June 27, 2026 • 60 mins
Until 2007, the largest single corporate bankruptcy was Enron, a $67 billion energy trading company. Its decline was breathtaking, and while it’s a fascinating story of corporate malfeasance and greed, it’s also about the lives of ruined workers. Learn all about it in this classic episode.
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Speaker 1 (00:00):
Hey, guys, it's me Joshun For this week's select I've
chosen our twenty twenty three episode on the Enron scandal.
It's a pretty interesting episode, at the very least, just
because of the mind bogglingly nuts stuff that these guys
did all in the pursuit of money and personal gain.
Not only did they swindle entire states, they also, as
(00:23):
a nice cherry on top, wiped out the life savings
of thousands of their own employees. It's the kind of
thing that was such a big deal. It left us
stain on American society as a whole, just by how
cynical it made everybody about what people can get away
with just in the pursuit of wealth. At any rate,
I hope you enjoyed this episode. It's a good one.
Speaker 2 (00:47):
Welcome to Stuff You Should Know a production of iHeartRadio.
Speaker 3 (00:57):
Hey, and welcome to the podcast.
Speaker 1 (00:59):
I'm Joshu and there's Chuck and Jerry's here, and it's
stuff you should know.
Speaker 4 (01:03):
We you mean it.
Speaker 3 (01:04):
You should know this stuff because this is serious.
Speaker 1 (01:08):
Corporate malfeasance that I think it's probably not an American
over the age of twenty walking around who doesn't know
about this somehow, some way, to some degree. I know
they teach about this stuff in business school. It's been
written on extensively, but I mean I didn't understand the
ins and outs of it until I started researching this,
(01:29):
and it's quite shocking. And that shocking thing that I'm
talking about is the rise.
Speaker 3 (01:36):
And fall of Enron, one of.
Speaker 1 (01:38):
The greatest swindles in corporate American history, maybe in corporate
history in the world, definitely in corporate American.
Speaker 4 (01:47):
History for sure.
Speaker 2 (01:49):
I'm really glad you picked this because I didn't know
all the ins and outs either, because this is you know,
when I was a young late twenties, early thirty something,
didn't have a care in the world. Sure, And I
finally watched The Smartest Guys in the Room today.
Speaker 3 (02:06):
Yeah, I saw it last night.
Speaker 4 (02:08):
Yeah.
Speaker 2 (02:08):
The documentary based on the book, and we'll get to
the authors and stuff. It was Peter Elkind and.
Speaker 3 (02:15):
Who was a co author, Bethany McLain.
Speaker 4 (02:17):
Okay, he was the lead author.
Speaker 2 (02:19):
Even Okay, I knew she wrote the original articles and Forbes,
so she co authored the book and she's in the documentary,
as is Elkland. And it really is worth the watch.
But just want to point out that this is an
overview of the Enron scandal. It's pretty clear once you
start poking around that this could be like a ten
part series.
Speaker 3 (02:40):
Yeah for sure.
Speaker 2 (02:41):
And there probably is a podcast series out there that
covered just Enron. So there's lots of sort of ins
and outs that we won't be able to touch on,
but we can definitely give her the overview, which was
that Enron was a corporation. Originally it was a natural
gas line pipeline operator, but they quickly, well not quickly,
(03:05):
they got out of that business almost entirely when certain
people were hired and we'll sort of get to all
this in a minute too. Certain people, when certain people
were hired that basically said, you know what, we don't
we should even be in the pipeline industry. We should
invent almost a new kind of industry, which is to
(03:25):
use energy as financial instruments, and we should become a
trading company that trades natural gas and eventually paper pulp
and electricity and you name it. Like, we'll get into
all the things that they sort of pivoted to. But
(03:46):
in rounds started, I guess we should start at the
beginning when they in nineteen eighty five when Houston Natural
Gas Company merged with a company called Inter North and
they combined to form this b large energy corporation in Texas,
mainly natural gas, and the chief executive of HMNG at
(04:07):
the time was a man named ckn or Kenneth Lay,
who you might have heard of.
Speaker 1 (04:12):
Yeah, and if you haven't prepared to meet ken Lay
several times across this episode from the outset, I think
Houston Natural Gas and Inner North, we're both profitable, but
I saw that neither one of their the companies really
benefited from the merger, although it did expand their pipeline network.
Really it just protected them from a hostile takeover. But
(04:36):
it was just a just a standard gas company, you know,
no big frills or anything like that. I think the
first year it posted a fourteen million dollar loss. Put
that in your in your hat and smoke it later
with a pin. Okay, in that the first year Enron
was around, in nineteen eighty five, it posted a fourteen
(04:58):
million dollar loss.
Speaker 3 (05:00):
Remember that for later, Okay.
Speaker 4 (05:01):
Yeah.
Speaker 2 (05:01):
Also, something else you should put in your hat for
later is the fact that Kenneth Lay, the gentleman I
mentioned who was the CEO of Houston Natural Gas was
also very very tight with the Bush family, originally the
elder Bush and later on George W. As Governor of Texas,
(05:21):
big donor to their causes politically, and they ended up
having a very sort of you scratch my back, al
scratch yours kind of relationship.
Speaker 1 (05:31):
Yeah, it's I mean like I just started twirling around
over and over again out of anger, like multiple times
throughout the documentary, because they really go into some good
details about that. But the upshot of the whole thing
is George H. W and George W. Bush would not
(05:52):
probably have been able to help en Ron out as
much as they did had it not been for, of course,
Ronald Reagan and the sweeping deregulations that occurred in starting
in the eighties. There was just a spirit of deregulation
which was, as Ronald Reagan said, they quoted in the documentary,
Government's not the solution to our problems. Government is the problem.
(06:13):
And there was this idea that was really huge in
the eighties that if you got government out of the way,
competition was going to drive innovation, was going to lower prices,
was going to benefit society in myriad ways. That is
not untrue The problem is when you deregulate fully and
(06:35):
just basically say we're checked out from now on until
something really bad happens. Something bad always happens. That's the
problem with deregulation in the eighties, not that there's a
problem with deregulation, that it was done incorrectly, like it
seems to be every single time.
Speaker 2 (06:51):
Yeah, I mean, Reagan is also in the documentary quoted
as talking about the magic of the marketplace, and we
talked about this over and over on the show. And
this is not an attack on conservatism, but deregulation in
the marketplace and letting the free market decide things is
one of the core tenets of conservatism generally. And what
(07:13):
we've always kind of hammered home after years, and you
said it in one way, but I'll say it in another,
is it never takes into account humans are the ones
that are operating these systems. And when you have money,
lots and lots of money, and you have humans operating systems,
there are inevitably going to be greedy humans with so
(07:35):
much hubris that they sell their souls to make money.
And that's what happens every single time. Yet it's still
lessons are still not learned that there are certain kinds
of humans, and they always seem to be they always
seem to be the ones in charge here of these systems.
They will take advantage of them to the detriment of
(07:57):
the little guy and the little lady. And that is
that would happened with Enron.
Speaker 1 (08:02):
Yeah, And I don't know if it's always like they're
not taking into account human greed. I think most of
the people who are powerful enough to deregulate federal energy
regulations don't really care. In a lot of cases, they
know that they're going to make a boatload of money
by the time the thing really kind of blows up
sometime down the line. I think it could be either one.
(08:25):
But there was a big c change in nineteen eighty four,
a big change to regulation. The Federal Energy Regulatory Commission said, Hey,
you can now buy and sell gas natural gas from
any seller anywhere in the United States. You don't have
to just buy and sell within your state. And that
(08:47):
opened up an entirely new market, and all of a sudden,
you can make a lot more money moving this stuff around.
But like you said, they figured out at Enron, you
can make even more money by selling this stuff as
commodities and trading on like futures and turning them into
financial instruments, not actual just natural gas or oil or electricity,
(09:11):
but the concepts of them, the right to sell it
or buy that. Sometime down the road that changed absolutely everything.
Speaker 2 (09:19):
Yeah, and this is when things when you get into
finance like this, it's not that my eyeballs glaze over.
It just becomes almost and I say almost not real
because it's it is kind of not real. It becomes
a form of gambling in a way. And that's very
much what happened to Enron in a lot of ways.
(09:39):
And you'll kind of see here and there throughout the episode.
But they as a company, after that eighty four decision,
made a very faithful decision of their own in nineteen
eighty nine, just a few years later, when they got
a consulting firm on board Mackenzie and Company in particular
consultant for that company named Jeffrey Skilling, to create what
(10:01):
they called the a Gas Bank, which was basically, like
I said earlier, like, hey, why don't we just be
an intermediary between buying and selling of gas? And it
was going so well that two short years later, Skilling
left there and went to work full time.
Speaker 3 (10:17):
At Enron that's the John Gooing theme, oh.
Speaker 2 (10:20):
Sure, and eventually working his way up to the CEO
of that company.
Speaker 1 (10:25):
Yes, so he was he but for the most part
he was the right hand man, but essentially co CEO
with Ken Lay, who I think took him on as
a protege. And Jeffrey Skilling was the one who said,
let's set up this market. And he also transformed the
company's culture. One of the things he came up with
(10:48):
was the idea that every year they should review and
rate every employee, and the bottom ten percent of employees
should be fired.
Speaker 3 (10:57):
So every year he.
Speaker 1 (10:58):
Was planning on fire hiring ten percent of their workforce,
so about two thousand people every year. And the reason
he was doing this is because he's saying, we can
do better. We can hire the best and the brightest,
We'll replace those people with much better people, and then
the ones who are doing really well now we'll get
moved to the back, and we'll just constantly be improving
on the people that we're hiring. It makes sense in
(11:20):
a really machiavellian kind of way, but it's also psychotic
as well.
Speaker 2 (11:25):
Yeah, and the way I understood it from the documentary.
It wasn't just like regular upper management reviews of the
people that report to them, but it was all the
employees rating one another like within their department.
Speaker 4 (11:39):
Isn't that right?
Speaker 3 (11:39):
Yeah, that's what I took it as too, So.
Speaker 2 (11:41):
I mean, you don't have to like be a a
soothsayer to see where that heads when. And it certainly
creates competition if that's what they're all about with, you know,
sort of the charter of the company creating more competition
by deregulating. They sort of did the same thing than
the ranks and created a very I mean I've seen
(12:03):
it described everywhere as just overly macho and testosterone fueled.
Speaker 3 (12:09):
Yeah.
Speaker 2 (12:10):
It seems like the traders there were were hired and
kept on that were especially aggressive. And there are interviews
in the documentary about some of these men who were
traders that were like, you would cut the throat of
the guy next to you on the trading floor, your
fellow employee if you felt like you could make a
(12:31):
few extra bucks.
Speaker 1 (12:32):
Yeah, and that was very much encouraged, not just by
Jeffrey's skilling, but ken Lay had a history of at
the very least turning a blind eye, if not actively
encouraging people to break the law, do immoral stuff that
may or may not have been legal, all in the
interest of maximizing profits. Like, if you were making money
(12:54):
and you got in trouble, you didn't get fired because
you made money for the company. That's all all that
mattered was making money for the company. So in that sense,
Jeffrey Skilling was a really great protege for ken Lay.
But he was like ken Lay on steroids, and I
get the impression, and ken Lay is always or back
in the day, he was a master at presenting this
(13:16):
really laid back, almost.
Speaker 3 (13:21):
Detached persona.
Speaker 1 (13:23):
But if you watch the documentary and you read about him,
you really get the impression that he knew exactly what
outcome was ten steps down the road by just nudging
this thing over here, nudging that thing over there, all
with plausible deniability, but at the same time presiding over
this incredibly complex, complicated, masterful machination that was all dedicated
(13:48):
to the service of making money by whatever means possible.
Speaker 2 (13:52):
Yeah, and Lay, I mean the reason the documentary is
called The Smartest Guys in the Room is because I
think an equivalent everyone would admit that kin Ley and
Jeffrey Skilling, and we should introduce you to a young
recruit named Andrew Fastaal who is a key player eventually
becoming the CFO, and was up to all kinds of shenanigans.
(14:14):
But these were brilliant guys with amazing ideas, and a
lot of the ideas that they had for this company
were really good and ahead of their time. But they
had the notion that you should be able to trade
and make money off of great ideas and not necessarily
the results of those great ideas, because time and time again,
(14:35):
as you'll see as we tell this story, these ideas
were not making actual money, maybe because some of them
were ahead of their time, but that didn't matter because
they had ways, very creative ways to hide those debts
and losses. And that's the whole sort of fall of
Enron is wrapped up in that statement. But these are
(14:55):
all really really smart guys, and they were really really
good at making money, and maybe we should take a
break there. It's a nice little set up, all right,
and we'll come back and talk a little bit more
about their lobby to deregulate, and then some of the
early Shenanigans.
