This documentary, made by Alex Gibney in association with the HDNet cable channel, tells the story of the rise and fall of Enron, the most spectacularly crooked corporation of modern times.  It's based on the book The Smartest Guys In The Room: the Amazing Rise and Scandalous Fall of Enron by Bethany McLean and Peter Elkind.  The story is told party by a narrator (Peter Coyote), but even more by talking-head interviews with reporters and insiders who know the story.  McLean and Elkind act more or less as additional narrators.  Other key expositors are Bill Lerach (attorney for Enron shareholders), Mike Muckleroy (Enron executive who was with the company from its early years), Amanda Martin-Brock (Enron executive who worked closely with Jeff Skilling), whistleblower Sherron Watkins (an Enron vice-president), and former Republican Party strategist Kevin Phillips.  Many others contribute additional portions -- journalists, power traders, accountants, lawyers, stock analysts, and so on -- both investigators and insiders.

In style, the film is a generic documentary, with nothing to make it stand out very much except the material presented.  No distinctively personal style or sense of humor in the manner of Michael Moore, no soothingly graceful aesthetics a la Ken Burns... and equally, no reality-television false dramatics, a minimum of MTVish visual noise, and best of all, no heavy-handed bludgeoning propaganda like some of the countless Michael Moore wannabes who've popped up over the last two years.  The introductory section has an interestingly arty edge, but after the opening credits, it relies almost entirely on the content to create its impact.

It would have been easy to waste time on railing at how rotten these guys are, or hammering home the point of how crooked their tricks are, but they wisely avoid that temptation.  There's a rule that fiction authors are taught (if they're lucky): "Show, don't tell."  If you want to communicate that a character is, for example, a coward, one shouldn't just say so, one should show the character engaging in concrete cowardly acts.  The film uses this technique to establish the characters of Ken Lay and Jeff Skilling, the Enron bosses:  it shows them constantly lying.  It was rare to ever hear a truly honest sentence from either of them.  I tried to count the lies told by Skilling and Lay on camera, like Joe Bob Briggs counting breasts and quarts of blood in cheap horror movies, and got up to about fifty before giving up due to the impossibility of separating one lie from another, or deciding what to do with all the disingenuous not-quite-lies they were telling alongside the overt lies.

(We also hear nothing but lies from George W. Bush, but he only speaks about three times in the film.)

Like any documentary that relies heavily on archival video footage (such as Moore's films), fitting the picture to a theatrical or HDTV aspect ratio ends up constantly cutting off the tops of people's heads, or cutting off text at the bottom that gives people's names and titles.  C'est la vie.  The look of the film is a bit television-ish... one time when you can tell that cable TV minds were behind the film is when they discuss an Enron executive who spent all his time at strip joints: they include half a minute of stripper boobies on screen for no particular reason.

For someone like me, who is already familiar with a lot of Enron dirt, the number one criterion I tend to look for is thoroughness.  Especially since no film can possibly cover the detail that a book can -- one always worries that big pieces will have to be left out, like nonessential parts of The Lord Of The Rings.  So how well do they cover the whole story?  Quite well.  They go back to Enron's founding, and it quickly becomes clear that though at first they were a real energy company, which mainly delivered tangible goods instead of just playing financial games, the ideological basis for what it would later become was part of Ken Lay's philosophy from the beginning.

The key to it all was the belief in deregulation.  The neoconservative circles that buzzed around President Reagan included many strong believers in this idea, including George H.W. Bush, who as an oligarch was hardly the most convincing exemplar of the kind of libertarian-capitalist ideals that deregulationism was supposedly driven by.  George the Elder was one Washington insider who gave his imprimatur to Ken Lay as the unofficial ambassador from the Land of Deregulationism.

