biggest earnings restatement in U.S. history. In December, Enron went bankrupt, leaving twenty
thousand employees jobless, many watching their life savings practically erased by the company’s
fall. Investigators found that Enron had deceived investors by reporting false profits and hiding debts
of more than $1 billion, manipulated energy and power markets in California and Texas, and won
international contracts by giving illegal bribes to foreign governments. Lay was convicted on six
counts of conspiracy and fraud.
We can debate about how much Lay truly knew about Enron’s illegal activities, but it’s difficult to
deny that he was a taker. Although Lay may have looked like a giver to many observers, he was a
faker: a taker in disguise. Lay felt entitled to use Enron’s resources for personal gain. As Bethany
McLean and Peter Elkind describe in The Smartest Guys in the Room, Lay took exorbitant loans from
the company and had his staff put his sandwiches on silver platters and fine china. A secretary once
tried to reserve an Enron plane for an executive to do business, only to learn that the Lay family was
currently using three Enron planes for personal travel. From 1997 to 1998, $4.5 million in Enron
commissions went to a travel agency owned by Lay’s sister. According to accusations, he sold more
than $70 million in stock just before Enron went bankrupt, taking the treasure from a sinking ship.
This behavior was foreshadowed in the 1970s when Lay worked at Exxon. A boss wrote a reference
recommending Lay highly, but warned that he was “Maybe too ambitious.” Observers now believe
that as early as 1987, at Enron Oil, Lay approved and helped to conceal the activities of two traders
who set up fake companies and stole $3.8 million while allowing Enron to avoid massive trading
losses. When the losses were discovered, Enron Oil had to report an $85 million hit, and Lay denied
knowledge and responsibility: “If anyone could say that I knew, let them stand up.” According to
McLean and Elkind, one trader started to stand up but was physically restrained by two colleagues.
How did a taker end up becoming so successful? He knew somebody. In fact, he knew a whole lot
of somebodies. Ken Lay profited greatly from claiming his company’s financial resources as his own,
but much of his success in growing that company came the old-fashioned way: he built a network of
influential contacts and leveraged them for his own benefit. Lay was a master networker from the
start. In college, he impressed an economics professor named Pinkney Walker and started his ascent
on the shoulders of Walker’s connections. Walker helped Lay land an assignment as an economist at
the Pentagon, and then a position as a chief assistant in the White House in the Nixon administration.
By the mid-1980s, Lay became the head of Enron after engineering the company’s move to
Houston following a merger. As he consolidated his power, he began to hobnob with political power
brokers who could support Enron’s interests. He put Pinkney Walker’s brother Charls on Enron’s
board and developed a relationship with George H. W. Bush, who was running for president. In 1990,
Lay cochaired an important Summit of Industrialized Nations meeting for Bush in Houston, putting on
a dazzling show and charming the crowd, which included British prime minister Margaret Thatcher,
German chancellor Helmut Kohl, and French president François Mitterrand. After Bush lost his
reelection bid to Bill Clinton, Lay wasted no time in reaching out to a friend who was a key aide to
the president-elect—the friend had gone to kindergarten with Clinton. Soon, Lay was playing golf
with the new president. Several years later, as George W. Bush gained power, Lay used his
connections to lobby for energy deregulation and get his supporters in important government positions
in Texas and the White House, influencing policies in Enron’s favor. At nearly every stage in his
career, Lay was able to dramatically improve his company’s prospects—or his own—by making use
of well-placed contacts in his network.
biggest earnings restatement in U.S. history. In December, Enron went bankrupt, leaving twenty thousand employees jobless, many watching their life savings practically erased by the company’s fall. Investigators found that Enron had deceived investors by reporting false profits and hiding debts of more than $1 billion, manipulated energy and power markets in California and Texas, and won international contracts by giving illegal bribes to foreign governments. Lay was convicted on six counts of conspiracy and fraud. We can debate about how much Lay truly knew about Enron’s illegal activities, but it’s difficult to deny that he was a taker. Although Lay may have looked like a giver to many observers, he was a faker: a taker in disguise. Lay felt entitled to use Enron’s resources for personal gain. As Bethany McLean and Peter Elkind describe in The Smartest Guys in the Room, Lay took exorbitant loans from the company and had his staff put his sandwiches on silver platters and fine china. A secretary once tried to reserve an Enron plane for an executive to do business, only to learn that the Lay family was currently using three Enron planes for personal travel. From 1997 to 1998, $4.5 million in Enron commissions went to a travel agency owned by Lay’s sister. According to accusations, he sold more than $70 million in stock just before Enron went bankrupt, taking the treasure from a sinking ship. This behavior was foreshadowed in the 1970s when Lay worked at Exxon. A boss wrote a reference recommending Lay highly, but warned that he was “Maybe too ambitious.” Observers now believe that as early as 1987, at Enron Oil, Lay approved and helped to conceal the activities of two traders who set up fake companies and stole $3.8 million while allowing Enron to avoid massive trading losses. When the losses were discovered, Enron Oil had to report an $85 million hit, and Lay denied knowledge and responsibility: “If anyone could say that I knew, let them stand up.” According to McLean and Elkind, one trader started to stand up but was physically restrained by two colleagues. How did a taker end up becoming so successful? He knew somebody. In fact, he knew a whole lot of somebodies. Ken Lay profited greatly from claiming his company’s financial resources as his own, but much of his success in growing that company came the old-fashioned way: he built a network of influential contacts and leveraged them for his own benefit. Lay was a master networker from the start. In college, he impressed an economics professor named Pinkney Walker and started his ascent on the shoulders of Walker’s connections. Walker helped Lay land an assignment as an economist at the Pentagon, and then a position as a chief assistant in the White House in the Nixon administration. By the mid-1980s, Lay became the head of Enron after engineering the company’s move to Houston following a merger. As he consolidated his power, he began to hobnob with political power brokers who could support Enron’s interests. He put Pinkney Walker’s brother Charls on Enron’s board and developed a relationship with George H. W. Bush, who was running for president. In 1990, Lay cochaired an important Summit of Industrialized Nations meeting for Bush in Houston, putting on a dazzling show and charming the crowd, which included British prime minister Margaret Thatcher, German chancellor Helmut Kohl, and French president François Mitterrand. After Bush lost his reelection bid to Bill Clinton, Lay wasted no time in reaching out to a friend who was a key aide to the president-elect—the friend had gone to kindergarten with Clinton. Soon, Lay was playing golf with the new president. Several years later, as George W. Bush gained power, Lay used his connections to lobby for energy deregulation and get his supporters in important government positions in Texas and the White House, influencing policies in Enron’s favor. At nearly every stage in his career, Lay was able to dramatically improve his company’s prospects—or his own—by making use of well-placed contacts in his network.