Speaker 4 (15:11):
Right after this.
Speaker 3 (15:13):
Should know, large holds of.
Speaker 5 (15:21):
SKUs watched s k as good.
Speaker 1 (15:35):
Okay, So after about six years after that big deregulation
from FIRK that said you can buy gas and sell
it at wherever in the country. That opened up a
huge market, there was another watershed deregulate deregulation that's that
reversed an act that went back to nineteen thirty five,
(15:55):
the Public Utilities Holding Company Act. Pooka love that one
that said, if you are generating and selling electricity, you
are a local utility and we're going to regulate you
like you were providing the life blood of America, because
they are Electrical utilities provide the life blood of America
(16:17):
and have since long before nineteen thirty five. And in
nineteen ninety they managed to get that reversed and now
all of a sudden, anybody could buy an electric utility.
And Enron definitely jumped on that.
Speaker 2 (16:30):
Yeah, for sure, their lobby was strong to put up mildly.
They hired lobbyists to lobby different states. In those states,
as no surprise, ended up getting millions of dollars flowing
back toward Enron. I think they hired a lobbyists for
at least thirty seven states. They also helped overturn along
(16:53):
nineteen eighty eight that said the military has to buy
power from local utilities, and now let's open that back up.
Pretty soon, Enron got a twenty five million dollar contract
for supplying electricity to Fort Hamilton and Brooklyn. And these
are just, I mean, twenty five million ins up being
(17:13):
peanuts in the grand scheme. But these are just examples
as they sort of ramped up to their schemes of
how they deregulated or lobbied to get things deregulated such
that it was allowed to happen.
Speaker 4 (17:25):
Right.
Speaker 1 (17:25):
And one of the things, one of the schemes that
got the attention of the entire country in two two
thousand and one was an electrical scheme in California. California
had undergone its own electrical deregulation power deregulation, but it
had had adopted this weird patchwork compromise law or set
(17:49):
of laws that just had loopholes you could drive a
truck through, and that were just really created all sorts
of legal gray areas. And so rather than just kind
of like here they're biting around the edges, seeing what
they could do. Instead, the energy traders at Enron started
figuring out how to move energy out of the state,
(18:11):
wait for the state to be like, hey, we need
some energy, and move it back at incredibly inflated prices.
They would purposefully take electrical utilities that they owned offline
to generate more demand, a spike in demand, and so
they could raise prices again. And they actually basically crippled California.
(18:34):
I think I saw that California had a couple dozen
blackouts in six months after that deregulation, after Enron started
coming in and messing with stuff, whereas the six months
before deregulation they had had one blackout. So if you
watch the documentary and you listen, you know, you read
some other sources about it. This was an entirely fabricated
(18:58):
scarcity of electricity. There's plenty of it, and Ron just
figured out that they could kind of pull this lever
in that lever and charge way more by creating this
fake scarcity.
Speaker 2 (19:07):
Yeah, and by pulling a lever like literally sometimes they
called up a power company, a power plant and said
pull the lever to the off position, and they have
them on tape, you know, they played this in the documentary.
Well they'll they called one in Las Vegas and said, hey, man,
can you take this thing offline for a few hours
(19:28):
and just just make something up because a rolling blackout
meant big money all of a sudden, California again was
buying their own energy back at a higher rate. And
Governor Gray Davis at the time, and this is you know,
I'm not like giving some full throated endorsement to any
effectiveness of Gray Davis as a governor because I really
(19:48):
don't know, but he definitely was sort of left holding
the bag and scratching his head like what's going on here?
Like We've got plenty of energy, and it just all
through the document people are saying like this just isn't
adding up in California. And some of those tapes that
they play of these traders, like there was that natural,
(20:09):
uh wildfire that broke out that jeopardized one of the pipelines,
and these guys are on, you know, on tape on
the phone with each other saying burn, baby, burn, because
that's good for business if it knocks something offline, and
is you know, make laughing at like uh, you know,
old Grandma's like sweating in the summer heat because they
(20:30):
can't get air conditioning, like the most vile, reprehensible kind
of stuff in the name of making the alminer mighty
dollar that you could imagine.
Speaker 1 (20:39):
What's also interesting is they don't really go into detail
about it, but it's it appears to have also been
a coup to get rid of Gray Davis and replace
him with Arnold Schwarzenegger. Yeah, because ken Lay held a
meeting at the Peninsula Hotel in Los Angeles and he
invited Arnold Schwarzenegger. This was long before Ard Arnold's Shortzenegger
(21:00):
was known to have had like real political aspirations. He
wasn't governor yet wasn't running for governor over a problem
that Enron created. It was like that level of In
addition to also just making billions and billions of dollars
by strangling the state, they also managed to replace the
executive of the state as well to somebody who is
much more friendly to them.
Speaker 2 (21:21):
Yeah, and get rid of in the of course he
didn't like knock them off or anything. But in California,
you can ever recall it seems to come up every
twelve years or so where Californians aren't happy with the governor,
and so if recall vote passes, you can have just
an election out of nowhere and replace that governor. While
(21:42):
this is going on, you know, kin Leigh stands on
a stage and says, we're making money in spite of California,
not because of California. So just lying through their teeth
on stage to their shareholders. And you know, all these
little schemes had little nicknames. The one where they got
energy out of California just to make them buy it
(22:03):
back was called Ricochet. There was one called death Star,
and they're on tape like joking about like, hey, let's
have a nice friendly name for this one, like death Star.
So they're just they're playing games with people's livelihood essentially.
Speaker 1 (22:17):
And lives you can make a case as well, for sure.
So three of those traders plagued guilty. Jeffrey Richter, John Forney,
and Timothy Belden were three of those traders who manipulated
California's energy market, costing the state between forty and forty
five billion dollars in retrospect of unnecessary electrical prices and costs.
Speaker 2 (22:42):
All Right, so Enron is doing great, They're making a
lot of money and we should point out that this
is just you know, Ricochet was just one little scheme.
They had all sorts of schemes along the way to well,
we'll get to those between nine six though. In two
thousand and one, like as far as the stock market
(23:03):
world was concerned in Run was a Darling Fortune named them,
I think six years straight America's most innovative company.
Speaker 4 (23:10):
Every single year in a row.
Speaker 2 (23:12):
Yeah, But what was going on behind the scenes is
these ideas and these investments in schemes that they had.
You know, some of them made money, but a lot
of them didn't make any money at all, and they
just became really really good at hiding that fact.
Speaker 1 (23:28):
Yes, that was the whole thing. Like, they were very innovative.
They were ahead of their time in a lot of ways.
Like they got into building broad band high speed internet
access in like two thousand or two thousand and one,
something like that, and.
Speaker 4 (23:44):
This was I looked it up.
Speaker 1 (23:45):
It wasn't until two thousand and seven that half of
all US Internet users had broadband, so this was way
ahead of time. And then also they also got into
the video on demand market. They tried to partner with Blockbuster,
and this was these things were basically like the progenitor
of Zoom and Netflix. But these guys were trying this
(24:06):
in two thousand and two thousand and one, so it's visionary.
The problem is they were ahead of their time. The
infrastructure wasn't there that the I think the customer base
even wasn't there. So there's stuff that they were doing
wasn't making money, which is not bad in and of itself.
What was bad was when they were covering it up.
And the schemes that they used to cover it up
(24:28):
are so involved in complex, but also so fascinating that
they would they would have the audacity to do this
because there's no there's no fudging it, there's no like, oh,
this is kind of questionable. This was just fleecing all
of their investors, all of their employees, fleecing the entire world.
(24:48):
There was a handful of executives at Enron who were
fleecing the entire world to the tune of tens and
tens and tens of billions of dollars every year in
revenue that apparently didn't actually exist.
Speaker 2 (25:01):
Yeah, it's pretty clear that at a certain point they
lost their way and that they weren't as concerned about
being a company that made money, and the only thing
that mattered was that as a corporation was that they
kept their stock price high, right, because that's where that's
where all the money was they had as long as
they could keep that stock price high and keep shareholders,
(25:25):
especially their employees, encouraging their employees to get you know,
get paid in company stock, like use every penny of
your paycheck that you can to buy this company stock.
Because Ron stock was soaring, it was doing really, really well,
and all the while it was you know, it's called
pump and dump. They would drive up the value of
their stock and then the upper echelon and you see
(25:45):
this time and time again in the corporate world. The
CEOs and the CFOs and the upper management are the
one who then sell off their stock and walk away
with you know, some of them hundreds of millions of dollars.
And you know some of the schemes that you talked
about was they found ways to move debt around. We
(26:06):
mentioned Fastyle was one of their hires, and he was
hired and I think his late twenties, early thirties, and
quickly rose up the ranks to CFO and he started
a company called LSM which stood for Leah, Jeffrey, and Matthew,
which are named after his wife and kids. Sort of ironically.
That was like such a sweet tribute to them. And
(26:28):
the only purpose of this company was to have all
kinds of sort of little sub companies that would absorb
the debt and where they could move debt around from
Enron to make it invisible to the shareholders, right, so
they could prove on a balance sheet that you had
this money coming in in the way of you know,
people investing in the company, but then you're hiding the
(26:49):
losses and so everyone thinks you're doing great.
Speaker 1 (26:52):
So the way that I saw it explained, Investipedia actually
has a couple of really good articles about this that
are just wonky enough to like understand it, but also
so wonky that you just like, I have no idea
what I'm reading. And the way they put it was basically,
if Enron had, like a good example is they build
a power station in India that was a huge loss.
It was just a generally bad idea, and they sunk
(27:15):
billions and millions of dollars into this power station and
without realizing any money whatsoever. I think they abandoned it
before it even came online. They would take this and
sell it to one of these special purpose vehicles or
special purpose entities, which was a tangentially related company that
the company Enron was not on the hook to pay
(27:38):
off its debts for right, and they would take that,
and then that special purpose vehicle would go out and
try to sell it, sell that terrible toxic asset, and
they would use Enron stock as the collateral right. And
because Enron stock was just through the room, everybody was saying, sure,
(28:01):
we'll give you a loan, sue, We'll give you some
money for that terrible idea of a power plant that
you abandoned, because you're backing it up with Enron stock.
And as long as the time that that stock came
to was far enough away, and as long as Enron
stock kept going up, this house of cards could be
held together. But that's not at all how it worked.
The upshot of it is that they could take toxic assets,
(28:24):
move them off of their books to these special purpose.
Speaker 3 (28:27):
Entities, and then they would take.
Speaker 1 (28:29):
The money that these special purpose entities would go borrow
against that toxic asset and they would count that on
their books as revenue. So they were hiding debt, boosting
their revenues to just ridiculous heights for stuff that just
should not have been counted as revenue.
Speaker 2 (28:48):
Yeah, and just to be clear, they didn't invent the
special purpose entity, And an SPE is not some evil
creation in and of itself. It is it's an entity
that a lot of corporations, businesses use where it's just
it's sort of like has a very narrow purpose in
that they create this thing when they might use it
(29:08):
to purchase an asset or move an asset, so the
company as a whole may not be on the hook
if anything goes wrong. It sort of mitigates risks. So
it's not some evil purpose in and of itself. But
they were manipulating these such and starting all of these
things under Fastau's guidance with his LSM sort of sub corporation,
and eventually LSM two. I think that they were making
(29:32):
I think they hit ninety dollars in August of two thousand,
market cap of the whole company at seventy billion, which
made it the seventh largest publicly traded company in the
world at that point.
Speaker 1 (29:49):
Yeah, so that's a market cap of seventy billion. Remember
that in nineteen eighty five. Its first year, it posted
losses of fourteen million. Within in fifteen years, they posted
revenue of one hundred billion dollars billion dollars in fifteen Yeah,
in sales in fifteen years. That's what happened to that
(30:11):
company when they brought Jeffrey Skilling on board. Jeffrey Skilling
brought Andrew Fastau on board, and people just started going
nuts making money anyway they could.
Speaker 4 (30:21):
Yeah.
Speaker 2 (30:21):
The other thing we should mention too is another sort
of slick trick is that Skilling's idea and they got
approval and I wasn't clear how or where this approval
comes from, but to use something called mark to market accounting,
which is basically when you can where you can rate
the financial health of your company based on not theorized
(30:46):
but just on future earnings basically and not necessarily what
they're worth that day, so anticipated future value instead of
its purchase costs.
Speaker 4 (30:58):
Did you get how that.
Speaker 2 (30:59):
They were because it seemed like they were all like
super psyched that they got approval for marked to market accounting.
Speaker 1 (31:04):
Yeah, that would have been the sec the Securities and
Securities Exchange Commission, who would have given that approval. And
just like a special purpose entity marked to market accounting
is it's totally legitimate, it's recognized as generally accepted accounting principle.