The argument, as put forth by Ken Lay and many others, including Reagan, was that excessive interference from governmental bureaucrats, with a mandate to micromanage industry, was stifling entrepreneurial innovation, making every product more expensive, and slowing down the whole economy.  When the deregulation of the natural gas industry -- a goal for which no one worked more tirelessly than Ken Lay -- took effect, deregulationists were immensely gratified to see a drop in gas prices.  Most of them, and those who heard their propaganda, remain convinced to this day that natural gas prices are permanently lower thanks to deregulation, but the truth is that prices climbed quickly again once the economy got up to speed, and today the overall price trend over the last forty years shows no clear signs of being lower, slower to climb, or more or less volatile in the days after deregulation than it was before.  The famous drop, in hindsight, looks pretty much like it's just a rebound from a spike caused by the seventies oil crisis.  (Ironically, the next time that natural gas prices shot up was during Enron's own west coast power shortage, created through what was called deregulation.)

The film does not discuss deregulationism in any depth; it assumes you know the essentials and can connect the dots.  And perhaps they are feeling the need to be circumspect about rhetoric that the general public would dismiss as leftist rantery, wishing to reach as broad an audience as possible.  Since I feel no such constraint myself, I'll take a little time here to spell out more bluntly what "deregulation" means in a case like Enron's.

You see, the freedom to be productive businessmen selling useful products at competitively low prices was never what Lay's crowd of deregulation evangelists really wanted.  Certainly Lay himself was never very interested in the small profit margins such an approach entails.  To understand the deregulationists' real agenda, you have to ask: what do all these regulations actually make businesses do, or not do?

What they make them do is fill out a fair amount of paperwork.  This is annoying, but it's hardly a crippling burden.  (Of course, there are exceptional cases, such as aerospace contracts for the Pentagon or NASA, where extremely slow and careful work seems to be the only approach that's dependable.)  What regulations make business not do, when they work, is much more important.  They don't let businesses

These are rules that do indeed impose substantial costs on businesses.  We impose this on them because if we don't, they impose those costs on us.  Many businessmen who don't think of themselves as wishing to endanger anyone want to escape these costs, and in some cases have a deep and even rather childish resentment of having to abide by these rules.  Their complaints deserve to be heard, but experience shows that when businesses are free to pursue these harmful options, lack of bad intentions doesn't protect us.

And then there are some businessmen who, if freed from regulation, will take advantage of every opening or loophole to engage in all the worst unethical behaviors, if they can make a buck doing so.  That's the kind that Ken Lay was.  Quoth Kevin Phillips: "Ken Lay had a view of deregulation from the standpoint of all the money that he thought could be made."  And don't assume that the principled opposition of Lay and the Bushes to government interference would stop George H.W. from arranging large subsidies for Enron, as the film points out.  (Phillips calls the relationship of Lay with Bush Sr. "professional courtesy between a sidewinder and a timber rattlesnake.")

The film demonstrates Lay's attitude in this area beyond a doubt by reviewing Enron's first scandal, which happened in 1987, when the company was only two years old.  Two executives, Louis Borget and Tom Mastroeni, started running market scams, skimming cash into offshore accounts, keeping double books (Mike Muckleroy, investigating for the home office, only got to see the real books after threatening to kill Mastroeni!), and gambling wildly with Enron's money.  When Ken Lay was informed, he told the guys to keep it up, because their branch (Enron Oil of Valhalla, NY) was at that time the only one making any profits!  This branch was, for a time, a miniature of what the entire company would later become... and as in the later case, its luck ran out.  Enron made its first visit to the Congressional scandal-investigation hot seat, and the two Valhallans got minimal sentences.

Lay apparently had his appetite whetted by the large, though temporary, profits Valhalla had made -- so the film tells it, anyway.  He was probably already impatient with the slowness and difficulty of making honest money selling a tangible product, and wanted something  quicker and easier than the corporate equivalent of having to work for a living.  Then he found Jeff Skilling, who had a vision of how it could be done.

