Tuesday, February 25, 2014


In January 2002, Cruver got a letter from Enron stating that his employment was terminated. All that meant to him was no more free checks. It was trivial compared to what else was unfolding that month. First, Enron fired Arthur Andersen as its auditor -- and over the next several weeks, Andersen was fired by Dynegy, Delta Airlines, Pennzoil, Sun Trust Banks, and over a hundred other companies. Less than a week after Andersen was dropped, Ken Lay resigned as Enron's CEO and Chairman of the Board. But the worst news came on January 25. A former Enron Vice Chairman, J. Clifford Baxter, had been found dead from a gunshot wound to his head behind the wheel of his Mercedes. Rumors spread that he had been murdered because of what he knew about Enron's inner workings, but after the autopsy was finished, Baxter's death was ruled a suicide. Besides, the police did find a final note to Baxter's wife:


I am so sorry for this. I feel I just can't go on. I've always tried to do the right thing but where there was once great pride now it's gone. I love you and the children so much. I just can't be any good to you or myself. The pain is overwhelming. Please try to forgive me.


That one note encapsulates Enron's entire legacy: betrayal, moral bankruptcy, and shattered lives. However repentant any of them may be, I have no sympathy whatsoever for the likes of Kenneth Lay, Jeff Skilling, Andy Fastow, Rebecca Mark, Joe Sutton, or even Mr. Blue. None of them were too concerned about their actions while they were riding high and wrecking other people's lives. Good fuckin' luck in front of that Houston jury, you members of the defense -- you're all gonna need it.

But then there's Brian Cruver. For him, life goes on after Enron. What to do?

Hey, why not write a tell-all-you-can book topped off with helpful hints? Cruver's tenth and final rule for conquering corporate America (this one's my favorite): "Always ask the person interviewing you, 'How did you become so smart?'"...


If an investor is worried about the next Enron, they need look no further than a company's board of directors. The directors are the watchdogs for the investor -- with the pure and simple task of maximizing shareholder value. The question shouldn't be, "Do I trust this company?" because a "company" is nothing more than an officially authorized illusion. A company is not a person; therefore, it should not be judged as having human characteristics. A company is not trustworthy, loyal, naughty, or nice. For those who argue that companies are "controlled" by people, I refer them to Exhibit X: Enron. The people there were "controlled" by the company.

The question of trust should be asked on an individual level, not trust in the company but trust in its leaders. Am I talking about CEOs and CFOs and the rest of the C-level managers? No.

Let me now refer you to Exhibits Y and Z: Skilling and Fastow.

The question -- and the responsibility -- of investor trust should be aimed aggressively at the independent members of the board of directors. Unlike management, they have an agenda strictly in line with shareholders. After all, directors are most often elected by the shareholders. The members of the C-level gang, on the other hand, have peripheral agendas, some that can be potentially lethal to the stock price and the stability of the company.

The days of quick and simple board meetings are over. Enron's collapse is an alarm bell for board members to start earning their $300,000 per year, instead of just sitting on their hands...

People have asked me who I blame the most for the Enron mess, and now you know my answer.

As an investor, I have three things to point out to the independent board members of every company I own stock in (and some companies I don't own stock in):

1. There are a lot of crooks out there.

Studies by the FBI and Bureau of Justice Statistics in 1999... show that white-collar crime is alive and well in the United States... In that year, more than 487,000 arrests were made in the crime categories of fraud, embezzlement, forgery, and counterfeiting.

Also in 1999, federal courts convicted over 12,000 individuals of committing crimes in those same categories...


White-collar crime isn't just for breakfast anymore. Pay attention to what your senior managers are doing and what they may be hiding.

2. Risk has gotten riskier.


Risk management is not about avoiding risks -- risk management is about managing risk (Surprise!). Board members need to be aware of what these risks are and, more important, how the CEO and others are managing them.

Risks facing businesses have always been bucketed into a few basic categories: market risks (such as foreign-currency-exchange risk, interest-rate risk, commodity-price risk, and equity-price risk); business risks (such as competitor risk, technology risk, and supply/demand risk); and operational risks (such as natural-disaster risk, quality-control risk, and management-error risk).

Let's see, I left out liquidity risk, regulatory risk, environmental risk, industry-consolidation risk, internal-expansion risk, insurance risk, bankruptcy risk, credit risk, payroll risk, legal risk, model risk, Internet-hacker risk, computer-virus risk, terrorist risk, fraudulent-behavior risk, you-could-go-to-prison risk, you-just-lied-to-the-shareholders risk, the-CEO-said-"asshole" risk, Wall Street Journal risk (credit Andy Fastow with that one), and many, many, many more.


3. Ethical Behavior = Higher Returns.

As proven by Enron, dirty deeds at work inside a company can cut a stock in half in just a few stock-market minutes (see above: Wall Street Journal risk). Sudden surprises that sink well below the ethical waterline can do much more harm to the stock price than would consistent, clear doses of the unshredded truth. Especially when those sudden surprises are first revealed by news organizations like the Journal.

Deliberately misleading stock analysts, masking true financial conditions, spewing positive propaganda around failing projects, silently delivering flawed products -- these efforts to conceal reality will indeed support a short-term gain, but ultimately the truth will wipe out investor confidence and the many price multiples that are tied to it...

(Off-topic: Good Lord, I hope someone possessing a conscience and laboring away deep within the bowels of Bush & Co. is reading this...)

On March 26, 2002 -- exactly one year after he began working at Enron -- Cruver looked in the mirror. He really needed to shave. (Frankly, so do I -- and I'm currently employed.) And he, having been betrayed by Greed Incorporated (a.k.a. Enron), wondered, of all the things one could possibly wonder about, if he was greedy...


By any definition, "greed" is an excessive desire, but I was never exactly clear where the "excessive" line should be drawn. When does desire -- for money or material goods or whatever -- become excessive?

We live in a world in which desire builds things, invents things, cures things, and discovers things. But when does this desire become gratuitous? Is it excessive to want a better life -- to want more adventure, a bigger house, a nicer car, fancier clothes, or premium dog food?

I don't think it's that simple. I think greed -- or excessive desire -- is defined by the means, not the end. It's the behavior that should be tested for excessiveness. Greedy is a term that applies to someone who lies, cheats, and steals in the name of possessing more than they need or even deserve. Financial success alone doesn't equal greed, but being a scumbag with financial success -- that's where the line should be drawn.

So, were Enron executives greedy because they had eight-digit bank accounts? No. Were they greedy if those millions were generated by fraud or at the expense of others? Absolutely!. And the Enron culture of bonus-driven behavior that twisted the truth and devastated thousands of people... Greed, Incorporated!

A year after starting at Enron I looked in the mirror, and I was thankful that I could stand to look in the mirror. I thought others might be having a hard time with that...

Don't know about Skilling, Lay, or Fastow, but I'm positive that this was a major problem for someone like Cliff Baxter...

Brian Cruver wrote Anatomy of Greed to show readers how he, and everyone else within the Death Star, not only believed in the myth spun by Lay and his underlings, but wanted to believe in it. In writing this book, whether or not he realized it, he clearly illustrated what can happen to people for whom the most important things are their illusions. Calvin Coolidge once quipped that the business of America is business. If so, then we better start paying attention to what people like Brian Cruver have to say, because we can't afford to use a disaster like Enron for our template. We can do better, we deserve better, and we know better. Corporate America needs to stop gazing at the bottom line and start looking at what goes into the bottom line. After all, it's only good business sense.

Until then, corporate America will continue flirting with the, uh... "no-bottom-line" risk.

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The End.