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Photograph by Wyatt McSpadden

Masterminds: Enron's Ken Lay (left) and Jeffrey Skilling jobbed the system, investors and rate payers for billions.

The Big E

Richard von Busack talks to director Alex Gibney about his documentary 'Enron: The Smartest Guys in the Room'

THE MOTTO of Enron was "Ask Why." After the Houston-based energy-broker was the subject of the largest bankruptcy in American history, there were plenty of people who did ask why.

Among those questioners is documentary maker and producer Alex Gibney, whose film Enron: The Smartest Guys in the Room, is the idiot's guide to the amazing and appalling swindles of Enron. Gibney gave an interview during his film's appearance at the San Francisco International Film Festival.

After promoting his film, Gibney will be continuing work on a number of projects, including Exiles On Main Street, a series of short films all about cultural collision, by talents ranging from Sherman Alexie to Wayne Wang to Mira Nair. He is also working on a series called The Ten Commandments, akin to Kieslowski's Decalogue.

On the subject of the recent wave of political documentaries, Gibney notes, "I think there's a hunger for them. They're not only being made, they're being seen. One of the reasons for that is that TV news has become so bankrupt, because they don't want to offend anybody. I also think ironically, commercial TV has helped. Reality shows have helped documentaries: An 'unintended consequence,' as the economists say. People feel they can see films without actors and be entertained."

METRO: Were there times when you thought the mystery of Enron was going to be too impenetrable to make a film about?

GIBNEY: Well, from the outside Enron didn't seem a subject to make a film about. Because it seemed like it was all about obscure accounting rules. But then I read the book by Peter Elkind and Bethany McLean. It's not just a story about numbers, it's a story about people and about how good people go bad. Our system not only allowed it to happen, but also almost encouraged it. So for all those reasons I thought that would make a good film.

METRO: But the Enron labyrinth involved the deregulation of electricity in California-as a historical problem, it sounds like what was said of the Schleswig-Holstein Question, "Only three people understood it, and one of them was driven mad thinking about it."

GIBNEY: When you start getting into the details of that story, you almost could go crazy. Electricity trading is very complicated. Ultimately, I needed to understand the basics of it, but I could short circuit a lot of the explanation. I wasn't making a story about the intricacies of energy deregulation, I was making a film about moral behavior.

There were traders who said that many of these mechanisms that we did were market rational: it made sense to game the market. It wasn't illegal. It was our job to make money for our shareholders so that's what we did. That's true, but you can take a step back and say yeah, but you're shutting down the grid!

METRO: What do you think the outcome will be of the Ken Lay-Jeff Skilling trial?

GIBNEY: I think that it's a different issue than the film, since the film is an ethical report card. The case against Lay and Skilling will be hard to try because it's become extremely complicated. I think Lay and Skilling will try to make it as complicated as possible, and the Justice Department will try to make it as simple as possible. It's taking them a long time to come up with the indictments, because they want to make sure they have the goods on them.

The Lay case is a little bit different from the Skilling case, because Lay really was not that involved in a day-to-day basis. After Skilling left, the question is Did Lay hide the true financial condition of the company, in an attempt to prop the stock up?

METRO: It's an infuriating story.

GIBNEY: It's not just Lay and Skilling and Andrew Fastow. People are reserving a lot of rage for the banks, for one. Look at those emails-and I just included one of many: "We know what we're doing is dirty, but the money's just too good." What does that tell us about our financial system? That's what I find so intriguing about the videotape where Fastow is pitching to the bankers this new concept for this company that will only do deals with Enron. The bankers are sitting there thinking, "Yeah, man!" This is not a deal you could go get at your local branch. You can't go up to the tellers and say, "I'd like that Fastow deal where you can get a 2,000 percent interest on an investment." So they're just licking their chops, but it's an insider game.

METRO: Did the authorities ever catch those traders who are cackling on that famous tape recorded during the California power shortage?

GIBNEY: Yeah. A lot of those guys some of those people in those tapes have pled guilty to wire fraud and will go to jail. Others have not been prosecuted, but everyone knows who they are. I know more about those guys now then I did when I started. And the astounding thing to me is, as horrible as those tapes are-and that's something that doesn't come across on the printed page-you have to hear those voices …

METRO: …the glee in them…

GIBNEY: And you hear how they're laughing, it's like frat-house stuff. It's like a video game to them, bringing down the grid. But off the job, a lot of those people are very, very nice guys by all accounts. They're very into community service. So you're thinking, what is that about? That they could be so decent off the job and on the job they become killers?