It was Skilling's idea to turn Enron from an energy producer into an energy trader: a parasitic middleman in other people's energy sales.  They would create an open exchange floor, like the Chicago commodities exchange, where people could buy and sell energy speculatively.  And then use their own traders to out-speculate everyone else... it would be the ultimate in insider trading: they could speculate in a market where they were both player and referee.  Such a vision would have been utterly impossible without the magic of deregulation, which allowed the most vacuous and fraudulent of financial flimflams to pass themselves off as solid industrial producers.  Lay made Skilling his CEO.  And from there the film can segue smoothly into the late phase of the Enron story, in which the official books start diverging ever more widely from reality.  It spends a fair amount of time on the process of how they got themselves steadily deeper into trouble, while the public saw nothing noticeably wrong and Wall Street still kept proclaiming them gods among men.

It must have been right in the early stages of Skilling's plan that Enron started getting sucked into the trap that drew in so many early dot-com ventures... and was deliberately pursued by so many later ones.  They couldn't help but notice that the quickest and easiest way to make money, in the short term, was for the company's stock to go up.  (The trouble is, that money isn't really yours unless you cash out -- and who would do that if it's going up? -- and it can disappear as quick as it arrives.)  So they would do whatever it took to make the stock keep rising.  That wasn't hard in the nineties, when the whole market was in a speculative bubble.  But the rule became that, in order for the stock to go up, they had to report a larger profit each quarter than the one before.  Every quarter, no exceptions.  So Skilling hired Andy Fastow as CFO and charged him with making the bottom line look suitably profitable, no matter how deep he had to pile the bullshit in the company's accounting records to create that appearance.  And the height of the pile had to increase exponentially... the more unrealistic the last report, the more imaginative the next one would have to be.

After the crash, the Enron bosses naturally tried to pin all the blame on Fastow, but Sherron Watkins makes it clear in her interview that "Skilling was Kathleen Turner and Andy was William Hurt."  Fastow was young and readily steered by his superiors.

When the stock market finally flattened out, Fastow began pulling desperate moves to keep things going.  That's when he started coming up with the cornucopia of financial inventions that his name will always be remembered for: the hundreds of shell companies that he used to conceal losses and debt, the fake mutual funds which he presented to Wall Street banks as offering guaranteed profits.  He told them up front that the fund companies were based on deals made between himself and himself, and this was how he could be sure of a good return.  The documentary scored video footage of his sales pitch!  It's a classic moment.  Of course, what the fund really amounted to was a Ponzi scheme, a pyramid, where early investors are given back good returns only to attract more and larger investments.  Even as it describes Enron's use of intimidation tactics to keep stock analysts and their employers in line, the film pulls no punches with the Wall Streeters who went along with the hooey:  "The analysts weren't analyzing at all.  They were willing to believe anything Enron told them."

Lay and Skilling finally knew they could not keep this going.  And that's how we come to the California energy crisis.  Which was, again, made possible through the wonder of deregulation.  Specifically, the utility deregulation law signed by Governor Pete Wilson (Republican, of course) in 1996.

This is one area where the film lays out a key point excellently: they spell it out plainly that the reason California got reamed out of billions by an artificial electricity shortage was because Enron had run out of other ways to make money.  Their original plan in the deregulated California market had apparently been just to continue their middlemanship, draining off a few millions here and there each week by trading on price fluctuations.  But they reached a point where Fastow's house of cards was going to collapse unless they got a flood of fresh cash.  So they decided to forget all about nurturing a long term sustainable relationship with their parasitic host, and just drain as much blood as possible at maximum speed.  So California's power plants began to shut down, and electricity prices shot up through the ceiling like Daffy Duck after a belt of whiskey.

Ironically, this was one time when Enron finally managed to make some money as a producer rather than as a trader.  They had bought up a number of power plants in California (including the big windmill farms in the Tehachapi area, a useful bit of environmental PR), and now those that they allowed to run made mighty incomes.  Up to this point, Enron's attempts to make money on the hardware side of the energy business had largely been flops: they were typically big, bold ideas that other companies weren't trying, which looked good on paper but failed in practice.  This may have been because they were so prone to believing their own entrepreneurial bullshit that they were incapable of seeing the risks and drawbacks of their ideas, or it may have been because they were, by this time, amateur dilettante poseurs at the art of building energy industry hardware.  Either way, they operated their hardware ventures like a bunch of cokeheads, blathering on about how rich they were going to get while carelessly wasting all their ready cash.  But during the California crisis, even they could make big profits just by running power plants built by somebody else.  Or not running them.

