C-SPAN Q&A : BRIAN LAMB, HOST: Bethany McLean, author

Uncorrected transcript provided by Morningside Partners.
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BRIAN LAMB, HOST: Bethany McLean, author of The Smartest Guys in the Room, out in paperback since the fall of 2004, why did you participate in the documentary on Enron?

BETHANY MCLEAN, SENIOR WRITER, FORTUNE MAGAZINE: Well, Alex came to us in the early winter of 2004 -- Alex Gibney, the filmmaker, and expressed an interest in making some sort of film out of the book, whether it was a documentary, a feature film.

And frankly at that time, Enron had kind of faded from the public consciousness. I think there was this belief that the corporate scandals like Enron were this natural reaction to the aftermath of the bull market and now it was all over. And onward and upward.

And so people weren't exactly beating down our door to come and make a movie out of our book. And not only was Alex interested, but he had read the book and gotten out of it what we hoped people got out of reading the book, which is that it's really a story about people and not a story about numbers.

So you don't need to make a film that is -- explains all these complicated transactions Enron did. You can make a film that explains human weakness and human frailties and go a long way to explaining what happened at Enron.

LAMB: I have in my hands from March 5th, 2001, by Bethany McLean, it starts out like this: "In Hollywood parlance, the It Girl is someone who commands the spotlight at any given moment--you know, like Jennifer Lopez or Kate Hudson. Wall Street is far less glitzy, but theres still such a thing as an It Stock. Right now, that title belongs to Enron, the Houston energy giant."

What did this start?

MCLEAN: I'm not sure it so much started anything. I think I -- people have said, well, this story began this chain of events that lead to Enron's unraveling. I think I more picked up on a skepticism that was growing under the surface about Enron and expressed that in the story.

I'm uncomfortable as seeing that story as an actor in events. I see it as more an observation on a skepticism that was growing about Enron in the business community and among investors. And so I'm not sure if that story hadn't been published that history would've been changed. I think the skepticism was there regardless of whether I expressed it or not, maybe it accelerated something.

LAMB: That was Fortune magazine, March 5th, again, 2001. What was known at that time? What were the feelings in the air about Enron?

MCLEAN: Well, it's interesting because Enron was really -- as the lead-in to the story expresses, it was one of those companies that could do no wrong. The stock had gone up, I think, 90 percent in the year 2000. Every Wall Street analyst with the exception of one who followed the company was telling investors to buy it. Everybody who talked about Enron said, well, this is the company that's revolutionizing business.

And that's what people would say at first when I started talking to them. But underneath that, not with everybody, but with a few people, there was this sort of vein of fear. And people were unwilling to say anything on the record, but people would say things to me like, well, their meetings are revival meetings, or, the California energy crisis was going on at the time, this company making a lot of money or losing a lot of money in California, but they'll hide it somehow, Enron always does.

LAMB: You were based where in 2001?

MCLEAN: I was in New York.

LAMB: How long had you lived here?

MCLEAN: I had lived here since, let's see, early 92, mid 92.

LAMB: What was the reason you came here in the first place?

MCLEAN: I came to New York to work as an investment banking analyst. So a lot of the big Wall Street firms hire people right out of college and do work there supposedly for two years. And you basically work 80 hours a week-plus. And you crunch lots of numbers and learn how to read balance sheets, and then maybe you go on to go to business school and you come back as a senior investment banker.
FULL TRANSCRIPT:>>
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[SNIP]
LAMB: So who published what Jeff Skilling said?

MCLEAN: Very few people did at the time. It -- a couple of -- a guy named Herb Greenberg who writes generally skeptical pieces online, published the transcript of Jeffâ€˜s remarks.

I think The Wall Street Journal might have made note of it somewhere in an article. But a lot of people let it go. It was one of those things that unless you were watching Enron closely, unless you were a Wall Street person -- the press didn't make much of it. I think people who were investors in Enron made a lot of it.

LAMB: But if you go back to your original story, you raised all this business of -- in the story about not getting to the bottom of where the money is and -- you know, and the fact they wouldn't publish all of that, do you think people picked it up from your story, the idea of asking the question?

MCLEAN: I don't think Richard Grubman did. I think his skepticism about Enron had started earlier. But he -- I mean, I think the story, by -- my story, by bringing to light in a magazine like Fortune, which had previously written very positive pieces about Enron, by publicly raising questions like this, I think it provided a sort of validation for people who wanted to ask questions.