But there's a lot of room for temptation to just
(31:26):
basically say this deal with Blockbuster, we haven't made a
penny off of it, but we can we can cite
the future earnings from it now now that we booked
this deal, and I think it'll probably be worth a
billion dollars, just a total guess. And you're not supposed
(31:46):
to do it like that. You're supposed to do it
much more realistically and legitimately. But they had enough leeway
that they were able to take marked to market accounting
and use it to their to their benefit in that way,
and in doing that, they pumped up their their revenue
through the roof. Like the deal would just be inked.
They wouldn't have seen a penny from it, and they
would add it to their balance sheets as revenue.
Speaker 2 (32:08):
Yeah, it would become part of the ledger before like
a real penny.
Speaker 1 (32:10):
Was made exactly, and sometimes the pennies weren't made. And
if the pennies weren't made, don't forget, those debts would
be moved to a special purpose entity, so they wouldn't
have these toxic assets on their books, even though they
very much owned and were indebted for these toxic assets.
Speaker 2 (32:27):
Still yeah, I mean, like I said, these were brilliant
people and like they had all their bases covered except
for the fact that we all know that a house
of cards will eventually fall. It's that hubrius thing that
just blinds people into thinking that it will always like
when that kind of money is rolling in. I think
(32:48):
it blinds certain people so much that they don't understand
a who it's hurting at the time, or they don't care,
or they think it's always going to be rolling in
like this, or they think, hey, I'm gonna get mine now.
Because there were people in Enron. I mean, there will
talk about a whistleblower that eventually sort of came out
(33:09):
and a journalists who are poking around, but there were
people that started looking at this company the Darling of
Wall Street and saying something's not right here, like something's
not adding up, Like you can't even explain how your
cash flows through your business kind of way that makes
any kind of coherent sense. And anytime they were confronted
with this Skilling and his cronies would. They would get
(33:33):
very haughty about it and just be like, well, what
do you mean we can't explain that? Like, sure we can,
it's really easy.
Speaker 3 (33:39):
You just can't understand.
Speaker 2 (33:41):
Yeah, you just can't understand it, right, Oh, it makes
your blood boil.
Speaker 1 (33:44):
Let's let's take a break and then we'll come back
and talk about the downfall.
Speaker 3 (33:47):
How about that? Yeah, the downfall definitely should know draw
large Also r.
Speaker 5 (33:58):
Y skid as what why sk as good.
Speaker 4 (34:08):
To you?
Speaker 3 (34:08):
Should? Okay, chuck.
Speaker 1 (34:13):
So, one question that people might be asking is how
were these guys allowed to use this accounting and get
away with it? Why were people even investing in buying
shares of this this company when it was just so
fraudulent and and just ridiculously fraudulent too, not even subtly fraudulent.
And the answer is the the company was such a
(34:36):
Wall Street darling that financial analysts would not understand what
they were hearing on these earnings reports, but would still
give it a stamp of like buy. The other thing
that really really helped was the banks. Wall Street banks
were very much complicit in this as well. And then
the thing that helped the most was Arthur Anderson, the venerable,
(34:59):
eighty plus year old accounting firm.
Speaker 4 (35:02):
The oldest one of the country.
Speaker 1 (35:04):
Yeah, that was a third party accountant to Enron. Was
so cozy that they actually hired all of Enron's internal
auditing staff, made them Arthur Anderson's staff, and then opened
one hundred and fifty person office for Enron in Enron's
own in Enron's headquarters and Arthur Anderson office in Enron's
(35:25):
headquarters made up of former Enron auditors. That's who was
watching the show. And so Arthur Anderson had such a
good reputation that because they were signing off on this,
because the Wall Street analysts are saying, yeah, it's a buye,
people were just like, I'm buying, I'm buying, and it
kept the stock prices going up and up and up
because nobody was paying attention enough.
Speaker 2 (35:49):
Yeah, there was one person in the dock that said
that kind of crystallized it, which was like, I'm paraphrasing,
but he was talking about the fact that when this
kind of stuff pops up in corporations, like it's not
like this, the n runs are everywhere. There is all
kinds of mouthfeasance. For sure, in the corporate world, but
he basically said, somewhere along the way, it doesn't get
(36:12):
this big because a legal team says you can't do this,
or your accountants say you can't do this, or the
bank say we can't get involved in this. And Ron
seemed to be one of those sort of unicorns where
every person along the way just zip their mouth shut
even though the numbers weren't adding up, and was complicit
(36:33):
in this right.
Speaker 1 (36:35):
And there was a trader that was interviewed in the
documentary who said, like it was ironic that Enron's slogan
was asked, why why does something.
Speaker 4 (36:44):
Happen like that?
Speaker 3 (36:45):
Why can't we do it that way?
Speaker 1 (36:46):
And that this trader said, I didn't ask myself why
because I didn't want to know. I suspected things were
weird or ry, and I just didn't want to know
because it was my job. I was making tons of money.
And I think you can probably get that excuse out
of just about anybody who was complicit in this larger
small but Arthur Anderson that was the one that really
really helped things along. And as we'll see, they didn't
(37:08):
manage to survive the scandal.
Speaker 2 (37:10):
Yeah, they were Oh man, there was that one part
of the documentary where they were talking about Fastyles, you know,
Shell companies, and he was in a meeting that was
secretly taped and they're basically like, well, wait a minute,
it looks like you're on the buying and selling sides
of these transactions, right, And he was like, yeah, basically,
(37:31):
but I've always got Ellen Jay's interest at heart, and
the whole time he's skimming money and they believe that skilling,
and Ley knew that, like, hey, I'm sure that fast
Ols is skimming money off the top for himself, right,
Who cares? Because this guy's taking care of business for
us exactly.
Speaker 1 (37:48):
And I think he skimmed about thirty five million dollars
for himself. He stole from Emron and they looked the
other way because the stuff he was doing was so unethical,
so illegal that he basically earned it as far as
they were concerned to have his hand in the cookie
jar like that. So I think you kind of mentioned
(38:09):
there were some people who were like, wait, what's going
on here. One of the first people was Bethany McClain,
the journalists who ended up writing the Smartest Guys in
the Room.
Speaker 3 (38:18):
She is awesome.
Speaker 1 (38:19):
She started out writing a story for Fortune magazine back
in March of two thousand and one titled is Enron Overpriced?
And she was one of the first people to publicly
say how is Enron making its money? But she wasn't
the first to hit on this. There's another guy named
Jim Chanos of Kainiko's Securities, I think maybe, and I
(38:42):
think he's in the documentary, but he started shorting Enron
in two thousand because he noticed very simply their cost
of capital, so the cost of doing business was more
than their return on investment, which automatically means that they
were not a profitable company, which totally was contradicted by
(39:03):
all of their earnings reports and filings. And he saw
this and he said, this is this is this is
not right, and I'm going to start making money off
of the future downfall of this company and made hundreds
and hundreds of millions of dollars shorting and Ron stock
starting in two thousand.
Speaker 4 (39:21):
Yeah.
Speaker 2 (39:22):
The whistleblower two was an executive main named Sharon Watkins,
and she pops up a lot in the documentary. Obviously
is key to the story. She didn't whistle blow while
this was all going on. It was sort of after
the ship started sinking. But we'll talk a little bit
about how that all happened and where she ended up.
(39:44):
But what happened in August of twenty twenty one. Skilling
had replaced lay a CEO in February of that year,
and on August fourteenth, twenty twenty one, Skilling out of nowhere,
and he had just taken the reins, you know, a
handful of months before he Skilling quit out of nowhere.
He resigns, he cited personal reasons, And what was going
(40:05):
on was the you know, the Titanic sprung a leak, right,
and as they described in the documentary, he was one
of the first rats to try and get off the
sinking ship.
Speaker 3 (40:17):
Yeah.
Speaker 1 (40:17):
And it's like, if you are a CEO of a
huge company, you don't just leave like that. That is
an enormous red flag. There's like a whole process and
procedure for finding your replacement, grooming them, introducing them to
the rest of the world. You don't just leave like that.
And that was such a red flag that that whistleblower,
(40:40):
what's her name, Sharon Watkins. Yeah, she wrote an anonymous
letter Delay basically saying, hey, there's a lot of fishy
stuff going on around here, and now that Skilling suddenly departed,
like everyone's going to start having questions and this whole
house of cards is going to fall, and Lay it
apparently didn't do much about it, and she came to
(41:03):
Lay later on and said, I'm the person who wrote
that anonymous letter, and I'm really concerned about this, and
ended up trying to keep it in the company because
I think I get the impression that she thought it
was something, especially now that Skilling was gone, that could
be resolved internally. I think she really underestimated the extensiveness
(41:24):
of the corruption and yeah at the company and thought
it was a few people, when really it was a
large cadre of people who all were complicit in this.
And I get the impression that's why she didn't really
blow the whistle publicly at that point. But apparently ken Lay,
once he found out that it was Sharon Watkins, consulted
(41:48):
legal council to figure out how to fire her legally.
Speaker 4 (41:51):
Yeah.
Speaker 2 (41:52):
The same day that Skilling resigned, on August fourteenth, the
broadband division that we talked about earlier reported one hundred
and thirty seven million dollar loss analysts and.
Speaker 4 (42:03):
We should point out too.
Speaker 2 (42:04):
As far as the analysts go, they were always installing
friendly analyst and only working with friendly analysts. But they
finally got the clue they dropped their ratings for the stock.
The end came very, very swiftly for Enron. On October twelfth,
Arthur Anderson's I mean you still remember all the shredding
jokes on late night TV that ran for months and months.
(42:26):
Arthur Anderson's legal counsel said, everybody shred everything, destroy every
file that you have on Enron, And in one day
they shredded literally one ton of paper.
Speaker 1 (42:38):
Yeah, and that was just one day. They apparently shredded
around the clock from October twenty second to November eighth,
and that was just one ton one day. They shredded
literal tons of documents, just shred, shreded, shread. If you
were an executive at Anderson, you were probably working a
late night shift shredding alongside everybody else. It was like that,
(42:58):
And it was apparently at a time time where you could
legally do that and not be you know, indicted for it.
But that was not a good look when it came
out that Arthur Anderson was the auditors of this company
were shredding tons of documents, and the SEC got into
this and they said that they're going to start investigating
(43:19):
finally the special purpose entities that Fastau had set up,
and so Enron fired Fastau that same day. And I
think that was in November or late October of two
thousand and one. And right after that, on November eighth,
en Ron said, hey, everybody, do you remember all of
(43:41):
our all that money we said we made going back
to nineteen ninety seven, We're going to need to restate
our earnings. One of the first things they did was
they reported a six hundred and eighteen million dollar loss
for Q three of two thousand and one. Q one
they posted a four hundred and six million dollar profit,
(44:04):
Q two a four hundred and four million dollar profit,
Q three a six hundred and eighteen million dollar loss.
So they finally came clean. They finally said this accounting
is off, and this is how radically it's off.
Speaker 2 (44:17):
Yeah, I mean that is if a company is restating
their earnings for that period of time at all, like
mistakes can happen, but that's a that's a real bad sign.
They almost got a lifeline in I guess late October
of that year when they tried to merge with a
(44:38):
company called Dynagy Incorporated, and that deal, that deal fell apart.
On November twenty eighth, they backed out of the deal
Dynagy did and then what is this Four days later
on December tewod Run filed for the largest Chapter eleven
bankruptcy in US history.
Speaker 3 (44:58):
Up to that time.
Speaker 1 (44:59):
Sixty five I zero point five billion dollar company filed
for bankruptcy. That just did not happen. If you had
that kind of money, you could have a fire sale
and sell off stuff for way less than you paid
for it, but you could still survive. And that just
goes to show you, like just how fraudulent this company was.
They couldn't have a fire sale and make up that
(45:19):
kind of that kind of the debt that they owed
I think was seventy two billion dollars I think in
debt that they finally were found to have owed, and
at the time it was the biggest. In two thousand
and eight, we saw what big really was. Yeah, Lehman Brothers,
for example, had six hundred and thirty nine billion dollars
in assets when it filed for bankruptcy and went under.
(45:41):
But at the time Enron was like eye popping as
far as bankruptcies went for corporations.
Speaker 2 (45:48):
Can you imagine the wave of a relief that swept
through Dynagy Incorporated. Yeah, the particular bankruptcy a few days
later after they backed out.
Speaker 1 (46:00):
Yeah, that one. Just offhand conversation at the vending machine
over a packet of checks mix, like, save Dynagy forever.
Speaker 4 (46:09):
You know, this seems like a bad deal to me.
