Enron looked as vital as ever in early 2001. Jeff Skilling had just taken the reins from Ken Lay as CEO. And if Enron’s share price wasn’t breaking new records, it was still trading close to the $90 peak it reached the previous August.
Bethany McLean often gets credit for being the first to sound the alarm bell with her March article in Fortune magazine, “Is Enron Overpriced?” But McLean says that, as the stock market began its slide, she was one of many questioning what the company was hiding in its impenetrable financial statements.
“Enron had been counting on its broadband to kind of save it, and as skepticism grew about this business, it began to grow about lots of other things too, and then as times got tougher, Jeff Skilling abruptly quit as the company’s CEO in August of 2001, and that really intensified the pressure on Enron.”
Ken Lay, still chairman, agreed to come back as CEO, but proved unable to reassure investors. The first revelations of massive accounting fraud began to emerge. And at the end of October, Enron was forced to acknowledge a multi-billion-dollar loss. Investor relations manager Max Eberts.
“I was sitting in this place called Java Café, which was on the lobby floor, and Warren Buffett whisked through with a group of bodyguards and was hustled up to the top floor. That started the rumor mill that he might be interested in buying pieces of the company.”
When Buffett expressed no interest, Enron sought a merger with rival Dynegy. Richard Rathvon, then a salesman in Enron’s industrial energy unit, describes what happened next.
“I was in the office at the time. I had a major company in there trying to extend a transaction that we had already done. There were stock screens throughout the office, and that’s when the Dynegy transaction kind of blew up, and that’s when the stock went below $2, and that’s when I dismissed this particular client. You know, the writing was on the wall.”
December 3rd was a warm muggy day in Houston, as Max Eberts remembers.
“It was early morning on a Monday, and the air conditioning wasn’t even working. It was a miserable day.”
Eberts soon learned the reason why. Floor by floor, managers were telling employees that the company was bankrupt. Cindy Olson, then vice president for human resources and community relations, says it was the worst day of her life.
“I talked to the people that I knew in my group that were going to stay and then got everybody else together, and like everyone did on every floor, announced that if you hadn’t been talked to that this was your last day, and we’re sorry, and I know I cried, and helped people pack their boxes. And that’s the scene that everybody saw on TV.”
Employees were given thirty minutes to leave the building. Ravi Kathuria was with Enron Energy Services.
“And I remember standing in the elevator banks with all of these people, and it seemed like a surreal moment. There was disbelief, there was despair, nobody could really grasp — even though for the past three months, we knew of all these events. We still hoped things would work out.”