Jusbasche, Michael, 253

Justice Department, U.S., xxiv, 408. 410–13, 415

Kafus, 130

Kaiser Permanente, 184

Kaminski, Vince, xiv, 192–93, 206, 228, 305, 306, 363, 373

Kaplan, Jana, 365, 371

Katy Interconnect, 38

Kean, Steve, 346

Kelly, Bob, xiv, 51, 54, 73, 75, 76, 103

Kelly, Emmett, 4

Kelsey, Robert, 194

Kinder, Anne, 25

Kinder, Rich, xiv, 46, 94–95, 105, 125–27, 148, 164, 171, 391

  as Bush finance chairman, 88

  CEO ambitions of, 97–99

  departure of, 97–99, 100–101, 104, 110, 139, 160, 314, 362

  ECT and, 56, 103

Kinder, Rich (
cont.
)

  Enron Oil and, 18–22

  Gas Bank and, 35

  importance of, 86, 91–92, 93

  McNeil’s marriage to, 97–98

  Mark and, 73, 75, 77, 78–79, 82, 83–84

  rise to prominence of, 24–26, 27

  Skilling compared with, 107

Kinder Morgan, 98

King, Martin Luther, Jr., 424

Kirkland & Ellis, 311, 328

Kissinger, Henry, xxiv, 79, 367

Kitchen, Louise, xiv, 222–23, 333, 398, 404

Koch Industries, 65

Koenig, Mark, xiv, 322–23, 325, 345, 347, 360, 420–21

Komansky, David, 313

Kopper, Michael, xiv, 155, 161, 164, 166, 167, 168, 169, 212, 279, 305, 343, 354, 383–84, 400, 414

  departure from Enron of, 330, 361

  earnings and wealth of, 153, 169–70, 330, 413

  guilty plea and deal of, 413

  homosexuality of, 153, 384

  LJM and, 192, 196–97, 198, 203–4, 210, 306, 311, 328, 330, 353, 364, 366, 376, 381

  performance reviews of, 152–53

Korea, 354

Koslowski, Dennis, 182

Krautz, Mike, xiv, 289, 294, 296, 415

  indictment against, 412

Kristol, William, 240

Krugman, Paul, 240

Kuhn, Thomas, 230

Kynikos Associates, 319–21, 326, 348–49

Lake, Simeon, 419, 422, 423, 424, 429

Lanier, Bob, 423

Larry King Live,
417

Las Vegas, Nev., 425

Launer, Curt, xvii, 179, 232, 348, 353, 371, 407

Lavorato, John, xiv, 215–16, 226, 276, 282, 304, 398, 404

Lawson, William, 424

Lawyer, Larry, 289

Lay, Bonnie, 4

Lay, Elizabeth, 6, 367

Lay, Judith, xiv, 5–8

Lay, Ken, xiii, xxiii, 58, 100, 103, 108, 162, 215, 219, 222, 232–33, 326, 334, 341

  on accounting practices, 39, 41, 146, 158

  on Azurix, 247, 250, 251, 255, 257, 258

  background of, 2, 72, 96

  Beth Tilney and, 190

  board of directors and, 96–99, 314, 344–45, 349–50, 402–4, 415–16

  campaign contributions of, 173

  charitable activities of, 3, 49, 85, 86, 96,
98

  COO search by, 352–53

  on corporate ethics, 240, 269, 275

  on Dabhol, 80, 315

  as deregulation advocate, 2–3, 172, 175, 240, 265, 267, 278, 281, 327

  distance from Enron of, 85–86, 91, 101, 240

  divorce of, 7–8, 27, 46

  in Dynegy’s proposed acquisition, 392, 395–400, 402–3

  early career of, 1, 5–14

  earnings and wealth of, 7, 12, 89, 93, 98, 240, 313, 343

  ECT and, 56

  education of, 4–5, 9

  EES supported by, 182

  on Enron International, 259, 261–62

  Enron Oil and, 15, 18–19, 21–24

  in Enron’s collapse, 403–5

  Enron stock promoted by, 242, 366–67, 417

  in exit-strategy mode, 328, 342

  on Fastow and financial structures, 134, 150, 169, 190, 193, 199, 289–90, 305, 370, 375–77

  at Federal Power Commission, 6

  financial problems of, 343–45, 367, 398, 416

  at Florida Gas, 6–8, 10, 11, 19, 25, 46

  Gas Bank and, 35

  homes of, 7, 89, 96, 344, 392, 416

  influence of, 172–73, 234–35, 291, 385

  at Interior Department, 6–7, 24

  Kopper unknown to, 153

  management style of, 3, 24–25, 26, 45, 46, 75, 85, 89–90, 92, 101–2

  Mark and, 73, 75, 79, 83, 84, 110, 111, 261–62

  marriages of,
see
Lay, Judith; Lay, Linda

  modest origins of, 3, 4, 28

  on outside corporate boards, 86, 182, 344

  at Pentagon, 5

  as political donor and fund-raiser, 85, 87–88, 173

  positive public statements made by, 121, 126, 133, 171, 177, 229, 259, 292, 379

  religious background and beliefs of, 2, 3, 5, 385, 423