Speaker 1 (46:11):
Crunch Crunch, You're right, and Dynagy, by the way, went
on to become Apple.
Speaker 2 (46:18):
So the fallout from this, there are a lot of victims.
Twenty thousand employees. Twenty thousand employees lost their job. And
how long did they have to get out? What is
saying the second day? I think they had the day.
I think it was less than that. I feel like
it was hours or something. Basically, pack your s and
(46:38):
get out of here, everybody. Yeah, and like literally, this
huge tall building has thousands of people just leaving all
day with banker's boxes with their contents of their desk
in it, like the ultimate movie trope. Every employee that
had been told for years and years, hey, you got
to invest everything you can in that form because Enron
(47:01):
is I mean, look at the stock we're going places
and that money will be safe there.
Speaker 4 (47:07):
They obviously lost.
Speaker 2 (47:09):
Almost everything that was a you know, the rank and
file employees. That was one in the documentary that said
he had about close to three hundred and fifty thousand
dollars in stock that he ended up dumping for twelve
hundred dollars.
Speaker 4 (47:21):
Yeah, they froze.
Speaker 2 (47:23):
The stock accounts of the rank and file while upper
management was actively still cashing out.
Speaker 1 (47:29):
Yeah, that was a really scummy move. They, i'm sure,
purposefully changed four oh one k providers in the midst
of all this. And when you do that, there's a
minimum thirty day freeze as you transfer assets over, so
these poor employees couldn't sell their shares, like you said,
while the executives were making tens and tens of millions
(47:52):
of dollars worth of option trades. Yeah, I mean it's
just mind boggling. That to me is probably the worst
part of the whole thing.
Speaker 2 (48:00):
Well, and you know, tie with that, their severage package
averaged about four five hundred dollars for the average employees,
while management bonuses totaled more than fifty five million. And
that's just bonuses, that's not cashing out stocks and Livia
who helped us put this together, great job on this article. Yeah, agreed,
(48:20):
pointed out something like other fallout like you'd never even
think about, which was Ron was a very big investor
in donor in local nonprofits in Houston, and all of
a sudden, all that money is cut off, and like
the Red Cross chapter had to cut its budget from
twelve million dollars to nine million dollars in one year,
largely because the money dried up from Enron.
Speaker 4 (48:42):
So the fallout was far and wide.
Speaker 2 (48:44):
And that's not even mentioning, like we're talking about the
employees who had stock in the company, like every other
human being that had just stock in in Ron that
had nothing to do with it, lost all their money.
Speaker 1 (48:56):
Yeah, I mean the stock price was at ninety at
one point and it dropped down to I think forty
something since in like a year basically, So, Yeah, the
employees in particular and the retirees who had already left
and whose pension funds were just totally evaporated, meaning you're
gonna have to go get a job as a Walmart
(49:18):
greeter now because you can't afford anything. They are definitely
the greatest victims of all this. I saw ken Lay's
lawyer afterward portray ken Lay as the greatest victim of
all of it, because he apparently lost a few hundred
million dollars, and he didn't say it himself, but he
(49:38):
definitely tried to say, like, I lost so much money,
there's no way I could have known what was going on,
and that fell on deaf ears. And that same defense
was used by Jeffrey Skilling too, I didn't know what
was going on. So what they tried to do was
pin the whole thing on Andrew Fastau, who had been fired,
who had skimmed thirty something million dollars himself, demonstrated he
(50:01):
was a criminal. They made it. They tried to play
like he was a rogue CFO that had done all
of this under the very nose of Jeffrey Skilling and
ken Lay, and that they hadn't known. And the public, Congress,
the courts, juries, everybody said, you have to be kidding us.
Speaker 4 (50:20):
Yeah, And they were right. In the end.
Speaker 2 (50:22):
Fastyle pleaded guilty to two counts of wirefraud and securities
fraud in return for being a witness against Skilling and Lay.
I think had a ten year sentence for what was
going to be a much larger sentence, ended up serving
five years and then got out into twenty eleven and started,
you know, getting paid as a speaker to corporations about
(50:46):
business ethics.
Speaker 4 (50:48):
You know.
Speaker 2 (50:49):
To his credit, I guess twenty years on he came
out officially and apologized for everything. Seems to really have
turned the corner and learned a less and although he
never knows what is going on in someone's heart from
the outside, Arthur Anderson completely went away, the oldest counting
form accounting firm in the country, never recovered, completely folded
(51:13):
and went out of business. The Sarbanes Oxley Act was
enacted basically because of Enron in two thousand and two,
which was and I remember, I remember years ago when
we were working in our early days at how Stuff Works,
there was a lot of like Sarbanes Oxley talk.
Speaker 4 (51:32):
Do you remember that stuff?
Speaker 1 (51:33):
Yeah, because they came up with the Frank Dodd Act
to basically undo or combat against future stuff from the
two thousand and eight financial crisis. Yeah, this was the
same thing six years prior. Like Enron had such a
huge effect that they passed the law that basically point
for point outlawed all the stuff that Enron had done.
(51:55):
They did the same thing with the Dodd Frank actor.
Speaker 2 (51:57):
They tried to and of course know certain people will
say Sarbanes octually has no real teeth anymore because they're
not even funding the oversight that they promised. Other people,
you know, the diehard free marketers will say, that's actually
too restrictive. Uh, we're not able to be competitive anymore
because you've got all these rules now to make sure
(52:18):
we're not defraunding people of billions of dollars.
Speaker 3 (52:21):
Right, Yeah, you're making it hard to exploit people.
Speaker 1 (52:24):
Yeah. So there was actual convictions like this is crazy.
And one of the hardening things, Chuck is if you
watch like these congressional hearings on this, people from both
sides of the aisle are grilling these guys. Oh yeah,
No one was apologizing to them for their you know,
their colleague from the other side of the aisle asking
(52:45):
you know, mean questions. Everyone was mad at these guys.
The whole world hated Jeffrey Skilling and Ken Lay and
Andrew Fastow.
Speaker 2 (52:54):
He was so smug up there man answering those questions. Oh,
in the face of all that he was still so
smug about it.
Speaker 1 (53:01):
I looked up whether he ever apologized, and I could
not find it. I don't think Jeffrey Skilling ever apologized.
I think he went throughout his entire time in prison
basically saying like he was a victim, that this was unfair,
but he was imprisoned. He was an executive that was
in prison. That just does not happen lately. He was
convicted of nineteen counts froud conspiracy, insider trading. He got
(53:25):
twenty four years in prison and ended up serving twelve,
which is I mean, yeah, that sucks, but years not
to sneeze, No, for sure, that's a long time to
do in the clink. And then ken Lay he was
convicted on ten counts, but he wasn't able to be
sentenced because he died of a heart attack six weeks
after being convicted, and I think his conviction was vacated.
Speaker 2 (53:50):
Yeah, Skilling now is out and works at an oil
and gas analytics startup. It seems that other people I
think we Yeah, I mentioned that fast I was on
the speaker circuit. The whistleblower. Ms Watkins was named Times
Person of the Year in two thousand and two and
(54:13):
I believe it is also now a paid speaker and
executive in residence at Texas State University. And then there
was a matter of because I was like, Lyvia didn't
get to it, but I was like, well, surely there
was some sort of making it right for these people
who lost all this money right. And there were lawsuits
(54:35):
that came out and settlements that came out. Different people
ended up being paying different things. I think it was
a seven point two billion dollar settlement from Enron. I
believe the banks were on the hook. I can tell
if the banks were on the hook for some of
that or if it was a separate thing.
Speaker 3 (54:54):
I don't know.
Speaker 1 (54:55):
I saw that they squeezed a total of twenty billion
out of Enron before they like let it go.
Speaker 4 (55:00):
Oh okay.
Speaker 1 (55:02):
I don't know, but I did see the banks were
definitely on the hook just for being complicit. I don't
know if that was an addition though, either.
Speaker 4 (55:08):
Yeah. I think yeah.
Speaker 2 (55:10):
It says right here that the bulk of the settlements,
almost seven billion of it, came from JP Morgan, Chase
City Group, the Canadian Imperial Bank of Commerce. Oh yeah,
Lehman Brothers chipped in, Bank of America chipped in the
Big five auditing firm Arthur Anderson. Of course we talked
about they chipped in. I think, well, I don't see
(55:32):
how they could have chipped in it they went out
of business, but.
Speaker 1 (55:34):
I guess they chipped in before they went out of business,
all right. So you know, if you hear the story,
especially if you're used to us in our podcast, you
might be like, well, guys, you didn't really get to
the other side of the story. There is no other
side of the story. This is one of those rare
stories that is basically black and white. It was just
(55:59):
there's no redemption, there's no explaining it away, there's no
apologizing for it. It's just it was just as wrong
as it appears. So that's why we didn't include the
other side of the story in this one.
Speaker 2 (56:12):
Yeah, I don't think there's anyone out there who's going
to bat for Enron.
Speaker 1 (56:16):
It's there's somebody, there's somebody, and they will leave it
on our Apple.
Speaker 2 (56:19):
Reviews, right, they totally will Ron didn't get a fair
shake from these times, totally.
Speaker 3 (56:26):
Neither did a.
Speaker 4 (56:27):
Hitler or Satan.
Speaker 3 (56:28):
You got anything else, I got nothing else.
Speaker 1 (56:31):
Well, I don't have anything else either. If you want
to know more about Enron, go watch the smartest Guys
in the Room. Definitely will leave you wanting more, and
there's plenty to read about, including some great contemporary articles
all over the internet. And since I said contemporary instead
of contemporaneous, it's time for listener mail.
Speaker 2 (56:53):
This is a little wordy, but it's it's We don't
often do shout outs and tributes, but this is a
really special one, so we're doing it nice. Hey guys,
this is from Gavin, recent college graduate and history enthusiast,
and Gavin says, I've been listening since I was fifteen,
over seven years now. My mom was the one who
introduced me to the show, and we've both been listeners
ever since. I'm pretty sure she listens to every episode
(57:15):
that you guys put out. My mom was also the
person who imparted a thirst for knowledge and learning in
me as a child. I've had great many teachers in
my life, and I'm very thankful for them, but my
mom has always been my greatest encouragement and my role
model as a student and as a person. Over the
past four years in college and directly after I got
really busy, moved twelve hours from home, and it meant
(57:35):
I stopped listening to podcast including you guys. I know.
More importantly, I also lost touch with my mom. I
didn't completely ghost he or anything, but I still did
not reach out to her nearly as much as I
wanted to or needed to. But often when I eventually
would that, she would ask me if I listen to
stuff you should Know recently, and she'd have an episode
to recommend because I think you'd really enjoyed this one. Luckily,
(57:58):
now have a job where I'm having more flexible hours,
and over that time, I've picked stuff he should Know
back up, re energize my love for knowledge, and learned
that my mom has given me that my mom had given.
Speaker 4 (58:08):
Me years ago.
Speaker 2 (58:10):
All this to say, you guys mean a lot to
me and my mother, and I thank you for that.
You've helped me stay connected to her in a way
that I would not have been able to do otherwise.
I'd just like to take this chance to thank my mom.
I know you're listening, Mom, I know we'll talk about
this episode later, And thank you for encouraging me and
understanding that I love you even when I'm not great
(58:30):
at communicating it.
Speaker 4 (58:32):
Man, boy, this one's really pulling at the heartstrings.
Speaker 2 (58:35):
Yeah, every time I pick up a book or listen
to a podcast or write a paper, I think of you, Mom,
and I know that I always will. I love you,
And this is the only way I know how to
tell you properly. Kevin, you can pick up the phone
and say this stuff my friend.
Speaker 4 (58:52):
He is back to you. Guys, you got a great show.
Speaker 2 (58:54):
I hope we have many more years of remaining, learning
and growing together. And that lovely, lovely sentiment is from
Gavin and Fayetteville, Tennessee.
Speaker 3 (59:04):
That was amazing. Gavin, hats up, Chuck.
Speaker 1 (59:06):
I totally get why you chose that shout out to
be the one to break the rule.
Speaker 2 (59:11):
Yeah, it should have been along Mother's Day, around Mother's.
Speaker 1 (59:14):
Day, but well we can replay it around Mother's Day first,
select how about that instead?
Speaker 4 (59:19):
It's the the inrun episode, right.
Speaker 1 (59:22):
If you want to be like Gavin and just be
a super great person, but not request a shout out,
Just be a super great person, we want to hear
from you. Also, while I'm thinking of it, go check
out our social feeds. They used to suck, Now they're great. Also,
if you want to get in touch with this, like
I said, You can hit us up via email at
stuff podcast at iHeartRadio dot com.
Speaker 5 (59:47):
Stuff you Should Know is a production of iHeartRadio.
