HOUSTON -- Several years before the meltdown, something already seemed out of whack to Tom Brigger at Enron's Corp. headquarters here.
Everyone hustled around in a ceaseless buzz. Ideas flew, sparked projects everywhere, ran through hurried testing -- and often quickly dropped out of sight. Brigger, who oversaw Enron's mid-Atlantic unit for energy-management services, wondered how much energy was wasted.
''We moved forward constantly. It would change directions constantly, and nobody would ask what this is going to cost. It would just blow my mind,'' says Brigger, who left Enron in July to form a smaller company. ''They were growing ... so rapidly, there is no way they could put a plan together.''
Enron succeeded fabulously in the 1990s -- or so it seemed -- by dreaming up a new model for an energy business. Enron would be light on steel and concrete and even lighter on its feet. In short order, Enron became the new industry's swaggering giant.
Enron grew so big and so fast, pumped up its stock so high, and wooed so many big shots that the company intimidated competitors and intoxicated analysts, business gurus, reporters -- and maybe even itself. As clever deals piled up and the money spigot never shut, Enron's leadership came to feel, by many inside accounts, that it could do no wrong and could never be touched by anything.
Yet the company with the tilted ''E'' logo has tumbled -- unbelievably within two months -- into the biggest business bankruptcy in American history and a truly Enron-sized corruption scandal.
''This company started at 10 mph and, by two years ago, was running at 60 mph, and you don't see many stop signs at 60 mph,'' says Houston securities analyst John Olson, who has watched Enron's rise and fall and knows some of its people. ''So when this company went off the cliff, it went off at 60 mph.''
In the old comic-book ad, a skinny weakling gets a faceful of sand, courtesy of a bully, and decides to transform himself. He builds up his muscles, and hits the beach again, this time with an attitude. That weakling was Kenneth Lay.
A Missouri native with deceptively avuncular ways, Lay earned a University of Houston economics doctorate, worked as an economist at Exxon, and took over as chairman of Houston Natural Gas in 1984. The decades-old government controls on the natural gas business were softening up to let in new cost-cutters, and operators were devouring one another in mergers. Lay fought off one would-be merger before he was obliged to hitch to larger Internorth, another natural gas company in Omaha, Neb. Enron was born as the owner of 37,000 miles of interstate pipeline.
Before long, Lay, from the smaller company, emerged from infighting as leader of Enron. But what now? Natural gas prices went into a slump, and Enron's merger debts were heavy. Lay hired a Harvard Business graduate named Jeff Skilling, and together they set out to find a new identity for Enron.
They struck on a formula now taught in business schools. Enron would reshape itself primarily into a wholesale buyer and seller of natural gas. Why can't customers be given alternatives: small or big volume, fixed or variable price, length of contract, even time of day for delivery? Enron would offer one-stop shopping for trimmings like built-in credit and hedge investments that could be used to ease losses. With the right computer models, statistical methods and a belly for risk, money could be made by the barrel, without producing a thimble of natural gas.
It was a risky notion that tended to appeal more to Wall Street than to the stodgier, old boy petroleum business of Texas. But Enron's directors, seeing drab prospects otherwise, were willing to endorse radical change.
Enron's timing was good: Federal regulators were heading in the same direction of loosening regulatory reins. When Enron opened trading at its GasBank in 1989, customers also bought into it, and in a big way.
''Skilling said, 'Let's give customers choice.' That was an astonishing suggestion for an industry that had basically dealt in a one-size-fits-all model for decades,'' says Robert Bruner, who teaches Enron as a case study in business at the University of Virginia.
Lay wanted choice for Enron too. That meant handling lots of buys and sales, pumping lots of capital, and flooding new markets with overwhelming money and manpower.
''Enron exploded out of the blocks and became the 900-pound gorilla,'' says Bruner. Within five years, Enron was brokering electricity deals.
In its 15-year rise, by the year 2000, Enron boomed into the world's biggest energy dealer and the country's No. 7 company with $101 billion in annual business, at least according to their method of figuring revenue. It had about 20,000 employees.
Ken Lay and company were the big men on the beach now.
Flush with cash, Enron put on business meetings to remember.
Matt Mitchell, 29, still remembers his ribeye steak. Then there was that $35 shot of whiskey that somebody downed. And the $700 worth of wine lapped up by his 15-member engineering group at a swank Houston restaurant.
''I don't think we ever discussed business,'' Mitchell says of that meeting.
