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Conspiracy of Fools: A True Story

by Kurt Eichenwald

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  1. 00
    Octopus: Sam Israel, the Secret Market, and Wall Street's Wildest Con by Guy Lawson (bjornar)
    bjornar: Readers who enjoyed reading about the shenanigans of Enron executives in Kurt Eichenwald’s Conspiracy of Fools would like Guy Lawson's Octopus as well. They are both fast-paced, suspenseful and set in the rarefied reaches of corporate finance, although Lawson clearly implies that there is far less fiction involved in his book. Whereas Eichenwald admits he freely filled in the blanks with fiction, Lawson says he got his story straight from the main source of his book, Sam Israel. Much of the story in Octopus could not be verified, however, so the reader is left to take it at face value.… (more)
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Review by Kurt Eichenwald

As I reached the end of the 675 - pages of Kurt Eichenwald's saga of Enron recounted in Conspiracy of Fools A True Story, I walked away shaking my head in disgust and at the same time shock!

Award winning journalist, Eichenwald, has written for the New York Times for more than seventeen years. Letting the facts tell the story, Conspiracy of Fools, A True Story, is based on the author's more than one thousand hours of interviews he conducted with over a hundred participants. Combing through thousands of confidential corporate and government documents, contemporaneous records, personal diaries, and best recollections of the participants, the author delivers a compelling and superb recounting of just what transpired- all with believable dialogue.

It is difficult to conceive just how was it possible that a prestigious accounting firm, Arthur Anderson & Co, could with just a wink and nod accept the creative accounting shenanigans that were practiced at Enron?
Although, it should be noted that Enron, at the time and prior to the change in the rules of acceptable accounting practices for energy companies, was legally permitted to use "mark to market" accounting, which allows companies to count as current earnings, profits they expect to earn in the future, from energy-related contracts. This was very cleverly used to prop up the balance sheet, keeping the banks and credit raters content.

Can we honestly believe that so called "smart" business people like Ken Lay, Enron's Chairman and CEO and Jeff Skilling, its President, did not know about or were not concerned with the fraudulent activities of their chief financial officer, Andrew Fastow?

Even until the end of his days at Enron, Fastow never did explain in a precise manner the poor financial condition of the company that had been the result of his incompetence and venality.

Furthermore, through the ineptness of Fastow, Enron was not tracking their cash in order to know when they were experiencing shortfalls-an essential requirement to know when and if they could pay their bills.
Apparently, nobody had a clue as to how much daily cash was collateral posted by trading partners and how much was coming in from the business.

What is so mind-boggling is Fastow's paradoxical behavior. He may not have understood basic business principles or Finance 101, however, he was quite clever in swindling from Enron over sixty million dollars with his masterminding of off -the- books personal partnerships, wherein he hid billions of dollars in debt and artificially boosted the company's profits.
As long as the share price of Enron was propped up and be damned at everything else, everyone went along for the ride without digging too deeply and asking too many questions. The old adage, "hear no evil, see no evil."

Eichenwald also brings to light how Enron became involved in all kinds of activities that had little to do with their principal line of energy business. As the author states, under the stewardship of Skilling, Enron was changed into a radically different beast.

This all led to Enron's pursuing of contradictory strategies and a loss of focus, wherein you had at the one end dealings that brought in huge earnings with little cash that were dependent on Enron's credit rating. On the other hand, you had activities devouring huge amount of cash, while producing very little earnings for years that would potentially put their credit ratings at risk.

Furthermore, our CFO, Fastow, did not have the foggiest idea about how to calculate investment returns!

You had a company that lied to its investors, hid losses to make itself look good, and executives who siphoned off company funds, all under the noses of their top officers.

A recipe just waiting for disaster!

In all fairness, I should add that there were several executives, who to some degree, did complain about some of the creative accounting that was going on at Enron.

This is a remarkable and engrossing read that chronicles a multi-billion dollar sham that came to light in 2001.

One question, however, still lingers on in my mind, how many more Enrons are there lurking in the shadows? Will we ever put an end to this shameless behaviour on the part of some public companies? Just ponder the wider effects it has on innocent employees, who not only loose their jobs, but also in many instances, their life savings and pension plans?

Just in passing, Ken Lay has been indicted and faces criminal charges that include security and wire fraud and making false statements. Jeff Skilling, likewise, faces thirty- six charges, including fraud and insider trading. Fastow has pleaded guilty to two counts of wire and securities fraud and is now serving a ten- year sentence without parole. He has agreed to co-operate with the authorities. Stay tuned.

Norm Goldman is the Editor of the book reviewing site, http://www.bookpleasures.com and the travel site, [http://www.sketchandtravel.com]http://www.sketchandtravel.com.