Speaker 2 (59:50):
For more podcasts my heart Radio, visit the iHeartRadio app,
Apple Podcasts, or wherever you listen to your favorite shows.
Hey, guys, it's me Joshun For this week's select I've
chosen our twenty twenty three episode on the Enron scandal.
It's a pretty interesting episode, at the very least, just
because of the mind bogglingly nuts stuff that these guys
did all in the pursuit of money and personal gain.
Not only did they swindle entire states, they also, as
(00:23):
a nice cherry on top, wiped out the life savings
of thousands of their own employees. It's the kind of
thing that was such a big deal. It left us
stain on American society as a whole, just by how
cynical it made everybody about what people can get away
with just in the pursuit of wealth. At any rate,
I hope you enjoyed this episode. It's a good one.
Speaker 2 (00:47):
Welcome to Stuff You Should Know a production of iHeartRadio.
Speaker 3 (00:57):
Hey, and welcome to the podcast.
Speaker 1 (00:59):
I'm Joshu and there's Chuck and Jerry's here, and it's
stuff you should know.
Speaker 4 (01:03):
We you mean it.
Speaker 3 (01:04):
You should know this stuff because this is serious.
Speaker 1 (01:08):
Corporate malfeasance that I think it's probably not an American
over the age of twenty walking around who doesn't know
about this somehow, some way, to some degree. I know
they teach about this stuff in business school. It's been
written on extensively, but I mean I didn't understand the
ins and outs of it until I started researching this,
(01:29):
and it's quite shocking. And that shocking thing that I'm
talking about is the rise.
Speaker 3 (01:36):
And fall of Enron, one of.
Speaker 1 (01:38):
The greatest swindles in corporate American history, maybe in corporate
history in the world, definitely in corporate American.
Speaker 4 (01:47):
History for sure.
Speaker 2 (01:49):
I'm really glad you picked this because I didn't know
all the ins and outs either, because this is you know,
when I was a young late twenties, early thirty something,
didn't have a care in the world. Sure, And I
finally watched The Smartest Guys in the Room today.
Speaker 3 (02:06):
Yeah, I saw it last night.
Speaker 4 (02:08):
Yeah.
Speaker 2 (02:08):
The documentary based on the book, and we'll get to
the authors and stuff. It was Peter Elkind and.
Speaker 3 (02:15):
Who was a co author, Bethany McLain.
Speaker 4 (02:17):
Okay, he was the lead author.
Speaker 2 (02:19):
Even Okay, I knew she wrote the original articles and Forbes,
so she co authored the book and she's in the documentary,
as is Elkland. And it really is worth the watch.
But just want to point out that this is an
overview of the Enron scandal. It's pretty clear once you
start poking around that this could be like a ten
part series.
Speaker 3 (02:40):
Yeah for sure.
Speaker 2 (02:41):
And there probably is a podcast series out there that
covered just Enron. So there's lots of sort of ins
and outs that we won't be able to touch on,
but we can definitely give her the overview, which was
that Enron was a corporation. Originally it was a natural
gas line pipeline operator, but they quickly, well not quickly,
(03:05):
they got out of that business almost entirely when certain
people were hired and we'll sort of get to all
this in a minute too. Certain people, when certain people
were hired that basically said, you know what, we don't
we should even be in the pipeline industry. We should
invent almost a new kind of industry, which is to
(03:25):
use energy as financial instruments, and we should become a
trading company that trades natural gas and eventually paper pulp
and electricity and you name it. Like, we'll get into
all the things that they sort of pivoted to. But
(03:46):
in rounds started, I guess we should start at the
beginning when they in nineteen eighty five when Houston Natural
Gas Company merged with a company called Inter North and
they combined to form this b large energy corporation in Texas,
mainly natural gas, and the chief executive of HMNG at
(04:07):
the time was a man named ckn or Kenneth Lay,
who you might have heard of.
Speaker 1 (04:12):
Yeah, and if you haven't prepared to meet ken Lay
several times across this episode from the outset, I think
Houston Natural Gas and Inner North, we're both profitable, but
I saw that neither one of their the companies really
benefited from the merger, although it did expand their pipeline network.
Really it just protected them from a hostile takeover. But
(04:36):
it was just a just a standard gas company, you know,
no big frills or anything like that. I think the
first year it posted a fourteen million dollar loss. Put
that in your in your hat and smoke it later
with a pin. Okay, in that the first year Enron
was around, in nineteen eighty five, it posted a fourteen
(04:58):
million dollar loss.
Speaker 3 (05:00):
Remember that for later, Okay.
Speaker 4 (05:01):
Yeah.
Speaker 2 (05:01):
Also, something else you should put in your hat for
later is the fact that Kenneth Lay, the gentleman I
mentioned who was the CEO of Houston Natural Gas was
also very very tight with the Bush family, originally the
elder Bush and later on George W. As Governor of Texas,
(05:21):
big donor to their causes politically, and they ended up
having a very sort of you scratch my back, al
scratch yours kind of relationship.
Speaker 1 (05:31):
Yeah, it's I mean like I just started twirling around
over and over again out of anger, like multiple times
throughout the documentary, because they really go into some good
details about that. But the upshot of the whole thing
is George H. W and George W. Bush would not
(05:52):
probably have been able to help en Ron out as
much as they did had it not been for, of course,
Ronald Reagan and the sweeping deregulations that occurred in starting
in the eighties. There was just a spirit of deregulation
which was, as Ronald Reagan said, they quoted in the documentary,
Government's not the solution to our problems. Government is the problem.
(06:13):
And there was this idea that was really huge in
the eighties that if you got government out of the way,
competition was going to drive innovation, was going to lower prices,
was going to benefit society in myriad ways. That is
not untrue The problem is when you deregulate fully and
(06:35):
just basically say we're checked out from now on until
something really bad happens. Something bad always happens. That's the
problem with deregulation in the eighties, not that there's a
problem with deregulation, that it was done incorrectly, like it
seems to be every single time.
Speaker 2 (06:51):
Yeah, I mean, Reagan is also in the documentary quoted
as talking about the magic of the marketplace, and we
talked about this over and over on the show. And
this is not an attack on conservatism, but deregulation in
the marketplace and letting the free market decide things is
one of the core tenets of conservatism generally. And what
(07:13):
we've always kind of hammered home after years, and you
said it in one way, but I'll say it in another,
is it never takes into account humans are the ones
that are operating these systems. And when you have money,
lots and lots of money, and you have humans operating systems,
there are inevitably going to be greedy humans with so
(07:35):
much hubris that they sell their souls to make money.
And that's what happens every single time. Yet it's still
lessons are still not learned that there are certain kinds
of humans, and they always seem to be they always
seem to be the ones in charge here of these systems.
They will take advantage of them to the detriment of
(07:57):
the little guy and the little lady. And that is
that would happened with Enron.
Speaker 1 (08:02):
Yeah, And I don't know if it's always like they're
not taking into account human greed. I think most of
the people who are powerful enough to deregulate federal energy
regulations don't really care. In a lot of cases, they
know that they're going to make a boatload of money
by the time the thing really kind of blows up
sometime down the line. I think it could be either one.
(08:25):
But there was a big c change in nineteen eighty four,
a big change to regulation. The Federal Energy Regulatory Commission said, Hey,
you can now buy and sell gas natural gas from
any seller anywhere in the United States. You don't have
to just buy and sell within your state. And that
(08:47):
opened up an entirely new market, and all of a sudden,
you can make a lot more money moving this stuff around.
But like you said, they figured out at Enron, you
can make even more money by selling this stuff as
commodities and trading on like futures and turning them into
financial instruments, not actual just natural gas or oil or electricity,
(09:11):
but the concepts of them, the right to sell it
or buy that. Sometime down the road that changed absolutely everything.
Speaker 2 (09:19):
Yeah, and this is when things when you get into
finance like this, it's not that my eyeballs glaze over.
It just becomes almost and I say almost not real
because it's it is kind of not real. It becomes
a form of gambling in a way. And that's very
much what happened to Enron in a lot of ways.
(09:39):
And you'll kind of see here and there throughout the episode.
But they as a company, after that eighty four decision,
made a very faithful decision of their own in nineteen
eighty nine, just a few years later, when they got
a consulting firm on board Mackenzie and Company in particular
consultant for that company named Jeffrey Skilling, to create what
(10:01):
they called the a Gas Bank, which was basically, like
I said earlier, like, hey, why don't we just be
an intermediary between buying and selling of gas? And it
was going so well that two short years later, Skilling
left there and went to work full time.
Speaker 3 (10:17):
At Enron that's the John Gooing theme, oh.
Speaker 2 (10:20):
Sure, and eventually working his way up to the CEO
of that company.
Speaker 1 (10:25):
Yes, so he was he but for the most part
he was the right hand man, but essentially co CEO
with Ken Lay, who I think took him on as
a protege. And Jeffrey Skilling was the one who said,
let's set up this market. And he also transformed the
company's culture. One of the things he came up with
(10:48):
was the idea that every year they should review and
rate every employee, and the bottom ten percent of employees
should be fired.
Speaker 3 (10:57):
So every year he.
Speaker 1 (10:58):
Was planning on fire hiring ten percent of their workforce,
so about two thousand people every year. And the reason
he was doing this is because he's saying, we can
do better. We can hire the best and the brightest,
We'll replace those people with much better people, and then
the ones who are doing really well now we'll get
moved to the back, and we'll just constantly be improving
on the people that we're hiring. It makes sense in
(11:20):
a really machiavellian kind of way, but it's also psychotic
as well.
Speaker 2 (11:25):
Yeah, and the way I understood it from the documentary.
It wasn't just like regular upper management reviews of the
people that report to them, but it was all the
employees rating one another like within their department.
Speaker 4 (11:39):
Isn't that right?
Speaker 3 (11:39):
Yeah, that's what I took it as too, So.
Speaker 2 (11:41):
I mean, you don't have to like be a a
soothsayer to see where that heads when. And it certainly
creates competition if that's what they're all about with, you know,
sort of the charter of the company creating more competition
by deregulating. They sort of did the same thing than
the ranks and created a very I mean I've seen
(12:03):
it described everywhere as just overly macho and testosterone fueled.
Speaker 3 (12:09):
Yeah.
Speaker 2 (12:10):
It seems like the traders there were were hired and
kept on that were especially aggressive. And there are interviews
in the documentary about some of these men who were
traders that were like, you would cut the throat of
the guy next to you on the trading floor, your
fellow employee if you felt like you could make a
(12:31):
few extra bucks.
Speaker 1 (12:32):
Yeah, and that was very much encouraged, not just by
Jeffrey's skilling, but ken Lay had a history of at
the very least turning a blind eye, if not actively
encouraging people to break the law, do immoral stuff that
may or may not have been legal, all in the
interest of maximizing profits. Like, if you were making money
(12:54):
and you got in trouble, you didn't get fired because
you made money for the company. That's all all that
mattered was making money for the company. So in that sense,
Jeffrey Skilling was a really great protege for ken Lay.
But he was like ken Lay on steroids, and I
get the impression, and ken Lay is always or back
in the day, he was a master at presenting this
(13:16):
really laid back, almost.
Speaker 3 (13:21):
Detached persona.
Speaker 1 (13:23):
But if you watch the documentary and you read about him,
you really get the impression that he knew exactly what
outcome was ten steps down the road by just nudging
this thing over here, nudging that thing over there, all
with plausible deniability, but at the same time presiding over
this incredibly complex, complicated, masterful machination that was all dedicated
(13:48):
to the service of making money by whatever means possible.
Speaker 2 (13:52):
Yeah, and Lay, I mean the reason the documentary is
called The Smartest Guys in the Room is because I
think an equivalent everyone would admit that kin Ley and
Jeffrey Skilling, and we should introduce you to a young
recruit named Andrew Fastaal who is a key player eventually
becoming the CFO, and was up to all kinds of shenanigans.
(14:14):
But these were brilliant guys with amazing ideas, and a
lot of the ideas that they had for this company
were really good and ahead of their time. But they
had the notion that you should be able to trade
and make money off of great ideas and not necessarily
the results of those great ideas, because time and time again,
(14:35):
as you'll see as we tell this story, these ideas
were not making actual money, maybe because some of them
were ahead of their time, but that didn't matter because
they had ways, very creative ways to hide those debts
and losses. And that's the whole sort of fall of
Enron is wrapped up in that statement. But these are
(14:55):
all really really smart guys, and they were really really
good at making money, and maybe we should take a
break there. It's a nice little set up, all right,
and we'll come back and talk a little bit more
about their lobby to deregulate, and then some of the
early Shenanigans.
Speaker 4 (15:11):
Right after this.
Speaker 3 (15:13):
Should know, large holds of.
Speaker 5 (15:21):
SKUs watched s k as good.
