THE PRIDE AND THE FALL OF ENRON
THE PRIDE AND THE FALL OF ENRON
http://www.chron.com/cs/CDA/story.hts/special/enron/1624822
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Enron's tumble from Wall Street darling to corporate deadbeat seemed precipitous. A year later, it's clear the fall was a long time coming.
While the company grew rapidly through the 1990s, some of the worst manifestations of its culture -- obsessions with bonuses, the stock price and exotic accounting -- were also growing, and out of control.
Though the corporation's character flaws can be traced to its earliest days, they flourished under top executive Jeff Skilling.
He didn't act in a vacuum. Enron had a distracted, hands-off chairman, a compliant board of directors and an impotent staff of accountants, auditors and lawyers.
But it was Skilling's relentless push for creativity and competitiveness that fostered a growth-at-any-cost culture, drowning out voices of caution and overriding all checks and balances.
Skilling's attorney derides as "ridiculous" any suggestion his client allowed internal controls to be overriden. But interviews with dozens of current and former employees over the past year reveal that the creative aggressiveness Skilling deemed essential to dominating new markets went untempered by good business sense or fiscal discipline. The same decisions lauded as key to the company's future were also key to its demise.
"It was all about taking profits now and worrying about the details later," said one former Enron deal maker. "The Enron system was
just ripe for corruption."
Enron's culture wasn't spawned overnight. Its roots go back to the earliest days of the company, before Skilling came aboard.
In 1987, company auditors learned of a billion-dollar oil-trading scandal at the company's Valhalla, N.Y., offices. For years, traders there had falsified transactions to boost volume -- and fatten their bonuses.
Instead of firing the traders and contacting authorities, Chairman Ken Lay and his management team kept them on the payroll and tried to cover up the problems. Lay said the company needed the revenue.
Six months later, however, the traders had dug the hole even deeper and competitors were growing suspicious. If word got out, Enron's trading partners could have demanded the company cover its positions with cash, which it didn't have.
Only then were the traders fired and charged with crimes. Enron narrowly skirted insolvency by bluffing the markets, then slowly unwinding the trades. The company later reported an $85 million loss, but sources say it was probably at least $136 million.
Not long after, in the early 1990s, Enron made one of its earliest uses of creative financing, through a massive English power plant project known as Teesside. Enron owned about half of the project but was able to book as much as $100 million in revenue while the plant was still being built by acting as its own general contractor. That was years before the project earned a dime.
Teesside was also one of the earliest deals where managers reaped the benefits of an aggressive bonus program. Those who closed major deals were paid up to 3 percent of the value of the entire deal, payable when it was struck, not when the project actually began earning money. Many former employees say this upfront bonus encouraged deal makers to inflate their projected returns.
Deal inflation eventually became so widespread that one division, Enron Energy Services, had to eliminate its bonus program.
"They realized they couldn't pay us real bonuses based on alleged profits," said a former deal maker with EES.
Such practices were a byproduct of the company's obsession with its stock price, which was driven in the earlier years by Rich Kinder, chief operating officer from 1990 to 1996.
Kinder, a lawyer, began as chief counsel but gradually became more like a president and chief financial officer, demanding his managers meet lofty earnings targets, said former executives.
"He was very bottom-line oriented and would terrify people if they didn't meet their goals," said former chief tax counsel Robert Hermann, who left Enron earlier this year. "If he could have opened his office windows I'm sure he would have made people walk the plank."
Kinder left Enron in 1996 when it became clear Lay would not be stepping aside soon. That opened the door for Skilling, who had joined Enron in 1990 after working with the company as a consultant with McKinsey & Co. Except for their desire to grow the company, the two could hardly have been more dissimilar.
Kinder focused on operations and cash flow, the best single indicator of a company's real earnings. He met weekly with all division heads and grilled them on details, especially expenses.
"Kinder would approve an expense as if it were from his own checkbook," said Alberto Gude, a former vice president of information services. "He made you work through the details of your spending before he'd say OK."
Skilling did not care about expenses or seemingly much about day-to-day operations. Former colleagues say he disliked meetings, delegated responsibility and relied heavily on Chief Accounting Officer Rick Causey for details of what the many divisions of the company were doing.
Instead of cash flow, Skilling was concerned about revenue increases and widening profit margins.
"It was a well-known fact that Skilling didn't care what the expenses were so long as the margins looked good," said George Strong, a longtime lobbyist for Enron.
