LOSSES AS PROFITS

Evil Magic: A Film about the Rise and Fall of the Enron Behemoth

By Helmut Hoege

[This article published in: Junge Welt, 3/31/2007 is translated from the German on the World Wide Web, www.jungewelt.de/2007/03-31/014.php.]

The film festival “On Working” toured 50 German cities up to the beginning of April. Unions and welfare associations organized this festival. The provocative film “Enron – The Smartest Guys in the Room” by Alex Gibney was part of the program. It discusses the pomp, exploitation and disaster in modern capitalism in the downfall of the Enron Corporation.

Film and reality overlap more and more in America. With the documentary “Enron – The Smartest Guys in the Room,” Alex Gibney presented a very exciting film although the most important witnesses refused to be the director’s interview partners.

Enron stands for the greatest finance scandal in US economic history. The energy corporation was a symbol for the New Economy. It collapsed in 2001, shortly after the World Trade Center assassination – and left behind a mountain of debts in the billions. 20,000 people lost their jobs and had to clean their desks in 30 minutes.

Enron profited worldwide from deregulation. The reason was insufficient deregulation when something did not go well, for example the electricity broke down in the high tech state California and then was unaffordable. That was the claim in any case of the Enron leaders who were sentenced in 2006 to 5 to 24 years unless they committed suicide. They always had the best press on their brief but dizzy ladder of success. However a young female journalist uncovered the fraud in March 2001. Years ago six students at the Cornell University Business School showed in a dissertation about Enron that unloading their Enron shares as quickly as possible was profitable for investors.

The business idea of the firm consisted in showing future profits (for example for the year 2010) as “real” profits and thereby a super-balance. An Enron tax return only based on “real” revenues and not possible future revenues would have convinced everyone of the opposite. Enron paid no taxes because the firm only posted losses, not profits. It was a game with virtual eventualities. Nevertheless the investors, including the largest American and German banks, firmly believed in the Enron idea and invested billions. Even the accounting firm did not look closely until it collapsed together with Enron. “What unites all of them was the belief in the magic of the market,” as Ronald Reagan once proclaimed.

Alex Gibney, director of the Enron film, described the downfall of the New Economy flagship Enron as “a human drama with the emotional magnitude of a Greek tragedy.” I would speak of a “Darwinian tragedy” because the Enron cadre – first and foremost company chief Jeffrey Skilling – ennobled their corrupt business practices by referring to the famous book of the neo-Darwinian Richard Dawkens “The Selfish Gene.” Co-workers were evaluated every few months and 15 percent weeded out. The management organized races through the wilderness and motivated one another in strip bars. The performance of Enron shares had almost dream curves. Live dangerously!, the ideology declares. “Everything will be good if there are no rules and no regulations.” (Alex Gibney) Enron was a genuine rogue corporation where the exorbitant personal enrichment of business leaders was nearly the most harmless crime. They killed millions of persons for their savings, wages and pensions. The banks that joined in the game had to pay compensation of $12 billion to Enron creditors. The claims amounted to $63 billion.

The Enron managers were punished after they declared bankruptcy. They never made a secret that they acted out of the “lowest motives.” They were proud of that. They were celebrated for that worldwide and courted by politicians. The punishment first came when no new wicked idea occurred to them. That was the only reason why Skilling as the top manager was sentenced to 24 years imprisonment in 2006. He retired from Enron several months before the crash of the firm! Nothing more occurred to him! That was the real end of the “money machine.”

LINKS

Bill Moyers’ The Secret Government. One-and-a-half hour video focusing on Oliver North and Iran-Contra
video.google.com/videoplay
Enron: The Smartest Guys in the Room
www.youtube.com/watch