Speaker 1 (15:35):
Okay, So after about six years after that big deregulation
from FIRK that said you can buy gas and sell
it at wherever in the country. That opened up a
huge market, there was another watershed deregulate deregulation that's that
reversed an act that went back to nineteen thirty five,
(15:55):
the Public Utilities Holding Company Act. Pooka love that one
that said, if you are generating and selling electricity, you
are a local utility and we're going to regulate you
like you were providing the life blood of America, because
they are Electrical utilities provide the life blood of America
(16:17):
and have since long before nineteen thirty five. And in
nineteen ninety they managed to get that reversed and now
all of a sudden, anybody could buy an electric utility.
And Enron definitely jumped on that.
Speaker 2 (16:30):
Yeah, for sure, their lobby was strong to put up mildly.
They hired lobbyists to lobby different states. In those states,
as no surprise, ended up getting millions of dollars flowing
back toward Enron. I think they hired a lobbyists for
at least thirty seven states. They also helped overturn along
(16:53):
nineteen eighty eight that said the military has to buy
power from local utilities, and now let's open that back up.
Pretty soon, Enron got a twenty five million dollar contract
for supplying electricity to Fort Hamilton and Brooklyn. And these
are just, I mean, twenty five million ins up being
(17:13):
peanuts in the grand scheme. But these are just examples
as they sort of ramped up to their schemes of
how they deregulated or lobbied to get things deregulated such
that it was allowed to happen.
Speaker 4 (17:25):
Right.
Speaker 1 (17:25):
And one of the things, one of the schemes that
got the attention of the entire country in two two
thousand and one was an electrical scheme in California. California
had undergone its own electrical deregulation power deregulation, but it
had had adopted this weird patchwork compromise law or set
(17:49):
of laws that just had loopholes you could drive a
truck through, and that were just really created all sorts
of legal gray areas. And so rather than just kind
of like here they're biting around the edges, seeing what
they could do. Instead, the energy traders at Enron started
figuring out how to move energy out of the state,
(18:11):
wait for the state to be like, hey, we need
some energy, and move it back at incredibly inflated prices.
They would purposefully take electrical utilities that they owned offline
to generate more demand, a spike in demand, and so
they could raise prices again. And they actually basically crippled California.
(18:34):
I think I saw that California had a couple dozen
blackouts in six months after that deregulation, after Enron started
coming in and messing with stuff, whereas the six months
before deregulation they had had one blackout. So if you
watch the documentary and you listen, you know, you read
some other sources about it. This was an entirely fabricated
(18:58):
scarcity of electricity. There's plenty of it, and Ron just
figured out that they could kind of pull this lever
in that lever and charge way more by creating this
fake scarcity.
Speaker 2 (19:07):
Yeah, and by pulling a lever like literally sometimes they
called up a power company, a power plant and said
pull the lever to the off position, and they have
them on tape, you know, they played this in the documentary.
Well they'll they called one in Las Vegas and said, hey, man,
can you take this thing offline for a few hours
(19:28):
and just just make something up because a rolling blackout
meant big money all of a sudden, California again was
buying their own energy back at a higher rate. And
Governor Gray Davis at the time, and this is you know,
I'm not like giving some full throated endorsement to any
effectiveness of Gray Davis as a governor because I really
(19:48):
don't know, but he definitely was sort of left holding
the bag and scratching his head like what's going on here?
Like We've got plenty of energy, and it just all
through the document people are saying like this just isn't
adding up in California. And some of those tapes that
they play of these traders, like there was that natural,
(20:09):
uh wildfire that broke out that jeopardized one of the pipelines,
and these guys are on, you know, on tape on
the phone with each other saying burn, baby, burn, because
that's good for business if it knocks something offline, and
is you know, make laughing at like uh, you know,
old Grandma's like sweating in the summer heat because they
(20:30):
can't get air conditioning, like the most vile, reprehensible kind
of stuff in the name of making the alminer mighty
dollar that you could imagine.
Speaker 1 (20:39):
What's also interesting is they don't really go into detail
about it, but it's it appears to have also been
a coup to get rid of Gray Davis and replace
him with Arnold Schwarzenegger. Yeah, because ken Lay held a
meeting at the Peninsula Hotel in Los Angeles and he
invited Arnold Schwarzenegger. This was long before Ard Arnold's Shortzenegger
(21:00):
was known to have had like real political aspirations. He
wasn't governor yet wasn't running for governor over a problem
that Enron created. It was like that level of In
addition to also just making billions and billions of dollars
by strangling the state, they also managed to replace the
executive of the state as well to somebody who is
much more friendly to them.
Speaker 2 (21:21):
Yeah, and get rid of in the of course he
didn't like knock them off or anything. But in California,
you can ever recall it seems to come up every
twelve years or so where Californians aren't happy with the governor,
and so if recall vote passes, you can have just
an election out of nowhere and replace that governor. While
(21:42):
this is going on, you know, kin Leigh stands on
a stage and says, we're making money in spite of California,
not because of California. So just lying through their teeth
on stage to their shareholders. And you know, all these
little schemes had little nicknames. The one where they got
energy out of California just to make them buy it
(22:03):
back was called Ricochet. There was one called death Star,
and they're on tape like joking about like, hey, let's
have a nice friendly name for this one, like death Star.
So they're just they're playing games with people's livelihood essentially.
Speaker 1 (22:17):
And lives you can make a case as well, for sure.
So three of those traders plagued guilty. Jeffrey Richter, John Forney,
and Timothy Belden were three of those traders who manipulated
California's energy market, costing the state between forty and forty
five billion dollars in retrospect of unnecessary electrical prices and costs.
Speaker 2 (22:42):
All Right, so Enron is doing great, They're making a
lot of money and we should point out that this
is just you know, Ricochet was just one little scheme.
They had all sorts of schemes along the way to well,
we'll get to those between nine six though. In two
thousand and one, like as far as the stock market
(23:03):
world was concerned in Run was a Darling Fortune named them,
I think six years straight America's most innovative company.
Speaker 4 (23:10):
Every single year in a row.
Speaker 2 (23:12):
Yeah, But what was going on behind the scenes is
these ideas and these investments in schemes that they had.
You know, some of them made money, but a lot
of them didn't make any money at all, and they
just became really really good at hiding that fact.
Speaker 1 (23:28):
Yes, that was the whole thing. Like, they were very innovative.
They were ahead of their time in a lot of ways.
Like they got into building broad band high speed internet
access in like two thousand or two thousand and one,
something like that, and.
Speaker 4 (23:44):
This was I looked it up.
Speaker 1 (23:45):
It wasn't until two thousand and seven that half of
all US Internet users had broadband, so this was way
ahead of time. And then also they also got into
the video on demand market. They tried to partner with Blockbuster,
and this was these things were basically like the progenitor
of Zoom and Netflix. But these guys were trying this
(24:06):
in two thousand and two thousand and one, so it's visionary.
The problem is they were ahead of their time. The
infrastructure wasn't there that the I think the customer base
even wasn't there. So there's stuff that they were doing
wasn't making money, which is not bad in and of itself.
What was bad was when they were covering it up.
And the schemes that they used to cover it up
(24:28):
are so involved in complex, but also so fascinating that
they would they would have the audacity to do this
because there's no there's no fudging it, there's no like, oh,
this is kind of questionable. This was just fleecing all
of their investors, all of their employees, fleecing the entire world.
(24:48):
There was a handful of executives at Enron who were
fleecing the entire world to the tune of tens and
tens and tens of billions of dollars every year in
revenue that apparently didn't actually exist.
Speaker 2 (25:01):
Yeah, it's pretty clear that at a certain point they
lost their way and that they weren't as concerned about
being a company that made money, and the only thing
that mattered was that as a corporation was that they
kept their stock price high, right, because that's where that's
where all the money was they had as long as
they could keep that stock price high and keep shareholders,
(25:25):
especially their employees, encouraging their employees to get you know,
get paid in company stock, like use every penny of
your paycheck that you can to buy this company stock.
Because Ron stock was soaring, it was doing really, really well,
and all the while it was you know, it's called
pump and dump. They would drive up the value of
their stock and then the upper echelon and you see
(25:45):
this time and time again in the corporate world. The
CEOs and the CFOs and the upper management are the
one who then sell off their stock and walk away
with you know, some of them hundreds of millions of dollars.
And you know some of the schemes that you talked
about was they found ways to move debt around. We
(26:06):
mentioned Fastyle was one of their hires, and he was
hired and I think his late twenties, early thirties, and
quickly rose up the ranks to CFO and he started
a company called LSM which stood for Leah, Jeffrey, and Matthew,
which are named after his wife and kids. Sort of ironically.
That was like such a sweet tribute to them. And
(26:28):
the only purpose of this company was to have all
kinds of sort of little sub companies that would absorb
the debt and where they could move debt around from
Enron to make it invisible to the shareholders, right, so
they could prove on a balance sheet that you had
this money coming in in the way of you know,
people investing in the company, but then you're hiding the
(26:49):
losses and so everyone thinks you're doing great.
Speaker 1 (26:52):
So the way that I saw it explained, Investipedia actually
has a couple of really good articles about this that
are just wonky enough to like understand it, but also
so wonky that you just like, I have no idea
what I'm reading. And the way they put it was basically,
if Enron had, like a good example is they build
a power station in India that was a huge loss.
It was just a generally bad idea, and they sunk
(27:15):
billions and millions of dollars into this power station and
without realizing any money whatsoever. I think they abandoned it
before it even came online. They would take this and
sell it to one of these special purpose vehicles or
special purpose entities, which was a tangentially related company that
the company Enron was not on the hook to pay
(27:38):
off its debts for right, and they would take that,
and then that special purpose vehicle would go out and
try to sell it, sell that terrible toxic asset, and
they would use Enron stock as the collateral right. And
because Enron stock was just through the room, everybody was saying, sure,
(28:01):
we'll give you a loan, sue, We'll give you some
money for that terrible idea of a power plant that
you abandoned, because you're backing it up with Enron stock.
And as long as the time that that stock came
to was far enough away, and as long as Enron
stock kept going up, this house of cards could be
held together. But that's not at all how it worked.
The upshot of it is that they could take toxic assets,
(28:24):
move them off of their books to these special purpose.
Speaker 3 (28:27):
Entities, and then they would take.
Speaker 1 (28:29):
The money that these special purpose entities would go borrow
against that toxic asset and they would count that on
their books as revenue. So they were hiding debt, boosting
their revenues to just ridiculous heights for stuff that just
should not have been counted as revenue.
Speaker 2 (28:48):
Yeah, and just to be clear, they didn't invent the
special purpose entity, And an SPE is not some evil
creation in and of itself. It is it's an entity
that a lot of corporations, businesses use where it's just
it's sort of like has a very narrow purpose in
that they create this thing when they might use it
(29:08):
to purchase an asset or move an asset, so the
company as a whole may not be on the hook
if anything goes wrong. It sort of mitigates risks. So
it's not some evil purpose in and of itself. But
they were manipulating these such and starting all of these
things under Fastau's guidance with his LSM sort of sub corporation,
and eventually LSM two. I think that they were making
(29:32):
I think they hit ninety dollars in August of two thousand,
market cap of the whole company at seventy billion, which
made it the seventh largest publicly traded company in the
world at that point.
Speaker 1 (29:49):
Yeah, so that's a market cap of seventy billion. Remember
that in nineteen eighty five. Its first year, it posted
losses of fourteen million. Within in fifteen years, they posted
revenue of one hundred billion dollars billion dollars in fifteen Yeah,
in sales in fifteen years. That's what happened to that
(30:11):
company when they brought Jeffrey Skilling on board. Jeffrey Skilling
brought Andrew Fastau on board, and people just started going
nuts making money anyway they could.
Speaker 4 (30:21):
Yeah.
Speaker 2 (30:21):
The other thing we should mention too is another sort
of slick trick is that Skilling's idea and they got
approval and I wasn't clear how or where this approval
comes from, but to use something called mark to market accounting,
which is basically when you can where you can rate
the financial health of your company based on not theorized
(30:46):
but just on future earnings basically and not necessarily what
they're worth that day, so anticipated future value instead of
its purchase costs.
Speaker 4 (30:58):
Did you get how that.
Speaker 2 (30:59):
They were because it seemed like they were all like
super psyched that they got approval for marked to market accounting.
Speaker 1 (31:04):
Yeah, that would have been the sec the Securities and
Securities Exchange Commission, who would have given that approval. And
just like a special purpose entity marked to market accounting
is it's totally legitimate, it's recognized as generally accepted accounting principle.