That became a problem beginning in the mid-1990s, when the company began buying, expanding and launching businesses left and right.
"There were a lot of start-up businesses, so I guess he was content to let them have expenses since that's what it took to build new business," Hermann said. "But there came a point in time where he needed to call them in and say `OK, enough's enough.' "
"When Kinder left and Skilling took over the presidency," Strong said, "I started feeling that people were not looking at the longer-term perspective."
A classic example of the short-term thinking came when Strong recommended the company try to win a lucrative energy management contract for a major public school district.
"I told a manager that replacing the school district's current company wouldn't happen overnight, that it could take as long as a year to convince them. But I hit a brick wall," Strong said. "He said, `I haven't got a year. If I can't do it in three months I won't do it because my bonus depends on it.' "
That attitude was a product of the atmosphere Skilling nurtured, his former colleagues say. A key component of that atmosphere was hiring a certain kind of person. In the late 1990s, the human resources department began giving recruiters a new set of "cheat sheets" on what to look for in job candidates.
"It was not your typical, hard-working, extracurricular-activities type of student," said one manager who helped with recruiting. "It was a sharp-dressing extrovert, someone who would fit in as a ruthless trader. We weren't looking for softies."
Drawn from Harvard, Yale, Princeton, Rice, Northwestern and other leading universities, the new hires were smart, even brilliant, but did not prove to be good managers.
"If you keep telling people how smart they are, after awhile they start to think they have nothing else they need to learn," said one former manager, now in his mid-30s. "It was such a go-go, high-achievement environment that there wasn't close monitoring to make sure people learned the basics of good management."
The atmosphere became something like a college fraternity, where traders and deal makers were treated as brothers and the rest of the staff as pledges, said a former recruiter.
"Working in any of the support positions was like going through rush," the former recruiter said. "You'd have to become aggressive and ruthless before they would say, `Good boy, you're one of us now.' "
To enforce his particular vision, Skilling encouraged all units to use an employee-evaluation process he first implemented in Enron Capital & Trade, the division he first led.
That process -- "rank and yank," as it came to be called -- came to epitomize the company culture. Employees spent about two weeks annually ranking fellow employees' value to the company, from 1 down to 5. The process could be brutal, and often led to employees downgrading their peers to make themselves look better. And each division was forced to rank a fifth of the employees as 5s.
"We hired the best and brightest people, but now they were telling us we had to arbitrarily fire 20 percent of them. Why would we want to do that?" Hermann said. "Every company in America uses some sort of rating system, but the way it was used at Enron was just too divisive."
Skilling's attorney, Bruce Hiler, said the idea that Skilling created a culture that damaged the company is "ridiculous."
"There was an extensive internal control environment, which my client was instrumental in putting in place," Hiler said. "There were about 15 people that reviewed people for performance ratings, which would mitigate any possibility of anybody holding things over the heads of others. It just doesn't make sense."
Sensible or not, many others say, it happened regularly.
The cultural changes in the company even threatened the very language that defined the company's values: respect, integrity, communication and excellence. In the late 1990s, the company's Visions and Values Task Force considered expressing the principles with words such as "smart," "bold" and "aggressive." The effort failed, but it spoke volumes about what was afoot at Enron.
Smart, bold and aggressive people tend to get impatient with rules. The relentless demand to create new ways to make money -- or appear to make money -- spawned an environment where raising questions about a deal was considered disloyal or, worse, an indication someone "didn't get it."
In theory, Enron had mechanisms in place to raise such questions, to assess risk and accurately report financial numbers.
Enron's external auditor was the once-venerable Arthur Andersen, dubbed the "Marine Corps of accounting" for the hard-nosed attention to accounting standards it once exemplified.
Enron required that deals be rigorously analyzed, a process that often included review by the legal department of the originating unit, the corporate legal department, the chief risk officer and chief accounting officer.
But the system was easily overridden. Deal originators could determine the total value of their proposals by manipulating such factors as the long-term price for whatever was being bought or sold. Their bonuses were based on the total value of the deal, not the cash it brought in.
All this was designed to pump up the quarterly reports, made possible by "mark-to-market" accounting, a system Skilling pushed Enron to adopt in 1991 that allows a company to report as current revenue the total value of a deal over its projected lifetime.
Mark-to-market as it was used at Enron made earnings look good, pumping up the stock price and increasing the value of the thousands of stock options executives received as compensation.
"It was a moral hazard being able to record your profits immediately," one former executive said. "It created many temptations."