Norm is also a travel writer and he and his artist wife, Lily Azerad-Goldman meld words with art focusing on romantic destinations.

Article Source: Enron Debacle: Review Of Kurt Eichenwald's Conspiracy Of Fools A True Story ( )
This review has been flagged by multiple users as abuse of the terms of service and is no longer displayed (show).
  audreyl1969 | Jun 22, 2010 |
Veteran FBI Agent Keith Slotter has chosen to discuss “Kurt Eichenwald’s “Conspiracy of Fools: A True Story ", on FiveBooks (http://five-books.com) as one of the top five on his subject - The FBI and Crime, saying that:
“…Conspiracy of Fools came out shortly after the Enron debacle. I like the way the book tells the story from the inside of Enron. Before reading this it was hard to fathom that corruption and greed could be this rampant in any corporation, let alone a Fortune Top 25 Corporation…”
The full interview is available here:
http://thebrowser.com/books/interviews/keith-slotter ( )
  FiveBooks | Feb 2, 2010 |
A riveting history of the Enron scandal. Reads like a novel. Very well-researched. ( )
  checkadawson | Dec 31, 2009 |
How Enron went down, charisma and all that stuff. A very good book, a little less exciting than the amazing ADM thriller The Informant, written by Eichenwald. Both books about people, mostly men getting so wrapped up in their worlds they lose touch with reality, and thus forget the 'real world' outside their corporate doors. Palace madness.
  grheault | Sep 21, 2009 |
This large (nearly 700 pages) book is not the sort of thing I usually read. It is the true story of the Enron collapse nearly 10 years ago now. But Kurt Eichenwald, a New York Times reported who covered the financial beat and reported on the unfolding story has written a real page turner of a story that had me reading late into the night, enthralled. Let's just say it is no surprise to me now why our economy is in the shape it is in. Greed and politics are no strangers.

The only weakness in the book is that it ends too soon, before you know what happened to the main players in the story, although a quick search of Google or Wikipedia will bring you up to speed. Suffice it to say, if you ever find yourself in this situation, make sure you are the first one running to the police offering to rat your fellows out. It will save you about 25 years behind bars. ( )
1 vote co_coyote | Aug 15, 2009 |
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Amazon.com Amazon.com Review (ISBN 0767911792, Paperback)

Enron was a $100-billion-a-year company in October 2001--America's seventh-largest. The Houston-based energy firm enjoyed warm ties with newly installed President George W. Bush. Earnings were up 26 percent from the previous quarter, while Fortune magazine had named Enron the country's most innovative company six years in a row. Less than two months later, Enron filed for bankruptcy in the biggest corporate failure in history. Enron became synonymous with the greed and fraud of the go-go high-tech stock bubble of the late 1990s--the worst of a series of spectacular corporate collapses that also took down WorldCom, Tyco, and Global Crossing.

What went wrong? Veteran New York Times financial journalist Kurt Eichenwald does an epic job of telling Enron's story in his 742-page tome Conspiracy of Fools. Eichenwald, a finalist for the Pulitzer Prize in 2000, also authored The Informant, an acclaimed account of a vast international price-fixing scandal at Archer Daniels Midland. Conspiracy of Fools tells the Enron tale with a cinematic narrative style, relying almost exclusively on scene and dialogue to bring his account to vivid life. We see how federal regulators opened the doors for the Enron fraud early on when they let the company loosen up its accounting rules and essentially cook its books. We read how Enron bullied Wall Street firms into issuing favorable reports about its share price by threatening to take away lucrative banking fees. Eichenwald also reveals how Enron manipulated electricity prices during the California energy crisis of 2000. Eichenwald's book is less successful in situating the Enron debacle in its wider context--the cycle of market speculation that reached a historic summit in the dot-com bubble. Was Enron just a cautionary sign of the greed and lack of ethics of a few bad apples, or was it more symptomatic of an entire market system? That may be a debate for another book. --Alex Roslin

(retrieved from Amazon Mon, 30 Sep 2013 13:22:59 -0400)

(see all 4 descriptions)

In late 2001, the Enron Corporation--a darling of the financial world, a company whose executives were friends of presidents and the powerful--imploded virtually overnight, leaving vast wreckage in its wake and sparking a criminal investigation that would last for years. Journalist Eichenwald transforms the Enron scandal into a rip-roaring narrative of epic proportions, suitable for readers of thrillers and business books alike. In the roller-coaster style of a novel, the narrative takes readers behind every closed door--from the Oval Office to the executive suites, from the highest reaches of the Jusice Department to the homes and bedrooms of the top officers. It is a tale of global reach--from Houston to Washington, from Bombay to London, from Munich to Sao Paolo--laying out the unbelievable scenes that twisted together to create this shocking true story.… (more)

» see all 4 descriptions

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