(The film does mention Enron's unfinished power plant in Dabhol, India.  But they discuss it only as a losing business venture.  I wish they had taken a minute or two to describe the abuses that were committed in India -- the bribery and the beatings -- as part of the process to get the plant built.  Not to mention the jacked-up prices the customers ended up paying for an incomplete plant that quit running after only a few years.)

They also figured out dozens of ways to scam money out of loopholes in the new California regulatory scheme, which they had had some part in designing (though not a large one: the utility PG&E was the main responsible party there, by most reports).  They did things like transmit power out to Nevada on one set of wires, then back in on another, creating "congestion" which due to a legal technicality actually resulted in them getting paid by the state when they "relieved" it, and also cutting the amount of power in half by wastage on the round trip.

By this time the rest of the stock market was collapsing.  The dot-com bubble had burst... ironically, the dot-coms were a sector very hard hit by the electricity shortage, so Enron may have hastened the end of the nineties boom by weeks or months.  By the time of the second major wave of blackouts in the summer of 2000, the people at Enron must have suspected that even they couldn't keep making their stock go up.  But they did have help on the way: George W. Bush was about to be elected President.

And this is the first major point where I find grounds to criticize the film for skipping truly important material.  They discuss early on the closeness of the relationship between the Georges Bush and Enron, but they don't go into details.  They never mention, for instance, how Enron executive Thomas White -- who later turned out to be personally involved in the California thievery -- was appointed Secretary of the Army, and was retained in that post even after a storm of criticism.  (And then quietly sacked when they needed a real Army Secretary in wartime.)  They never mentioned the Energy Task Force headed by Dick Cheney, and the still ongoing lawsuit that is attempting to pry out the records of just how closely this task force followed orders from Ken Lay when it drafted the energy policy that Bush sent to Congress.  They only sketchily suggest how Bush and especially Cheney vociferously opposed the exact regulatory policies which, once finally enacted, rapidly ended the crisis... in the same terms that Ken Lay did.  These are key pieces of the Enron story, and without them, the suggestions that the Bush White House aided and abetted the theft remain thinly and unconvincingly sketched.

They do make clear one thing that I, in all my writings about Enron, had never realized until a reader of my Enron & Friends articles pointed it out to me: that the one individual most responsible for ending the electricity crisis (and with it, Enron) was Senator Jim Jeffords.  The Federal Energy Regulatory Commission, chaired by Ken Lay's own nominee Pat Wood, had steadfastly refused to set price caps.  It was when Jeffords switched parties and handed control of the Senate over to the Democrats that Wood was forced to act in spite of his personal resistance to doing so.  Price caps were imposed, and independent power plants could no longer raise their profits past that point by lowering their output, so they increased their hours of operation, and the shortages faded rapidly... starting just one day after Jeffords' switch in the spring of 2001.

The cessation of the electricity shortage finished off Enron.  It struggled on for another six months or so on sheer bluffing before it finally sent all its employees home.  The closing section of the film, in which Skilling flees the company and Lay takes his place, spewing constant lies to try to keep things rolling, is the most appalling part, though also the most familiar to most viewers.  This is when the responsible parties' behavior is at its worst, when the mendacity and heartlessness of the policies pursued by the executives as they struggled to keep the illusion alive -- or failing that, to keep as much as possible for themselves even if it meant fleecing their own employees -- becomes completely clear.  The stench of Lay's bullshit reaches an unsurpassed peak when, after September 11, he compares the people closing in pursuit of his failing company to the terrorists who attacked New York.