Resisting that temptation was difficult. Testimony from the Arthur Andersen criminal trial earlier this year detailed how external auditors were often bullied to sign off on complex and controversial accounting maneuvers.
Andersen partner Carl Bass said he was demoted from his role on the firm's prestigious internal review group when Enron officials complained about his objections to certain deals.
Former Enron executive Jeff McMahon testified to Congress early this year that Skilling essentially demoted him after he complained about Andrew Fastow's dual role as CFO and manager of two outside partnerships that invested in Enron deals.
McMahon said Fastow had told him afterward, "You should assume everything you say to Mr. Skilling gets to me."
And former Merrill Lynch analyst John Olson has said he was forced out of his job with the company in Houston after his persistent criticisms of Enron.
Members of Enron's own internal watchdog group, Risk Assessment and Control, found it particularly difficult to say no. Those who tried to stop deals regularly were given negative performance reviews under "rank and yank," said former employees.
"The RAC would say the assumptions made in a deal weren't realistic, but they were never able to kill a deal," said a former worker who tried to push deals through the group. "They could be pushed around because they knew we could screw them over through the performance review committee."
Another former trader said his boss's attitude toward accountants and risk managers was typical of many in the company: " `If they're not here helping us close deals, there's no need for them,' " he said.
Deal makers regularly invoked Skilling's name when trying to get their proposals approved, a tactic that carried much weight because the head of RAC, Rick Buy, answered to Skilling.
The influence of Skilling went beyond his official title. In a company stuffed with brilliant people, he was arguably the smartest.
One of the top students in his class at the Harvard School of Business and a former partner at consulting powerhouse McKinsey, his intelligence was often intimidating, even to customers and business partners, Hermann said.
"In a business situation you begin to wonder if you're going to be taken advantage of when you're facing someone so smart," Hermann said. "We'd have to send marketing people out after they met Jeff to calm them down and reassure them we were good people."
A senior engineer involved in international projects described one rank-and-yank session when Skilling cut off some positive comments about a company veteran: "This guy has spent 30 years in the same job in oil and gas. If he's that good he'd be a trader by now."
The Skilling fear factor rubbed off on a handful of other top executives whose close ties to him made them known as "Friends of Jeff." They included Ken Rice and Kevin Hannon, the two top executives with Enron Broadband; Greg Whalley, the president and chief operating officer of Enron Wholesale Services who became president and chief operating officer of the company after Skilling left; Dave Delainey, the CEO of Enron Energy Services; and John Lavorato, a top energy trading executive.
Some observers believe Skilling's style was a product of his background with McKinsey.
"Rank and yank" was a variation on a system developed by McKinsey. The "asset light" mantra that Skilling preached -- of a company that owned few hard assets and made all its money off trading and services -- was also a McKinsey-endorsed concept.
But like many consulting firms, McKinsey has gained a reputation as a flock of thinkers, not doers. Great at devising grand strategies, but not at making them work over the long term.
Skilling's background was reflected in his hands-off approach to details. Soon after taking over as chief operating officer, he revived the long-dormant post of chief financial officer and delegated many of the management responsibilities that Kinder had overseen to other executives.
The McKinsey influence can also be seen in his vocal belief that Enron could adapt the skills it developed in creating energy trading markets to such disparate products as Internet bandwidth, paper products and even weather.
The belief was so strong that it wasn't felt necessary to hire executives with telecommunications experience to build its broadband business. Instead, it simply gave the job to successful gas traders such as Rice and Hannon.
"These were people that didn't know how to spell `broadband,' nevermind run that business," said a former senior vice president. "But if you questioned them and the wisdom of the business, you would be ridiculed because you `didn't get it.' "
And when a business did fail or a deal fell apart, more effort was put into hiding the consequences than owning up to the problem. Debt and losses were anathema to Enron's financial statements.
In late 2000, for example, officials with EES, the division formed to sell power at the retail level, decided to remove the hedges it had put on several big energy trades so it could lock in the higher prices they were fetching during California's energy crisis. The maneuver allowed EES to report a big profit one quarter, but when the markets broke the other way, it was hit with a loss of as much as $800 million.
Rather than report it, former employees say, EES' trading activity was shifted under Enron's main trading business, where the huge revenues easily concealed the big loss. The reason for the shift was never publicly disclosed.
Similarly, four particularly notorious Enron partnerships, known as the Raptors, were created solely to hide losses.
