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Conspiracy of Fools: A True Story by Kurt Eichenwald (2005, Broadway Books, New York City, 742 pages)
THE MOST COMPLETE STORY OF THE ENRON SCANDAL to date has been written by Kurt Eichenwald. a seventeen-year New York Times veteran. A two-time winner of the George Polk Award for excellence in journalism and a 2000 finalist for the Pulitzer Prize, Eichenwald has based his account on more than a thousand hours of interviews with over a hundred participants in the events, as well as a review of tens of thousands of confidential corporate and government documents, including FBI notes and testimony before federal grand juries.
The book is written as a narrative, and Eichenwald manages to build suspense, along with incongruity, even though we all know the final outcome. The Enron scandal did not burst out, fully grown, in a matter of days. Widespread corner cutting, steadily falling standards and compromised financial discipline had been festering for close to a decade. Warnings about funny numbers and unrealistic expectations went unheeded, and investors celebrated reckless or incomprehensible business strategies that helped the stock price defy the laws of gravity.
Eichenwald depicts the Enron scandal as not simply the outgrowth of rampant lawbreaking. The true story was more complex and more disturbing. Crime was just one ingredient, along with shocking incompetence, unjustified arrogance, compromised ethics, and an utter contempt for market judgment. It was Enron's tragedy to be run by people smart enough to know how to maneuver around the rules, but not wise enough to understand why the rules had been written in the first place.
No single person was responsible. It took the shortcomings of a handful of executives along with a community of bankers, lawyers and accountants eager to win the company's fees, a government willing to abide absurdly lax rules and a class of investor more interested in quick wealth than long term rewards. The impact was broad, including the destruction of Enron, the demise of Arthur Anderson, the termination of the chief of the securities & Exchange Commission and the passing by Congress of the most onerous corporate compliance legislation since the Great Depression.
Eichenwald depicts most Enron executives as wanting to do the right thing. Robert Jaedicke, outside director and chair...