But there's a lot of room for temptation to just
(31:26):
basically say this deal with Blockbuster, we haven't made a
penny off of it, but we can we can cite
the future earnings from it now now that we booked
this deal, and I think it'll probably be worth a
billion dollars, just a total guess. And you're not supposed
(31:46):
to do it like that. You're supposed to do it
much more realistically and legitimately. But they had enough leeway
that they were able to take marked to market accounting
and use it to their to their benefit in that way,
and in doing that, they pumped up their their revenue
through the roof. Like the deal would just be inked.
They wouldn't have seen a penny from it, and they
would add it to their balance sheets as revenue.
Speaker 2 (32:08):
Yeah, it would become part of the ledger before like
a real penny.
Speaker 1 (32:10):
Was made exactly, and sometimes the pennies weren't made. And
if the pennies weren't made, don't forget, those debts would
be moved to a special purpose entity, so they wouldn't
have these toxic assets on their books, even though they
very much owned and were indebted for these toxic assets.
Speaker 2 (32:27):
Still yeah, I mean, like I said, these were brilliant
people and like they had all their bases covered except
for the fact that we all know that a house
of cards will eventually fall. It's that hubrius thing that
just blinds people into thinking that it will always like
when that kind of money is rolling in. I think
(32:48):
it blinds certain people so much that they don't understand
a who it's hurting at the time, or they don't care,
or they think it's always going to be rolling in
like this, or they think, hey, I'm gonna get mine now.
Because there were people in Enron. I mean, there will
talk about a whistleblower that eventually sort of came out
(33:09):
and a journalists who are poking around, but there were
people that started looking at this company the Darling of
Wall Street and saying something's not right here, like something's
not adding up, Like you can't even explain how your
cash flows through your business kind of way that makes
any kind of coherent sense. And anytime they were confronted
with this Skilling and his cronies would. They would get
(33:33):
very haughty about it and just be like, well, what
do you mean we can't explain that? Like, sure we can,
it's really easy.
Speaker 3 (33:39):
You just can't understand.
Speaker 2 (33:41):
Yeah, you just can't understand it, right, Oh, it makes
your blood boil.
Speaker 1 (33:44):
Let's let's take a break and then we'll come back
and talk about the downfall.
Speaker 3 (33:47):
How about that? Yeah, the downfall definitely should know draw
large Also r.
Speaker 5 (33:58):
Y skid as what why sk as good.
Speaker 4 (34:08):
To you?
Speaker 3 (34:08):
Should? Okay, chuck.
Speaker 1 (34:13):
So, one question that people might be asking is how
were these guys allowed to use this accounting and get
away with it? Why were people even investing in buying
shares of this this company when it was just so
fraudulent and and just ridiculously fraudulent too, not even subtly fraudulent.
And the answer is the the company was such a
(34:36):
Wall Street darling that financial analysts would not understand what
they were hearing on these earnings reports, but would still
give it a stamp of like buy. The other thing
that really really helped was the banks. Wall Street banks
were very much complicit in this as well. And then
the thing that helped the most was Arthur Anderson, the venerable,
(34:59):
eighty plus year old accounting firm.
Speaker 4 (35:02):
The oldest one of the country.
Speaker 1 (35:04):
Yeah, that was a third party accountant to Enron. Was
so cozy that they actually hired all of Enron's internal
auditing staff, made them Arthur Anderson's staff, and then opened
one hundred and fifty person office for Enron in Enron's
own in Enron's headquarters and Arthur Anderson office in Enron's
(35:25):
headquarters made up of former Enron auditors. That's who was
watching the show. And so Arthur Anderson had such a
good reputation that because they were signing off on this,
because the Wall Street analysts are saying, yeah, it's a buye,
people were just like, I'm buying, I'm buying, and it
kept the stock prices going up and up and up
because nobody was paying attention enough.
Speaker 2 (35:49):
Yeah, there was one person in the dock that said
that kind of crystallized it, which was like, I'm paraphrasing,
but he was talking about the fact that when this
kind of stuff pops up in corporations, like it's not
like this, the n runs are everywhere. There is all
kinds of mouthfeasance. For sure, in the corporate world, but
he basically said, somewhere along the way, it doesn't get
(36:12):
this big because a legal team says you can't do this,
or your accountants say you can't do this, or the
bank say we can't get involved in this. And Ron
seemed to be one of those sort of unicorns where
every person along the way just zip their mouth shut
even though the numbers weren't adding up, and was complicit
(36:33):
in this right.
Speaker 1 (36:35):
And there was a trader that was interviewed in the
documentary who said, like it was ironic that Enron's slogan
was asked, why why does something.
Speaker 4 (36:44):
Happen like that?
Speaker 3 (36:45):
Why can't we do it that way?
Speaker 1 (36:46):
And that this trader said, I didn't ask myself why
because I didn't want to know. I suspected things were
weird or ry, and I just didn't want to know
because it was my job. I was making tons of money.
And I think you can probably get that excuse out
of just about anybody who was complicit in this larger
small but Arthur Anderson that was the one that really
really helped things along. And as we'll see, they didn't
(37:08):
manage to survive the scandal.
Speaker 2 (37:10):
Yeah, they were Oh man, there was that one part
of the documentary where they were talking about Fastyles, you know,
Shell companies, and he was in a meeting that was
secretly taped and they're basically like, well, wait a minute,
it looks like you're on the buying and selling sides
of these transactions, right, And he was like, yeah, basically,
(37:31):
but I've always got Ellen Jay's interest at heart, and
the whole time he's skimming money and they believe that skilling,
and Ley knew that, like, hey, I'm sure that fast
Ols is skimming money off the top for himself, right,
Who cares? Because this guy's taking care of business for
us exactly.
Speaker 1 (37:48):
And I think he skimmed about thirty five million dollars
for himself. He stole from Emron and they looked the
other way because the stuff he was doing was so unethical,
so illegal that he basically earned it as far as
they were concerned to have his hand in the cookie
jar like that. So I think you kind of mentioned
(38:09):
there were some people who were like, wait, what's going
on here. One of the first people was Bethany McClain,
the journalists who ended up writing the Smartest Guys in
the Room.
Speaker 3 (38:18):
She is awesome.
Speaker 1 (38:19):
She started out writing a story for Fortune magazine back
in March of two thousand and one titled is Enron Overpriced?
And she was one of the first people to publicly
say how is Enron making its money? But she wasn't
the first to hit on this. There's another guy named
Jim Chanos of Kainiko's Securities, I think maybe, and I
(38:42):
think he's in the documentary, but he started shorting Enron
in two thousand because he noticed very simply their cost
of capital, so the cost of doing business was more
than their return on investment, which automatically means that they
were not a profitable company, which totally was contradicted by
(39:03):
all of their earnings reports and filings. And he saw
this and he said, this is this is this is
not right, and I'm going to start making money off
of the future downfall of this company and made hundreds
and hundreds of millions of dollars shorting and Ron stock
starting in two thousand.
Speaker 4 (39:21):
Yeah.
Speaker 2 (39:22):
The whistleblower two was an executive main named Sharon Watkins,
and she pops up a lot in the documentary. Obviously
is key to the story. She didn't whistle blow while
this was all going on. It was sort of after
the ship started sinking. But we'll talk a little bit
about how that all happened and where she ended up.
(39:44):
But what happened in August of twenty twenty one. Skilling
had replaced lay a CEO in February of that year,
and on August fourteenth, twenty twenty one, Skilling out of nowhere,
and he had just taken the reins, you know, a
handful of months before he Skilling quit out of nowhere.
He resigns, he cited personal reasons, And what was going
(40:05):
on was the you know, the Titanic sprung a leak, right,
and as they described in the documentary, he was one
of the first rats to try and get off the
sinking ship.
Speaker 3 (40:17):
Yeah.
Speaker 1 (40:17):
And it's like, if you are a CEO of a
huge company, you don't just leave like that. That is
an enormous red flag. There's like a whole process and
procedure for finding your replacement, grooming them, introducing them to
the rest of the world. You don't just leave like that.
And that was such a red flag that that whistleblower,
(40:40):
what's her name, Sharon Watkins. Yeah, she wrote an anonymous
letter Delay basically saying, hey, there's a lot of fishy
stuff going on around here, and now that Skilling suddenly departed,
like everyone's going to start having questions and this whole
house of cards is going to fall, and Lay it
apparently didn't do much about it, and she came to
(41:03):
Lay later on and said, I'm the person who wrote
that anonymous letter, and I'm really concerned about this, and
ended up trying to keep it in the company because
I think I get the impression that she thought it
was something, especially now that Skilling was gone, that could
be resolved internally. I think she really underestimated the extensiveness
(41:24):
of the corruption and yeah at the company and thought
it was a few people, when really it was a
large cadre of people who all were complicit in this.
And I get the impression that's why she didn't really
blow the whistle publicly at that point. But apparently ken Lay,
once he found out that it was Sharon Watkins, consulted
(41:48):
legal council to figure out how to fire her legally.
Speaker 4 (41:51):
Yeah.
Speaker 2 (41:52):
The same day that Skilling resigned, on August fourteenth, the
broadband division that we talked about earlier reported one hundred
and thirty seven million dollar loss analysts and.
Speaker 4 (42:03):
We should point out too.
Speaker 2 (42:04):
As far as the analysts go, they were always installing
friendly analyst and only working with friendly analysts. But they
finally got the clue they dropped their ratings for the stock.
The end came very, very swiftly for Enron. On October twelfth,
Arthur Anderson's I mean you still remember all the shredding
jokes on late night TV that ran for months and months.
(42:26):
Arthur Anderson's legal counsel said, everybody shred everything, destroy every
file that you have on Enron, And in one day
they shredded literally one ton of paper.
Speaker 1 (42:38):
Yeah, and that was just one day. They apparently shredded
around the clock from October twenty second to November eighth,
and that was just one ton one day. They shredded
literal tons of documents, just shred, shreded, shread. If you
were an executive at Anderson, you were probably working a
late night shift shredding alongside everybody else. It was like that,
(42:58):
And it was apparently at a time time where you could
legally do that and not be you know, indicted for it.
But that was not a good look when it came
out that Arthur Anderson was the auditors of this company
were shredding tons of documents, and the SEC got into
this and they said that they're going to start investigating
(43:19):
finally the special purpose entities that Fastau had set up,
and so Enron fired Fastau that same day. And I
think that was in November or late October of two
thousand and one. And right after that, on November eighth,
en Ron said, hey, everybody, do you remember all of
(43:41):
our all that money we said we made going back
to nineteen ninety seven, We're going to need to restate
our earnings. One of the first things they did was
they reported a six hundred and eighteen million dollar loss
for Q three of two thousand and one. Q one
they posted a four hundred and six million dollar profit,
(44:04):
Q two a four hundred and four million dollar profit,
Q three a six hundred and eighteen million dollar loss.
So they finally came clean. They finally said this accounting
is off, and this is how radically it's off.
Speaker 2 (44:17):
Yeah, I mean that is if a company is restating
their earnings for that period of time at all, like
mistakes can happen, but that's a that's a real bad sign.
They almost got a lifeline in I guess late October
of that year when they tried to merge with a
(44:38):
company called Dynagy Incorporated, and that deal, that deal fell apart.
On November twenty eighth, they backed out of the deal
Dynagy did and then what is this Four days later
on December tewod Run filed for the largest Chapter eleven
bankruptcy in US history.
Speaker 3 (44:58):
Up to that time.
Speaker 1 (44:59):
Sixty five I zero point five billion dollar company filed
for bankruptcy. That just did not happen. If you had
that kind of money, you could have a fire sale
and sell off stuff for way less than you paid
for it, but you could still survive. And that just
goes to show you, like just how fraudulent this company was.
They couldn't have a fire sale and make up that
(45:19):
kind of that kind of the debt that they owed
I think was seventy two billion dollars I think in
debt that they finally were found to have owed, and
at the time it was the biggest. In two thousand
and eight, we saw what big really was. Yeah, Lehman Brothers,
for example, had six hundred and thirty nine billion dollars
in assets when it filed for bankruptcy and went under.
(45:41):
But at the time Enron was like eye popping as
far as bankruptcies went for corporations.
Speaker 2 (45:48):
Can you imagine the wave of a relief that swept
through Dynagy Incorporated. Yeah, the particular bankruptcy a few days
later after they backed out.
Speaker 1 (46:00):
Yeah, that one. Just offhand conversation at the vending machine
over a packet of checks mix, like, save Dynagy forever.
Speaker 4 (46:09):
You know, this seems like a bad deal to me.
Speaker 1 (46:11):
Crunch Crunch, You're right, and Dynagy, by the way, went
on to become Apple.
Speaker 2 (46:18):
So the fallout from this, there are a lot of victims.