The Raptors were set up in late 2000 as hedges against the declining value of investments in other companies. For example, in 1998 Enron invested $28 million in Rhythms NetConnections. When the Internet service provider's stock went up, it was worth more than $500 million to Enron. The company then recorded the increase as revenue even though it didn't sell the stock.
Since mark-to-market accounting would require Enron to report a decrease in Rhythms' share price as a loss, Enron put the stock into one of the Raptors as a hedge against such a drop. But Enron used its own stock as its contribution to the partnership, assuming that its own share price would not fall. When both stocks fell at the same time, the Raptor went bankrupt.
In retrospect, Enron's problems may seem obvious. But the view from inside the company was rarely clear.
"Every division and business unit was like its own silo, separate from all the other businesses," said the former CEO of one of the divisions. "It was decentralized and not heavy on teamwork, with all of the divisions in competition with each other for resources."
Many employees say they saw things that were a concern, such as over-the-top bonuses and rampant expense-account abuse.
"I used to feel bad about the cost of my hotels overseas, so I'd eat at Taco Bell," said a former division president. "But then I'd hear about these young managers dropping hundreds of dollars every night on meals, and I wondered what had happened to allow that."
But since most only saw their part of the business, they assumed the problems were isolated.
"You understood your piece of the business and maybe what the guy next to you did, but very few understood the big picture," a former broadband worker said. "That segmentation allowed us to get work done very quickly, but it isolated that institutional knowledge into the hands of very few people."
Despite the company's downfall, many former employees say they still do not regret their time there.
"I lived the culture at Enron for 10 years and I really think it was the individual executives who did this to us," said a former trading executive. "Most everybody I knew at the company was honest and charitable."
"I don't think anyone started out with a plan to defraud the company," Hermann said. "Everything at Enron seemed to start out right, but somewhere something slipped. People's mentality switched from focusing on the future good of the company to `let's just do it today.'
"But once you start doing deals like that, maybe your mindset changes. Maybe you start to do deals just to do them."
Over the years, Strong said he saw many opportunities for key Enron employees to speak up.
"But they chose to look the other way," he said. "The culture wasn't one that wanted to hear about such concerns."
"In principle the system would work," said a former executive. "But it broke down because those expected to hold others accountable either didn't have the power to do their job or they lacked the will.
"In a business as risky as ours you can't afford to take off the safeties."
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WASHINGTON -- Almost no one tells jokes about WorldCom.
Tony Soprano didn't bemoan a lack of "Tyco-type connections." No one from Adelphia posed nude in Playboy, much less Playgirl.
When Senate Majority Leader Tom Daschle wanted to emphasize his opposition to Social Security privatization, he deployed a new verb: "I don't want to Enron the people of the United States."
But why Enron? The WorldCom bankruptcy was bigger. Former Tyco Chairman Dennis Kozlowski exhibited greed on a scale that dwarfed anything at Enron. The alleged looting of Adelphia was a family affair.
But it is the Enron scandal that has shown staying power, permeating popular culture far more than any of the other corporate debacles of the last year.
"It's become a cultural icon, in a way, but even cultural icons have a way of being somewhat ephemeral," said Michael Agnes, who as editor-in-chief of Webster's New World Dictionaries must evaluate the staying power of such images.
The Enron mystique is due, in part, to the fact it was first in the recent wave of corporate scandals. And the company's close ties to the Bush administration threatened to spark a major political scandal.
But Enron seems to have achieved primacy because it has all the earmarks of classic tragic drama, in which hubris causes the fall of the mighty. And people have always relished the spectacle of the powerful crashing to Earth.
"If Oedipus were a slave, who would have cared who he slept with?" asked Loren Fox, author of Enron: The Rise and Fall.
Enron was no one's slave. For years, it was the peacock of Wall Street. In the era of deregulation, executives Ken Lay and Jeff Skilling transformed Enron from a boring pipeline operator to a risk-taking, chest-beating worldwide trader of energy-water-broadband-whatever.
The company also was obsessed with recruiting brilliant, aggressive people. "Enron would have no problem going to Wharton or Harvard or Stanford ... and competing against Goldman Sachs for talent," said Ron Lumbra, executive director of Russell Reynolds Associates, an executive search firm that did considerable business with Enron.
Enron created a corporate culture that more resembled a dot-com startup in Silicon Valley than the behemoths in the Energy Corridor.
A visitor to the firm would see "desks cluttered with visionary bubble diagrams ... and weird office toys, ... people throwing crumbled wads of paper at each other," said Robert Bruner, a professor of business administration at the University of Virginia's Darden School of Business. "This was an environment that was both playful and aggressive.