The big question one always wants to ask is, how can such things happen?  The film has an answer: Bill Lerach, attorney for the shareholders suing Enron, calls it "synergistic corruption".  In simple terms, the more corruption you've got, the more you can create.  Anybody who's near it can make money by joining in, and the bigger the network gets, the more goodies there are to go around.  Everyone in private business who could have done something about Enron was instead seduced into participating in the lies and scams themselves, because that way they'd get a piece.  So the accountants at Arthur Andersen validated Enron's accounts when they knew they were fabrications, the Wall Street analysts recommended Enron's stock to retail trading customers when they knew it couldn't stay up, and bankers invested in Fastow's fake funds when they knew it was an insider trading flimflam and had to have suspected it was a Ponzi scheme.  Arthur Andersen is gone now, but Merrill Lynch and the other guilty parties are still very much in business... under mildly altered rules which are probably unenforceable in practice.

But what is the answer behind the answer?  How could all this "synergistic corruption" get going on such a scale?  There, the film is not explicit, though the dots are there to connect, if you know some of the background.  They start talking about the Milgram experiment and how people's consciences tend to malfunction when surrounded by an environment in which harmful behavior is accepted as a cultural norm.  For me, this is a waste of time -- the aspect that needs to be addressed in the public debate is policy, not psychology.  (And I say this as a big time pop-psych weenie.)  What made this time in history different from those in which excesses of such magnitude didn't tend to occur?

My answer is that deregulation has two aspects.  Only the visible front face has to do with cutting laws and bureaucratic rules to allow greater freedom for businesses.  The hidden back face of it is the curtailment of enforcement.  When regulations are left legally in force but the government doesn't pursue those who violate them.  That is what happened to the regulation of Wall Street and the financial markets, as well as to countless other sectors of the economy, in the Reagan administration when Enron got its start.  And that is the state of affairs that Bill Clinton winked at and left in place because he didn't want to give up the benefits of a constantly rising stock market.  When oversight from organizations like the SEC is lax, that's when Wall Street falls into the hands of pirates and fraudsters.  At other times, when the pendulum swings back toward stronger oversight, history shows that it's possible to keep the place quite a bit cleaner.

In short, this kind of piracy became possible because politicians in power wanted it to be possible.  And they wanted it because people like Ken Lay gave money to those who chose to speak out for it.  They were paid to want it.  They still are, even if advocacy of more deregulationism has to be spoken of very quietly for a while.

Besides that big question, the one question that I really wished the film could answer was, How much of that money is still out there somewhere?  How much of the five or six hundred million dollars that Lay and the others pulled out of the dying company is still squirreled away?  And how much more got set aside than the part we know about?  Unfortunately, the film can't answer it, because nobody knows yet.  They certainly whet your suspicions -- it's pretty improbable that Ken Lay's $300,000,000 got lost because he put the money back into the company just after taking it out, and that's about the only way his story about how the money disappeared could be true -- but as yet, nobody can show what actually happened.

The film does spend some minutes on the strangest and most amusing coda to the whole Enron story: the recall election that installed Arnold Schwarzenegger, of all people, as Governor of California.  I, for one, am still shaking my head in disbelief at this event, and I'm far from alone.  This has got to be one of the silliest misjudgments of cause and effect ever made by the electorate of my marvelous and beloved home state... Ahnuld's team pretty much stood for the kind of deregulation that created the mess, and Gray Davis had done more than anyone else in the state to stop it.  In fact, if Jim Jeffords gets the credit for doing the most of any single person to end the crisis, Davis gets the second-most credit: his move of writing long-term contracts with large generating companies at fixed prices, costly though it was, was the other half of the one-two punch that knocked out the shortages.  Also, I personally couldn't help noticing that in the debates before the recall election, it was Davis, of all the candidates, who spoke most clearly, perceptively, and truthfully on the issues.  He may have been dull, he may have been a one-fisted hero, but he was still a better choice for the governorship than any of his would-be replacements, including some that were, in terms of ideological position, more to my own personal liking.  The only real strike against him was that he had failed to stop the theft... and the GOP tried hard to distort this into a charge that the whole mess was his fault.  This was so transparently ludicrous and dishonest that it still amazes me that anyone swallowed it.  But a good many apparently did.