The perks were plentiful at Enron's $200 million headquarters too. There was dry cleaning and a service that, for a minimal fee, would walk your dog while you worked. The 40-story tower housed a doctor's office -- with a free doctor -- and a gym.
The money -- often in copious amounts -- also encouraged loyalty. For Mitchell, who had just joined Enron in June 2000, it was an $11,000 bonus on top of his $84,000 annual salary. For many, the money took the form of Enron stock. They bought it, took it in bonuses, or held it from company contributions to their retirement plans.
Charles Prestwood, of Conroe, a pipeline operator for 33 years first with Houston Natural Gas and then Enron, started watching Enron stock prices daily as he neared his retirement in 2000. ''It was going up and going up fast, it made me feel good -- more money for me!''
''I'd wear my coveralls with my Enron logo with great dignity,'' he adds. ''Heck, I wore them to town, I wore them everywhere.''
At peak, the stock -- his retirement fund -- was worth about $1.3 million. It is now worth several thousand dollars, and he has joined one of an onslaught of class-action lawsuits on behalf of employees. Even in the high-flying times, not everyone prospered, of course. Trader-eat-trader competition rippled through Enron. The little ones got eaten.
''It had Darwinian elements,'' says Bruner, at the University of Virginia. If you didn't meet your targets, you were gone.''
For some, the competition and atmosphere of overdrive were overwhelming. ''Certain employees had lots of fun; others were challenged,'' says Bill Brendler, a psychologist who trained Enron executives in employee relationships during the 1990s. The comfortable ones had to ''thrive on change and chaos,'' he says.
Meanwhile, the Enron behemoth kept sprouting heads. The idea congealed at Enron that it could sell just about anything. It began selling fiber-optic cable capacity, coal, paper and pulp, evolving toward a vast private commodities exchange.
Its financial services grew more exotic. It dealt more heavily in investments known as derivatives, which are pegged to the rise-or-fall of something else. In a weather derivative, a restaurant could win a premium, paid by Enron, if snow kept customers home. No snow, and Enron pockets the premium, paid by the restaurant out of healthy proceeds. Enron was always betting that its bets were best.
With its 1999 launch of Enron Online, the company established an Internet-based energy exchange. To its fat resume, it added dot.com.
And it never completely lost its taste for cement. Enron took on dozens of power projects around the world. Some ended up in trouble, like a $2.9 billion generating Goliath in India.
With so many disparate interests, Enron needed many friends, knew it and tried hard to cultivate them.
It started at home by helping charities and pledging $100 million over 30 years at a new ballpark for the Houston Astros. The graceful stadium with its brick archways and clocktower was named Enron Field. Enron won a friend in Houston baseball fan Edgar Glenn.
''That was something everyone in Houston could be proud of,'' he says. ''We could boast about it.''
Enron also gave money to both Republicans and Democrats, hedging its political bets like trades. During the 1990s, Enron showered candidates with almost $5.8 million. It has given to almost half of the sitting Congress, according to the Center for Responsive politics. Lay is a friend of both President Bush and his father, the former president.
You might say all that money bought little, since the company lost on an international accord it wanted on global warming, repealing the alternative minimum tax for corporations, and other issues. But it at least got a hearing in many cases, as when Vice President Dick Cheney was crafting energy policy last year. Even knowing that something it favors won't happen can give Enron an edge, especially because it trades on predictions of future prices.
Meanwhile, Enron's competitors were catching on, offering similar deals, and cutting into Enron's already modest margins. Even so, through last summer, Enron executives were swaggering in their public pronouncements
Then, in an out-of-the-blue October, Enron acknowledged a $638 million third-quarter loss, and the Securities and Exchange Commission opened an inquiry into a series of complex partnerships that Enron set up -- apparently to throw a veil over its rising debts. Enron acknowledged overstating profits by more than $580 million since 1997. Its stock crashed, and it requested bankruptcy protection by Dec. 2. Control of its once idolized energy trading business has been turned over to UBS Warburg, a division of a Swiss bank.
Olson, the Houston analyst, says Enron executives became addicted to sophisticated accounting tricks to keep their reputation high. ''It became like crack cocaine, where you had partnerships able to gin out synthetic earnings for you if you had a shortfall,'' he says. ''It was a matter of the culture getting carried away with their success.''
In a final slight, archrival Dynegy has walked away from an $8.4 billion merger. In the process, it has stripped away an Enron asset that has stayed valuable: a natural gas pipeline.
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