"Enron, in its final manifestation, wanted to be the world's coolest company," he said.
Business gurus raved. Enron was hailed as the business model of the future.
Fortune magazine named Enron the nation's most innovative company five years running and, a year before Skilling's resignation, ranked Enron among its "10 Stocks to Last the Decade."
"It was a child of deregulation, of rapid technological change, of very high innovation in business practices and processes, and of a culture that sought to rewrite the rules of competition and business management," Bruner said.
On the other hand, companies such as WorldCom and Tyco grew through such humdrum means as mergers and acquisitions.
"There's nothing that sexy about buying up other companies and becoming a conglomerate," Fox said.
Enron became the symbol of a renewed Houston, roaring back from the Oil Bust. Its new office tower was the first built downtown in more than a decade.
In the nation's capital, Enron was the envy of lobbyists. Lay hobnobbed with presidents and cherry-picked former lawmakers and administration officials to put the arm on legislators.
"Stocks? You gotta be high up in the corporate structure ... . We don't have
those Enron-type connections," says Tony Soprano (James Gandolfini) on HBO's
hit show The Sopranos. |
Then, it imploded, paralleling the collapse of the Internet startups. The public outrage was immediate and has endured.
At Oregon State University, the business school offered a special lecture series on the Enron implosion. More than 700 students showed up.
Enron-related Web sites popped up all over the Internet. At politicalhumor.about.com, users were invited to distort the faces of Lay, Skilling and Fastow with the click of a mouse.
Enron was frequent fodder for late-night comics. Jay Leno joked, "Osama bin Laden gloats about the damage he did to the U.S. economy. Let me tell you something, pal. Most of that damage was done by Americans at Enron."
Ben Karlin, head writer for Comedy Central's popular The Daily Show, said Enron became a "cultural touchstone" because it seemed to confirm "your creepy, horrible suspicions about just how government and the corridors of power work."
The other scandals just haven't had the same impact because "Enron got there first," Karlin said.
After being nominated for an Emmy award, the show's writers were asked to create a skit for the judges.
They decided to play "disgraced corporate executives taking the Fifth," Karlin said. "I had the honor of being Ken Lay."
And as for Daschle's effort to use the company's name as a verb, Webster's Agnes does not expect to see "enron" inserted between "enrollment" and "enroot" anytime soon.
For a word to find its way into Webster's, the term must be in general use for three years, Agnes said. "Enron," of course, has only been a popular pejorative for the past year.
While comments by Daschle and other politicos will be taken into account, Agnes' word sleuths would have to hear the term used more frequently in, say, restaurants in Cleveland, Webster's headquarters.
"We'd like to have some spoken citations overheard at lunch from some computer salesman saying, `We don't want to enron the company out of existence,' " Agnes said.
Agnes is betting against its longevity: "It's a fad."
Though Enron has come to stand for all that is wrong with corporate America, few observers expect it to become a lasting symbol.
"I think people still might call this the Age of Amazon.com, rather than the Age of Enron," Fox said.
And although Enron has been a major embarrassment for its hometown, Fox said, "Houston is such a city of booms and busts that 20 years from now, I'm sure there will be something else the city will be known for. And I don't necessarily mean a negative thing."
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WASHINGTON -- After Enron went through its high-profile collapse, elected officials trembled at the price they might have to pay this November.
But what was once expected to be a political earthquake now seems little more than a tremor.
Experts now expect the corporate-corruption issue symbolized by Enron to be decisive in very few races and to have only a mild impact on others.
"There has been a political impact, but probably less than most of us anticipated," said Larry Sabato, a political science professor at the University of Virginia. "It is tough to think of more than a few races where it is likely to make a difference."
"Democrats around the country are still using it in their advertising, so it is playing in races, but it may not be as determinative in races as it was once expected to be," said Stuart Rothenberg, a Washington-based political analyst.
That's not to say that people have forgotten the Enron scandal or are not upset about it.
"Ken Lay is a permanent part of the cultural landscape. Enron is, too, as a symbol of sickening excess," said Sabato. But voters just don't seem inclined to punish either party for the perceived sins of Enron.
A comprehensive Pew Research Center study of what would move voters released in mid-October found, "for the most part, the wave of recent business scandals has not become a significant factor in the November congressional elections."
