“Bad Bets” Podcast Details the Fall of Enron

JOHN EMSHWILLER, CO-HOST, “BAD BETS”: Well, Enron certainly seemed to be on the cutting edge of American business in many ways in the 1990s. You might remember that was the beginning of dot-com era and the first great dot-com bubble in the stock market. And Enron was this old-line company, a gas transmission company. It moved natural gas around the country. But it seemed to understand the Internet and grab on to it in ways that other old-line companies hadn’t. So it seemed to be this great combination of sort of bricks and mortar and now cyberspace. And it revolutionized energy trading in the United States and brought in all kinds of bright, ambitious people. So it really was kind of a superstar for a while in the both Houston firmament and in the greater corporate firmament.

BIANNA GOLODRYGA: Yes, obviously leading up to its demise, which you helped unravel at “The Wall Street Journal,” you and other reporters. And your investigation into Enron really began with something that didn’t seem like it was that stark of a headline. The CEO had resigned. He had been newly appointed to the job just a few months, Jeffrey Skilling. But it was an interview that he gave where he said the reason for his resignation was the stock price going down. That’s not a typical answer to somebody leaving the company so quickly.

EMSHWILLER: No. Enron — I mean, Jeff Skilling’s resignation was really the beginning for us, certainly for me. Rebecca was normally the Enron reporter and covered it, I thought, very well. But she was off on — moving into a house with no Internet connection or anything today I was supposed to interview Skilling. So I got assigned a job. And I — in preparation for it, I read this SEC filing, their latest one, and came across these very strange-sounding partnerships called the LJM partnerships, which were being run and partly owned by their own chief financial officer, Andy Fastow, and doing hundreds of millions of dollars of business. And that was sort of the prep for the interview I ran across. And then Skilling tells me this stuff about, the stock price, I probably wouldn’t have quit, which went against what they had said just the day before, that he quit entirely for personal reasons. So, between the — discovering those partnerships and his comments, Becky and I started on our adventure.

GOLODRYGA: So, Becky, talk about that adventure and what you ended up finding and unearthing, because what many ended up describing is not something illegal. In fact, it was almost a legal fraud.

REBECCA SMITH, CO-HOST, “BAD BETS”: Well, so one of the things we found — and this is one of the lessons from Enron — is that it was aided and abetted by all of the professional services. We’re talking the accountants, the lawyers, and also, to some extent, the Wall Street analysts. I mean, all of these were working — these individuals were working for companies that made a lot of fee income off of Enron. And so they had a stake in its success.