Part of that is the trader culture. You have to be like a shark, or else you get eaten by the other sharks. There were other companies that had such ideas, but Enron just took it further. They weren't unique, they were just an exaggeration of business as usual.

METRO: You stressed that Skilling's misreading of Richard Dawkins' book The Selfish Gene changed him: Skilling got his ideas from it, in the same way the robber barons of the Gilded Age misread Darwin.

GIBNEY: And a close reading of Adam Smith shows it's not a "What, me worry?" world. Yes, Skilling misread that book to believe that if everyone is as selfish as possible, the best possible social outcome will emerge. There's a lot in Darwin about cooperation as a viable genetic strategy.

METRO: The stuff anyone who goes on a rainforest tour learns, about symbiosis and interlocking systems. It's all just beyond the ken of these guys. What's especially disturbing is that Skilling thought that what he was doing to the state of California would make it tougher.

GIBNEY: Yes, tough love. That is classical economic theory. If you find a number of markets that are out of balance or imperfectly regulated, your job is to game them, game them back into alignment. I'm not an expert in energy deregulation, but I've talked to a lot of experts, and they'll tell you that no one has a perfect solution to how markets should be regulated or deregulated. As someone said to me, "Unfortunately, we can't experiment on rats, so the only thing we can experiment on is humans."

METRO: How did Enron get its name?

GIBNEY: This is a funny story. It's meant as a compendium of two names, a merger of two pipeline companies. The first name they came up with is "Enteron," I believe, a word for the large intestine. Ultimately, the first name for Enteron was the ultimate pipeline through which the shit flowed. Shit happens, as they say.

METRO: You claimed that Gray Davis could have been president, if the California energy crisis hadn't hit. This seems a little unlikely.

GIBNEY: They were all talking about it back then, it seems hard to believe now. Think about it. Before the energy crisis he was not the most charismatic politician. But he was the steward of the seventh largest economy in the world. In that sense every California governor is a viable presidential candidate.

METRO: You note that one possible title for this documentary had been Enron: Ask Why. You decided against the title as "too preachy." Still, you suggest that the Enron motto might have been a sort of taunt. You write, "It reminds me of the way master criminals always leave clues for detectives, as if the discovery if the crime is a kind of cat-and-mouse game." So you think there was something that made Lay and Skilling leave a trace?

GIBNEY: None of us are very good liars, even Skilling and Lay. Skilling, to do what he did, had to convince himself of the utter rectitude of his position. Enron's slogan "Ask Why"—to me that's a classic criminal/detective thing: go ahead, analysts, journalists: ask why, we dare you. Nobody did.

METRO: You also note that you got no help from the Department of Justice; that the TV networks charge a good deal of money for using news clips, and that getting people to talk to you was an effort.

GIBNEY: For a lot of practical reasons, civil suits and proceedings were all ongoing. Sometimes the deposition can cost you $20,000 to $50,000. For practical reasons, a lot of people were very uncomfortable. A lot of people came and talked to me at great length; they were burning up inside. But the Department of Justice had asked them not to talk to the press, as they wanted their testimony used in the most efficacious way to bring down Lay and Skilling.

In a way, it's a really big problem. I don't know how to address it. From a lawyer's standpoint, you don't want any statement out there that could possibly conflict with what your client might give in court. You don't want them saying anything, you want to completely control their testimony. That's good for the lawyers, but not so good for the public accounting of a story like this. For something like Enron, in some ways I think a Truth and Reconciliation commission might have been better.

METRO: Personally, I don't know if I'm up for that traditional African forgiveness thing.

GIBNEY: It's hard. People here demand justice, and I understand that. But sometimes a lot of truth is hidden through the legal process. It's not the best fact-finding mechanism. Rather, it's a blunt instrument.

METRO: Do you think Enron has tested the business world's faith in privatization and deregulation?

GIBNEY: No. The Enron people said the problem with the California market was that it wasn't sufficiently deregulated. The rules were lacking and made them prone to gaming, but I'm not sure I buy the argument.

I think many business people look at Enron and think, "Look, they screwed up, and they did some wild and wacky things that we here would never do." There are a lot of very hard-working, reputable businessmen. But in the culture there's still is a reckless belief that the best rules are no rules. To me, that's economic theology—it's not the real world.

Take electricity: Is it a good thing to have people constantly gaming the market on which so many people depend on a predictable supply? And of course the traders will tell you, "We're going to do it more efficiently, the market will always be better." It's not always better. As we've seen in Enron, companies get together to exercise market power, and that's what happens when there were no rules.

Enron: The Smartest Guys in the Room (Unrated; 109 min.), a documentary by Alex Gibney, opens Friday at selected theaters.

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