Only 2 percent of voters volunteered it as an issue politicians should be talking about. "Moreover, there is little evidence that either party has a clear advantage on the issue," the Pew researchers said.
Nonetheless, some say, Enron will have an impact on national policy by shifting a key ideological battleground.
"Enron symbolizes the end of a 20-year period of Republicans pushing for government deregulation," said Marshall Wittman, a senior fellow with the Hudson Institute. "Although there doesn't seem to be any short-term political gain for Democrats, it probably brings an end to the old conservative ideal that the bestgovernment is the least government."
Peter VanDoren, of the libertarian think tank Cato, believes the intellectual case for deregulation is as strong as ever, but conceded that Enron and related corporate frauds are going to make politicians queasy about supporting it.
"As a pragmatic matter, if I am a politician I could make the case that deregulation has really been good for lots of markets and consumers, but then my opponent is going to attack me with Enron," he said.
In one direct legacy of Enron, Congress passed, and President Bush signed, a law that tightened oversight on the accounting industry and increased criminal penalties for corporate fraud.
Another Enron-inspired piece of legislation, the pension reform act, is languishing in Congress but will likely be reintroduced next year. That bill would add some protections to 401(k) and pension plans. But critics, including Democratic congressional leaders and labor unions, describe the reforms as too little, too late.
Supporters say pension reform measures pushed by Republicans with some Democratic support would make it easier for workers to diversify and obtain investment advice, helping avoid another Enron-like debacle where many workers had their retirement plans completely invested in the now-bankrupt company.
But opponents say the House bill that stalled this year had a provision that would have made it easier for some companies to renege on pension protections for low- and middle-income employees while maintaining generous retirement plans for upper level management.
In mid-summer, to much fanfare, Bush signed an executive order creating a national task force to pursue corporate fraud.
Headed by Deputy Attorney General Larry Thompson, the task force linked the FBI and U.S. attorneys in several major cities, including Houston, into a single team and created a rapid-reaction squad of experts to handle future corporate crime cases.
The speedy passage of the new accounting law and the swift formation of the corporate fraud task force helped insulate the White House and Congress from more severe fallout, experts said.
"Republicans proved to be adroit cross-dressers on the corporate fraud issue," Wittman said. "The legislation passed by Congress and signed by the White House helped defuse it."
In the end, as Wittman said, "To the average voter it was not clear there was a political bad guy."
While Republicans might seem to be a natural target of voter scorn because of traditional ties to business, the Clinton administration also publicly embraced high-tech and other business sectors that fueled much of the boom in the 1990s, analysts said.
When that bubble burst, the blame did not fall on one political party. In fact, Pew researchers expressed surprise that, by a margin of 36 percent to 31 percent, voters felt Republicans were the better party at "dealing with corporate corruption."
Analysts said another factor lessening the impact of Enron is that political parties have improved at rapidly heading off potential disasters.
"Thirty or forty years ago, Republicans might just have said this is unfortunate but it will go away," Rothenberg said. "But I think both parties have learned they need to get out ahead of these types of issues and vaccinate themselves."
Several other factors have helped minimize the Enron fallout for candidates facing mid-term elections, experts said. Most importantly, perhaps, is that the political angle never really gained traction.
"I think collectively we overestimated Enron itself as a political story rather than a business story," said Rothenberg. "Early on, there seemed to be a lot there. There was a lot of smoke anyway."
The "smoke" emanated from the facts that Enron was a Texas company, contributed significantly to the president's campaign and the fact that Lay was friends with the Bush family. But no fire was found.
Also, the timing was off. The company's downfall came a full year before the mid-term elections, and at a time when America was rattled and angry about the Sept. 11 attacks.
"The Enron story came early enough that the public was still overwhelmingly concerned about war and peace," said Rothenberg. "If it had come later, it might have had more impact."
That is not to say the issue of corporate fraud will not be crucial in a few races.
Rep. Charles Pickering, R-Miss., who represents the district where bankrupt telecommunications giant Worldcom is headquartered, could be in a tougher than expected race because of the number of people there directly damaged by that company's collapse.
On the other hand, Sen. Paul Wellstone, D-Minn., who was believed to be vulnerable, may have been helped by his record as a critic of corporate wrongdoing.
And in Connecticut, Democrat William Curry has tried to make Enron an issue in his effort to defeat incumbent Gov. John Rowland. Curry has built his campaign around attacking Rowland for a controversial $220 million deal the state made with Enron in which the company was to buy steam electricity from the state at set prices for 11 years. But Curry has not been able to make much headway in the polls with the issue.