I believe that one important reason for this is how the media handled the crisis while it was going on.  This is another key point that the film does not cover, but the omission is a subtle one and it's not surprising that they would find this easy to miss, especially if the filmmakers were from out of state.  Which is the fact that the major media in California and elsewhere never reported that we were being ripped off, even after it had been going on for a year!  The news stories persisted in a state of bland obliviousness for an unbelievably long time, with only the left-leaning alternative press telling anyone what was really going on -- the knowledge was there, as the alt press demonstrated, but it was never publicized as you would expect.  Only in the last few months of the crisis, as prices soared to their highest prices ever during a time of year when demand was at a rock bottom minimum, did the major news institutions gradually start to catch on, or admit, that this wasn't being caused by the economic equivalent of forces of nature, it was being caused by thieves.  When public figures did speak out about what was happening, such as Loretta Lynch at the California Public Utilities Commission (who is in the film quite briefly), the quotes were buried and the stories were downplayed.

This gross irresponsibility on the part of the major news organizations, which left most people with only the vaguest ideas about what was going wrong during the time it was happening, made it pretty easy to keep people confused and uninformed after the crisis was over.  In the film, the Californians you see during the crisis are activists, who know exactly what's going on... you never realize, if you weren't here at the time, just how unrepresentative they were of the populace as a whole.  And that, children, is why Ahnuld won the Governatorship.

(He is now experiencing the backlash that often hits outsider nonpoliticians who get into office by promising the moon... people are catching on, rather too late, to what a turkey he is policy-wise.  He looks unlikely to be re-elected... but that's what we thought about George W.  Never underestimate the ability of the Republican Party to come up with unpredictable and audacious ways to whip up a public frenzy that benefits them at the polls.)

The total cost of Enron's binge is probably beyond guessing.  The amount stolen from the people of California -- and we'll still be paying for it for years to come -- was at least thirty billion dollars and could be twice that.  The wreckage left by Enron in its other ventures is scattered widely around other parts of the world, from Nigeria to Bolivia.  And one Enron & Friends reader, using some technique of macroeconomic analysis which I don't understand, says that his figures show that the electricity shortage probably contributed more to the recession now gripping the US economy than either the 9/11 attack or the dot-com crash did.  If that's true, then Ken Lay didn't just wipe out tens of thousands of jobs among his own employees, but hundreds of thousands.  And still, nobody is being held accountable for creating this situation.  Sure, Ken Lay is in handcuffs -- a cheering image near the end of the film -- but has anything been done to keep Wall Street more honest?  Not much.  The much-touted cleanup of the brokerage houses amounts to little more than that classic deregulationist's favorite: industry self-regulation.  Other business practices have been checked only by the relatively weak Sarbanes-Oxley act, which entrepreneurial moaners are now bitching involves an onerous amount of paperwork and over-regulation.  And has anyone been held accountable for the decisions of policy that created such an inviting atmosphere for piracy and fraud?  No, no, absolutely not.  Nobody.

At the start of this review, I referred to Enron as "the most spectacularly crooked corporation of modern times"... but by "spectacularly" I only mean that it was the most visibly crooked.  I would not want to assume that there aren't other large companies out there which are just as rotten -- they may just be better at maintaining a convincing appearance.

As things stand now, all this could happen again in a few years.  We haven't really even managed to repair the terrible mistakes that were made in the California utilities law.  Ahnuld sure doesn't want to go back to anything like the pre-1996 system, no matter how well it might have worked.

The justice system and the machinery of financial oversight are not now in any position to stop another Enron.  The one force that can change that, and restore the more effective rules of conduct that worked better in the past, is the voting public.  Who won't do us much good if they aren't informed.  Enron: The Smartest Guys In The Room is a film that lays out almost all of the important points of the story in 110 minutes, and helps clarify many of the reasons why it was able to happen, while avoiding the sort of tendentiosity that many middle-of-the-road Americans find offensive or tiresome in liberal-slanted attacks on corporate abuses.  Unless your ambition is to become a financial pirate yourself, any good American who believes in hard work and free enterprise ought to hope that his neighbors see this film, or otherwise inform themselves about the extent of fraud and corruption that has occurred and can occur again.  For them to be informed is in your financial self-interest.