Conspiracy Of Fools: A True Story (2005) - Plot & Excerpts
This book presents Andy Fastow, Enron CFO, as the principal architect behind the fall of Enron, diminishing the legitimacy of the US financial institution, feeding the CA energy crisis and international problems, specifically in India and Latin America.Fastow created accounting entities which were used to hide Enron debt. He initially named himself the owner of these entities and got the board to dismiss any conflicts of interest. He then played loose with accounting rules and received required 3% investment from a third part - a non-executive co-worker. Why wouldn't you trust your CFO, right?Fastow takes fees for running these entities - which ultimately end up being recognize as Enron years later. Basically he embezzled and gave others a piece of the pie to go along with it. Skilling, Lay and the board don't go into details so they think it's all on the up - hey, Fastow is reducing expense and increasing profit. Gotta love it.He's creating an trading & loan office within an oil delivery company.Enron's profits are huge. They're the big guy on the block. Well, how do you get this by the external accounting review (arthur andersen) and the ratings companies (Moody?) Well, both those companies receive money from Enron for other business. If you don't sign off, maybe that business will go somewhere else. You're numbers will be down, then you're job will be on the block. It's a soft approach to a strong-arm tactic. Politics uses a version of this too. Ask the wrong question of the president and you're access to the white house is cut-off. You can't be a WH correspondent and not have access.You get the SEC to sign-off by describing partially what you are doing.Seems good, and hey, the company gave money to Bush Sr, Bush Jr and Ashcroft. Lay's a big Bush family friend. This is obviously a trustworthy company.Now, packed with your CYA from the SEC and Anderson the board is assured that nothing can go wrong.All during this Enron has a number of other shady things going on. It sales is eager to book deals ( a multi-billion facility in India) but without any review of what actual costs are. They also get creative and create an energy market in CA which they then manipulate to shakedown a state by holding them as captive consumers.The snowball effect happens (no, not Warren Buffett), things start to leek. The culture of loyalty and pettiness internal starts to crumble. Deals fall through, economic triggers are hit.The hidden debt's ugly head appears and the company is actually 2-3 billion in debt. Just as a deal for Enron to be bought by Dynergy, the #2 company always made fun of by Enron, an economic trigger hits, an additional 690 millions is owed, and the final nail is driven into the Enron casket.Really, this story is about greed. That greed drove Fastow, Skilling, Lay, the Enron Board, Moody's, and Arthur Anderson. There needed to be regulations and review in place that were completely third party, without conflict of interest or influence. Every system, ultimately, is as good as its people. In a culture of greed and unfettered profiteering this is what happens, and will happen again.There's a saying about Texas businessman and how they take pride in your great losses as much as your great wins. The cost those losses are to everyone else never seem to make it to the balance sheet.So Fastow, the inflection point in this crime, created multi-billion debt, destroyed a company (Enron would have rebounded from their other problems if Fastow didn't do what he did, and perhaps they never would have engaged in those endeavors without his presence), damaged the world economy, contributed to the destruction of an accounting firm, destroyed peoples livelihood, retirements, jobs, and more... and received just six years in jail. That's all. Skilling received 14 years and Lay died before his sentencing.The issue with an unregulated capitalism is that you only know that you shouldn't have done something after the fact. By then, all the potential destruction has already been done. Case in point: the dodo. Market forces drove the extinction of an animal because immediate profits were greater than preserving (regulating/protecting) them and creating a sustainable market that could have lasted a hundred years or more.The book should really have been titled "Conspiracy for Greed" as they weren't fools - just greedy businessmen.
Would YOU like to cause the biggest bankruptcy in American history? Sure you would! Well, Enron has already gone kablooey, losing billions of dollars, throwing more than 20,000 people out of work, and contributing to at least one suicide. But you can use the Enron approach to management at your company by following these easy rules.* Don't keep track of how much money is coming in.* Don't keep track of when your bills are due. Petty details are boooooriiiiing.* Reward people for getting a deal done.* Don't reward people for getting a power plant built or for doing anything else that leads to actual, physical changes in the real world. Focus on the numbers that are on the paper.* When you make a deal, take credit for all the earnings that year, even if the deal is supposed to last 20 years.* When the deals don't make as much money as you thought they would, make secret deals to pump up the balance sheet and keep the stock price high.* Don't reward people for controlling costs.* Don't reward people for doing stuff like buying insurance for the company. A monkey could do that.* For key positions, hire underqualified, incompetent people, plus a few thieves. Trust them.* When someone asks you to sign a document, if other board members have already signed, don't bother to look too closely into what you are signing. You can trust the others.* Leave $10 million in checks lying around uncashed. You're at a Fortune 50 company, so don't sweat the small stuff.* When an accountant from an outside firm tries to find out specific information about your deals and about how the company works, complain to that person's supervisor that the person is "too rules-oriented" and "uncreative." Threaten to take your business elsewhere unless that specific person is reassigned.* When reporters begin investigating your company, say, "I don't care what you say about the company. Just don't make me look bad."* Spend your time flying around the world in a corporate jet, shaking hands with presidents and business leaders.P.S. This book is soon to be made into a movie starring Leonardo DiCaprio.
What do You think about Conspiracy Of Fools: A True Story (2005)?
Let me start by saying that, if i remember right, i cheated/cried my way through all finance and accounting classes i had to take in college. I'm not upset by that now, because those classes sucked and i am stupid. Nothing to argue with so far.So there is no f-ing reason for me to read or even go near this book. Especially when i remember watching the enron documentary in college and falling asleep in class and hating my life. so when i found it at my grandfathers house....fysh!...i'm bored already and realize i can't explain why this book is awesome, so barrrummph!
—John
This is a long book - almost 700 pages - but an easy read. Everyone knows the story of Enron from the anecdotes, and I've read a few other books on the subject, but this is by far the best and most complete. It does a great job of tracing how some minor decisions years earlier - to use mark-to-market accounting, to form off-balance-sheet entities that really weren't, managed by Andy Fastow, who probably shouldn't have been managing a McDonalds - led to it's ultimate collapse.The "Conspiracy of Fools" title is fitting- while Fastow and a few others committed massively illegal acts, much of the other players - including Lay and Skilling - are portrayed primarily as incompetent - they didn't bother to find out what was really going on. The book also highlights a few other people, especially Jeff McMahon - who sounded warnings about the behaviors and were ignored. There are a number of lessons from this book, but the biggest is probably that you should read anything you sign.
—Anthony
Wow, I've been reading this one almost non-stop. I could not get myself to put it away.The enormous spending of corporate funding, the way the exec's are looking the other way, the numerous ways where Enron could have taken another road -away from bankruptcy-, the way the characters play together to create this huge chunk of corporate mischief, I loved it. The book reads very easily if you have some feeling of accounting or finance, next to that there are a lot of characters involved but they're introduced in a well written way, easing in and out of the storyline. There were moments where I kept my breath, moments of laughter and a lot of moments where I disturbed my partner (again) to tell her about the humongous ignorance of the main characters involved, it got to a point where she asked me to just send me the summary and just let her be (and that's a very good sign for this book)Bit of a spoiler here; The main characters Ken Lay, Jeff Skilling and Andy Fastow seem to me like three parts of an intricate triangle. Ken Lay being the grandfatherly figure, the soothing voice to comfort and heal relations. Jeff Skilling is marked by chaos, selfdoubt and hoping to do well and Andy Fastow just fumes and schemes away, I found him to be just a very, very bad person where I kept hoping he will get caught..
—Joris