The last gasp at making Enron a national issue before the elections could come next Tuesday -- one week before voters visit the polls -- when the Democrat-controlled Senate Governmental Affairs Committee holds a hearing into whether government oversight of Enron failed. That hearing, chaired by presidential hopeful Sen. Joe Lieberman, will occur despite the fact that the Senate is on election recess.
Last week, Enron was raised as an issue by Democratic senate hopeful Ron Kirk against his opponent, GOP candidate John Cornyn, state attorney general.
"While Enron was collapsing, who was Cornyn protecting? First, Cornyn collected $193,000 in campaign cash from Enron. Then, just two months before bankruptcy, Cornyn ruled Enron could keep its finances secret," claimed a televised campaign ad.
A Cornyn spokesman dismissed the ad, saying Cornyn simply enforced existing state law governing trade secrets.
Though the issue resurfaced in their most recent debate last week, experts doubted the Enron issue would make any difference. The most recent poll showed Cornyn with a double-digit lead.
"You'd think (Enron would) be a big deal in the Texas races, but while it is being talked about it doesn't seem to be decisive," Sabato said.
In the longer term, Enron, as a metaphor for corporate fraud, might deter some from seeking major offices, Sabato said.
"In recent Senate races you've seen lots of big business types running by financing their own campaigns," Sabato said. "Jon Corzine is a good example of the kind of guy who might have had a hard time running this year."
Corzine, after retiring as co-chairman of investment banking firm Goldman, Sachs & Co., won election in 2000 as a Democratic senator from New Jersey by spending about $60 million, most of it his own money.
The current wave of corporate scandals is unlikely to cause any lasting antipathy for corporate leaders. Experts noted that the robber barons of the 19th century, the Great Depression, the savings and loan scandals of the 1980s and other events did not shake people's faith in the free marketplace.
"America is a very pro-business country," Wittman said. "There may be more skepticism about big corporations, but I don't think that will change."
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When her father had a stroke in upstate New York four years ago, Theresa Connor-Smith, an Enron office supervisor, couldn't afford to fly there.
Hearing of her situation, Chairman Ken Lay had her flown there on an Enron jet.
"That made a great impression on me," she said.
The impression did not survive Enron's bankruptcy and her ensuing layoff. She has lost all faith in Lay and now scoffs at his message that Enron was a family.
"It took me a long time to believe that Ken Lay was part of this," said Connor-Smith, a former office manager. "It's like you've got the greatest father in the world, and you find out he's an ex-con."
Enron's collapse stunned everyone at the company, especially the 4,500 who were laid off and the thousands who lost most or all of their retirement savings. Most have tempered their bitterness, moved on to stable companies and resumed their careers.
But for Connor-Smith and a few others, the debacle has completely changed the way they look at the world. Disillusioned with corporate America, they are no longer interested in climbing the ladder to big salaries and stock options.
Besides Connor-Smith, they include a senior administrative assistant who now works for the AFL-CIO; a human resources manager who wants to write and be an airport screener; and a public relations executive who has sworn off big business.
"I'm not sure it's an exaggeration to suggest some of these reactions amount to post-traumatic stress syndrome," said Steven Currall, a professor of management and psychology at Rice University's Jones Graduate School of Management.
"We don't pay enough attention to how people are affected by decisions by corporate hot shots in their executive suites."
Two years ago, Enron asked Connor-Smith to transfer from Houston to its office in New York to work as an executive administrative assistant.
"I adored New York City," she said.
For a while, everything went well. She said she was making more than $100,000 a year, counting overtime and bonuses. She saw a solid future and firmly believed the Enron message that it employed only "the best of the best."
Her vitality has given way to fragility. On Sept. 11, 2001, she and co-workers watched as the second jet crashed into the World Trade Center. Laid off in January, Connor-Smith, 49, suffered a nervous breakdown within weeks.
She so deeply admired Lay, seeing him as a quasi-father figure, that she had difficulty believing he had any real role in the company's collapse. She now says she detests him.
"I trusted him as much as I do my husband and my parents," said Connor-Smith, who has a bachelor's degree from the University of Texas and an associate's degree in accounting. "I feel betrayed.
"I want to get Enron out of my mind," she said. "I go through my closet, pulling out my suits and giving them away. I hate what they did. They took my whole world and turned it upside down."
