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'Start with a pretty straightforward question.'
"I don't get it."
Those four humbling words became the key to unlocking the secrets Enron Corporation had stored up before its collapse last December. But those four words proved to be a hard admission for most analysts who were paid to knowwhat Enron was up to. Hard, too, for Enron's highly compensated outside directors charged with protecting shareholders' interests.
Nor is this a statement that reporters and editors like to make either in public view or to each other. Journalists take pride in finding out answers to questions, not in being stumped and misled. What readers and viewers want from us is a way to see the bottom line with clarity and not confusing, unfinished calculations.
Fortune's Bethany McLean, the first journalist for a major business publication to question Enron's inflated reputation, started down this path toward clarity when in March of 2001 she spotlighted a central issue about Enron that neither she nor much of Wall Street could explain. "Start with a pretty straightforward question," McLean wrote: "How exactly does Enron make its money?"
Last spring, as Enron's high-flying stock descended, other reporters raised questions and quoted skeptics. In a probing U.S. News & World Report story in June, Anne Kates Smith asked whether Enron was overpriced. She quoted Houston securities analyst John Olson, an Enron doubter: "They're not very forthcoming about how they make their money. I don't know an analyst worth his salt who can seriously analyze Enron," Olson said.
But it was not until mid-October, after Enron's carefully hedged admissions of several unexpected and ill-- explained financial setbacks, that the mainstream press began to take notice. Then Enron's abstract accounting story took on a human face, that of its chief financial officer Andrew Fastow, an operator of mysterious investment partnerships that were lining his pockets. An article last August by Wall Street Journal reporters Rebecca Smith and John Emshwiller put a spotlight on Fastow. By October, other reporters were digging and more devastating disclosures followed. In December, Enron folded, with the largest bankruptcy filing in U.S. history. By then, something like $60 billion in stock market wealth had disappeared in...