Twenty thousand employees. Twenty thousand employees lost their job. And
how long did they have to get out? What is
saying the second day? I think they had the day.
I think it was less than that. I feel like
it was hours or something. Basically, pack your s and
(46:38):
get out of here, everybody. Yeah, and like literally, this
huge tall building has thousands of people just leaving all
day with banker's boxes with their contents of their desk
in it, like the ultimate movie trope. Every employee that
had been told for years and years, hey, you got
to invest everything you can in that form because Enron
(47:01):
is I mean, look at the stock we're going places
and that money will be safe there.
Speaker 4 (47:07):
They obviously lost.
Speaker 2 (47:09):
Almost everything that was a you know, the rank and
file employees. That was one in the documentary that said
he had about close to three hundred and fifty thousand
dollars in stock that he ended up dumping for twelve
hundred dollars.
Speaker 4 (47:21):
Yeah, they froze.
Speaker 2 (47:23):
The stock accounts of the rank and file while upper
management was actively still cashing out.
Speaker 1 (47:29):
Yeah, that was a really scummy move. They, i'm sure,
purposefully changed four oh one k providers in the midst
of all this. And when you do that, there's a
minimum thirty day freeze as you transfer assets over, so
these poor employees couldn't sell their shares, like you said,
while the executives were making tens and tens of millions
(47:52):
of dollars worth of option trades. Yeah, I mean it's
just mind boggling. That to me is probably the worst
part of the whole thing.
Speaker 2 (48:00):
Well, and you know, tie with that, their severage package
averaged about four five hundred dollars for the average employees,
while management bonuses totaled more than fifty five million. And
that's just bonuses, that's not cashing out stocks and Livia
who helped us put this together, great job on this article. Yeah, agreed,
(48:20):
pointed out something like other fallout like you'd never even
think about, which was Ron was a very big investor
in donor in local nonprofits in Houston, and all of
a sudden, all that money is cut off, and like
the Red Cross chapter had to cut its budget from
twelve million dollars to nine million dollars in one year,
largely because the money dried up from Enron.
Speaker 4 (48:42):
So the fallout was far and wide.
Speaker 2 (48:44):
And that's not even mentioning, like we're talking about the
employees who had stock in the company, like every other
human being that had just stock in in Ron that
had nothing to do with it, lost all their money.
Speaker 1 (48:56):
Yeah, I mean the stock price was at ninety at
one point and it dropped down to I think forty
something since in like a year basically, So, Yeah, the
employees in particular and the retirees who had already left
and whose pension funds were just totally evaporated, meaning you're
gonna have to go get a job as a Walmart
(49:18):
greeter now because you can't afford anything. They are definitely
the greatest victims of all this. I saw ken Lay's
lawyer afterward portray ken Lay as the greatest victim of
all of it, because he apparently lost a few hundred
million dollars, and he didn't say it himself, but he
(49:38):
definitely tried to say, like, I lost so much money,
there's no way I could have known what was going on,
and that fell on deaf ears. And that same defense
was used by Jeffrey Skilling too, I didn't know what
was going on. So what they tried to do was
pin the whole thing on Andrew Fastau, who had been fired,
who had skimmed thirty something million dollars himself, demonstrated he
(50:01):
was a criminal. They made it. They tried to play
like he was a rogue CFO that had done all
of this under the very nose of Jeffrey Skilling and
ken Lay, and that they hadn't known. And the public, Congress,
the courts, juries, everybody said, you have to be kidding us.
Speaker 4 (50:20):
Yeah, And they were right. In the end.
Speaker 2 (50:22):
Fastyle pleaded guilty to two counts of wirefraud and securities
fraud in return for being a witness against Skilling and Lay.
I think had a ten year sentence for what was
going to be a much larger sentence, ended up serving
five years and then got out into twenty eleven and started,
you know, getting paid as a speaker to corporations about
(50:46):
business ethics.
Speaker 4 (50:48):
You know.
Speaker 2 (50:49):
To his credit, I guess twenty years on he came
out officially and apologized for everything. Seems to really have
turned the corner and learned a less and although he
never knows what is going on in someone's heart from
the outside, Arthur Anderson completely went away, the oldest counting
form accounting firm in the country, never recovered, completely folded
(51:13):
and went out of business. The Sarbanes Oxley Act was
enacted basically because of Enron in two thousand and two,
which was and I remember, I remember years ago when
we were working in our early days at how Stuff Works,
there was a lot of like Sarbanes Oxley talk.
Speaker 4 (51:32):
Do you remember that stuff?
Speaker 1 (51:33):
Yeah, because they came up with the Frank Dodd Act
to basically undo or combat against future stuff from the
two thousand and eight financial crisis. Yeah, this was the
same thing six years prior. Like Enron had such a
huge effect that they passed the law that basically point
for point outlawed all the stuff that Enron had done.
(51:55):
They did the same thing with the Dodd Frank actor.
Speaker 2 (51:57):
They tried to and of course know certain people will
say Sarbanes octually has no real teeth anymore because they're
not even funding the oversight that they promised. Other people,
you know, the diehard free marketers will say, that's actually
too restrictive. Uh, we're not able to be competitive anymore
because you've got all these rules now to make sure
(52:18):
we're not defraunding people of billions of dollars.
Speaker 3 (52:21):
Right, Yeah, you're making it hard to exploit people.
Speaker 1 (52:24):
Yeah. So there was actual convictions like this is crazy.
And one of the hardening things, Chuck is if you
watch like these congressional hearings on this, people from both
sides of the aisle are grilling these guys. Oh yeah,
No one was apologizing to them for their you know,
their colleague from the other side of the aisle asking
(52:45):
you know, mean questions. Everyone was mad at these guys.
The whole world hated Jeffrey Skilling and Ken Lay and
Andrew Fastow.
Speaker 2 (52:54):
He was so smug up there man answering those questions. Oh,
in the face of all that he was still so
smug about it.
Speaker 1 (53:01):
I looked up whether he ever apologized, and I could
not find it. I don't think Jeffrey Skilling ever apologized.
I think he went throughout his entire time in prison
basically saying like he was a victim, that this was unfair,
but he was imprisoned. He was an executive that was
in prison. That just does not happen lately. He was
convicted of nineteen counts froud conspiracy, insider trading. He got
(53:25):
twenty four years in prison and ended up serving twelve,
which is I mean, yeah, that sucks, but years not
to sneeze, No, for sure, that's a long time to
do in the clink. And then ken Lay he was
convicted on ten counts, but he wasn't able to be
sentenced because he died of a heart attack six weeks
after being convicted, and I think his conviction was vacated.
Speaker 2 (53:50):
Yeah, Skilling now is out and works at an oil
and gas analytics startup. It seems that other people I
think we Yeah, I mentioned that fast I was on
the speaker circuit. The whistleblower. Ms Watkins was named Times
Person of the Year in two thousand and two and
(54:13):
I believe it is also now a paid speaker and
executive in residence at Texas State University. And then there
was a matter of because I was like, Lyvia didn't
get to it, but I was like, well, surely there
was some sort of making it right for these people
who lost all this money right. And there were lawsuits
(54:35):
that came out and settlements that came out. Different people
ended up being paying different things. I think it was
a seven point two billion dollar settlement from Enron. I
believe the banks were on the hook. I can tell
if the banks were on the hook for some of
that or if it was a separate thing.
Speaker 3 (54:54):
I don't know.
Speaker 1 (54:55):
I saw that they squeezed a total of twenty billion
out of Enron before they like let it go.
Speaker 4 (55:00):
Oh okay.
Speaker 1 (55:02):
I don't know, but I did see the banks were
definitely on the hook just for being complicit. I don't
know if that was an addition though, either.
Speaker 4 (55:08):
Yeah. I think yeah.
Speaker 2 (55:10):
It says right here that the bulk of the settlements,
almost seven billion of it, came from JP Morgan, Chase
City Group, the Canadian Imperial Bank of Commerce. Oh yeah,
Lehman Brothers chipped in, Bank of America chipped in the
Big five auditing firm Arthur Anderson. Of course we talked
about they chipped in. I think, well, I don't see
(55:32):
how they could have chipped in it they went out
of business, but.
Speaker 1 (55:34):
I guess they chipped in before they went out of business,
all right. So you know, if you hear the story,
especially if you're used to us in our podcast, you
might be like, well, guys, you didn't really get to
the other side of the story. There is no other
side of the story. This is one of those rare
stories that is basically black and white. It was just
(55:59):
there's no redemption, there's no explaining it away, there's no
apologizing for it. It's just it was just as wrong
as it appears. So that's why we didn't include the
other side of the story in this one.
Speaker 2 (56:12):
Yeah, I don't think there's anyone out there who's going
to bat for Enron.
Speaker 1 (56:16):
It's there's somebody, there's somebody, and they will leave it
on our Apple.
Speaker 2 (56:19):
Reviews, right, they totally will Ron didn't get a fair
shake from these times, totally.
Speaker 3 (56:26):
Neither did a.
Speaker 4 (56:27):
Hitler or Satan.
Speaker 3 (56:28):
You got anything else, I got nothing else.
Speaker 1 (56:31):
Well, I don't have anything else either. If you want
to know more about Enron, go watch the smartest Guys
in the Room. Definitely will leave you wanting more, and
there's plenty to read about, including some great contemporary articles
all over the internet. And since I said contemporary instead
of contemporaneous, it's time for listener mail.
Speaker 2 (56:53):
This is a little wordy, but it's it's We don't
often do shout outs and tributes, but this is a
really special one, so we're doing it nice. Hey guys,
this is from Gavin, recent college graduate and history enthusiast,
and Gavin says, I've been listening since I was fifteen,
over seven years now. My mom was the one who
introduced me to the show, and we've both been listeners
ever since. I'm pretty sure she listens to every episode
(57:15):
that you guys put out. My mom was also the
person who imparted a thirst for knowledge and learning in
me as a child. I've had great many teachers in
my life, and I'm very thankful for them, but my
mom has always been my greatest encouragement and my role
model as a student and as a person. Over the
past four years in college and directly after I got
really busy, moved twelve hours from home, and it meant
(57:35):
I stopped listening to podcast including you guys. I know.
More importantly, I also lost touch with my mom. I
didn't completely ghost he or anything, but I still did
not reach out to her nearly as much as I
wanted to or needed to. But often when I eventually
would that, she would ask me if I listen to
stuff you should Know recently, and she'd have an episode
to recommend because I think you'd really enjoyed this one. Luckily,
(57:58):
now have a job where I'm having more flexible hours,
and over that time, I've picked stuff he should Know
back up, re energize my love for knowledge, and learned
that my mom has given me that my mom had given.
Speaker 4 (58:08):
Me years ago.
Speaker 2 (58:10):
All this to say, you guys mean a lot to
me and my mother, and I thank you for that.
You've helped me stay connected to her in a way
that I would not have been able to do otherwise.
I'd just like to take this chance to thank my mom.
I know you're listening, Mom, I know we'll talk about
this episode later, And thank you for encouraging me and
understanding that I love you even when I'm not great
(58:30):
at communicating it.
Speaker 4 (58:32):
Man, boy, this one's really pulling at the heartstrings.
Speaker 2 (58:35):
Yeah, every time I pick up a book or listen
to a podcast or write a paper, I think of you, Mom,
and I know that I always will. I love you,
And this is the only way I know how to
tell you properly. Kevin, you can pick up the phone
and say this stuff my friend.
Speaker 4 (58:52):
He is back to you. Guys, you got a great show.
Speaker 2 (58:54):
I hope we have many more years of remaining, learning
and growing together. And that lovely, lovely sentiment is from
Gavin and Fayetteville, Tennessee.
Speaker 3 (59:04):
That was amazing. Gavin, hats up, Chuck.
Speaker 1 (59:06):
I totally get why you chose that shout out to
be the one to break the rule.
Speaker 2 (59:11):
Yeah, it should have been along Mother's Day, around Mother's.
Speaker 1 (59:14):
Day, but well we can replay it around Mother's Day first,
select how about that instead?
Speaker 4 (59:19):
It's the the inrun episode, right.
Speaker 1 (59:22):
If you want to be like Gavin and just be
a super great person, but not request a shout out,
Just be a super great person, we want to hear
from you. Also, while I'm thinking of it, go check
out our social feeds. They used to suck, Now they're great. Also,
if you want to get in touch with this, like
I said, You can hit us up via email at
stuff podcast at iHeartRadio dot com.
Speaker 5 (59:47):
Stuff you Should Know is a production of iHeartRadio.
Speaker 2 (59:50):
For more podcasts my heart Radio, visit the iHeartRadio app,
Apple Podcasts, or wherever you listen to your favorite shows.
Stuff You Should Know News
Hosts And Creators
Chuck Bryant
Josh Clark
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