Her husband, Keith Smith, also was without a job in January, so the two had no income, she said. In February, Smith, an Army Reserve sergeant, was sent to Afghanistan. He has returned but will soon be sent back. They now live on base at Fort Bragg, N.C.
Connor-Smith, who is on anti-depressants and anti-anxiety pills, is training to become a dog groomer, hoping to open her own shop someday.
"I have three dogs, a poodle and two Yorkies. I groom them all the time," she said. "I trust animals. They are not going to rob you."
Debbie Perrotta, 54, an executive administrative assistant, liked the way things were going at Enron and planned on retiring there.
"My pay was good, they were treating us good, the bonuses were great," she said. "We had everything we would need as far as the working environment."
Her transformation from corporate acolyte to labor activist began one day in December, when she and hundreds of others were gathered in a room and fired.
"I was flabbergasted and I was angry," she said. "It felt like we were a herd of cattle in a pen."
Many current and former employees suffered huge losses in retirement accounts loaded with Enron stock, though Perrotta said she had done better than most because she had diversified her holdings.
And nearly all fired workers felt cheated by a $4,500 severance payment. Though Enron was not obligated to pay anything at all, the existing company policy would have paid most workers multiples of that.
In January, she met the Rev. Jesse Jackson, who had come to Houston to take up the cause of fired Enron employees.
"Never in my life had I expected to go to a meeting with Jesse Jackson," Perrotta said. "I told him, and I told him straightforward, `I don't believe in everything you did, but if you are going to do something to help Enron employees, then I will back you 100 percent.' "
Won over, Perrotta became one of a half-dozen ex-employees working closely with Jackson and his Rainbow Coalition on Enron issues. In January, they made a bus trip from Houston to Washington, D.C.
The AFL-CIO hired a lawyer to help ex-employees fight for severance pay. It paid off when U.S. Bankruptcy Judge Arthur Gonzalez agreed in August to let Enron pay laid-off workers up to $13,500 each.
The union then offered Perotta a job as an organizer for the Texas Federation of Teachers, at $18,000 less than her Enron earnings of $48,000, counting bonuses. She took it because it allowed her "to be involved in something I truly believe in and where I think I can do good."
"This whole thing has changed me completely."
Milton Brown was so proud to work at Enron that he bought several shirts with the company logo.
"I used to sport the colors very proudly," said Brown, 41. "I really enjoyed the work and the people. There were some components of my job that I loved."
As a human resources manager, he didn't mind putting in long hours, he says, but the Sept. 11 terrorist attack got him thinking about whether his career at Enron was purposeful. The scandal and his abrupt December layoff finished the process.
"At every company I've gone, I've seen hints of unethical behavior," Brown said. "But until I experienced the magnitude of the Enron scandal, I had doubts about whether that was woven into the fabric of corporate America."
His unemployment benefits exhausted and his savings nearly gone, he's thinking about moving to Jackson, Miss., where he is on the list to become an airport screener. He'd be making between $23,000 and $35,000, about half his Enron salary.
Acting on a long-time ambition to write, he is working on a book that "chronicles my post-Enron traumatic syndrome," said Brown, who worked at the company from 1993 to 1996 and again from 1998 until December.
"I want to be able to share with my nieces and nephews that there is a right way of doing things in the workplace and you can do the ethical thing in corporate America," he said. "But I can't tell them that when greed and scandal and corporate fraud are becoming the rule rather than the exception."
In her 26 years at Enron and its predecessors, Marge Nadasky came to have an abiding faith in Enron.
"I thought it was a great company and we did great things, and we had the best of everything, great computers and a great building," said Nadasky, 53. "It was just me, living a naive existence."
When the corporation fell apart, Nadasky was manager of corporate identity and branding for Enron public relations. Initially she dismissed the news about the company's accounting schemes.
"It took me a long time to come to the conclusion that there were things going on at Enron that brought it down," she said. "It was not an easy sell. I was one of those who hung on."
But continuing revelations slowly eroded her confidence in corporate America. It crumbled upon learning that Morgan Stanley executives may have abetted Enron's financial finagling.
"I just saw where some folks ended up caving in because we were a huge account," she said. "To me, that was that kind of defining moment."
She lost about $1 million in her retirement fund, and her earnings now fall far short of what she made at Enron, but she considers herself lucky because she can rely on her husband's income and health insurance.
She now has a small marketing consulting business and is not interested in working again for a big company.
"Having been burned in a big way, I'm a bit wary of going into that environment," said Nadasky. "Greed has definitely taken over corporate America."