It made them think, well, maybe I'm not crazy. Because a big part of what happened at Enron was this intellectual intimidation: If you didn't go along with what Enron wanted you to believe, they'd say, well, you just don't get it.

And everybody wants to be thought of as smart. We've all been in a situation where you don't really understand something but you say you do because you don't want to ask a stupid question.

And for a lot of people -- it sounds hard to believe, but for a lot of people, that's what happened with Enron. They didn't really understand, but they didn't want to ask. So then, I think, when something is published in a major magazine like Fortune saying, nobody gets this, I think people became a little bit -- I think people were a littler freer to voice their concerns.

LAMB: Your paperback came out in the fall of 2004. When did your hardback come out?

MCLEAN: It came out in the fall of 2003.

LAMB: How long did it take you to write it?

MCLEAN: It took about a year-and-three-quarters.

LAMB: And how did you and your co-author divide your interests?

MCLEAN: We really worked pretty closely. Peter was based in Texas and I was here in New York. We both spent a lot of reporting time in Houston. But we did -- when we had a key person to talk to, would both go to the interview. But we divvied up the list of people we wanted to talk to. And so we didn't -- we tried not to tag team people.

We both shared all of the transcripts of our conversations with each other. And when it came time to write the book, we did a pretty exhaustive outline and we just picked chapters.

And there were some chapters that were really fun to write, and so we both wanted to do them, and then there were some chapters that were really not fun to write. And so, you know, if you got a fun one, you'd take a not fun one.

(LAUGHTER)

LAMB: Who did not talk to you and who talked to you of note?

MCLEAN: Unfortunately I can't say because most of the people who talked to us didn't talk on the record because people were either already criminally implicated or terrified of getting dragged into the criminal case. And so people talked to us on the condition of anonymity.

LAMB: Who talked on the record?

MCLEAN: Very few people. One who did and who spoke in the movie is a woman named Amanda Martin who was a pretty senior executive at Enron, and sort of a part of the inner circle for a while, and who is a great observer of events.

LAMB: The blonde woman in the movie.

MCLEAN: Yes.

LAMB: Well-dressed.

MCLEAN: Mm-hmm.

(LAUGHTER)

LAMB: How did she make out after all of this?

MCLEAN: She made out well. She walked away from Enron with a lot of money. And people have -- people's reaction to her in the movie as a result has been mixed.

I've always admired Amanda for one, being willing to come forward and say things publicly; and two, for her ability to reflect both on what happened at Enron and on her own role in events.

As I'd said earlier, the self-delusion at Enron was pretty remarkable and I haven't met a lot of people who have been willing to look back on their role and say, I did something wrong here, I learned from this, I look back and see this differently now than I did at the time.

The epilogue to our book is entitled "Isn't Anybody Sorry?" because the reaction we got from most people was, not my fault, not my responsibility, I did everything right, I behaved perfectly.

LAMB: One of the gentlemen in the movie who, I guess you would say, was spotlighted critically was a man named Pai?

MCLEAN: Lou Pai.

LAMB: They called him Pai, P-E-I.

MCLEAN: P-A-I, mm-hmm.

LAMB: P-A-I, we'll get it right.

(LAUGHTER)

LAMB: How much did he take away? He sold early. And where does he live now?

MCLEAN: He took away over $250 million from Enron. It was more than actually anybody made. And he was interesting character, instrumental in building Enron's early energy trading operation, kind of a ruthless, strange figure at Enron, later ran this doomed effort Enron had to expand into providing energy services to companies and industries across America.

He -- the story goes that he sold most of his stock because he was divorcing his wife in order to marry a stripper with whom he had had child. And one of things he was known for at Enron was his obsession with strippers.

So he bought a bunch of land in Colorado, I think he became the second-largest landowner in Colorado. The locals call his ranch "Mount Pai."

LAMB: Where does he live now?

MCLEAN: I think he still lives in Colorado. I had heard a rumor that he sold it and then moved to Hawaii. But I'm pretty sure he's still in Colorado.

LAMB: Indicted?

MCLEAN: No.

LAMB: Potential indictment?

MCLEAN: There are always rumors swirling around that, but one of the tricky things at Enron is that -- and one of the reasons it has taken so long to prosecute this case is that criminal wrongdoing is often very difficult to prove because it's very rules-based.

And one of the things Enron was very skilled at was following the letter of the law while totally violating the spirit of the law. So there are a lot of people at Enron that you, in an ethical framework, can blame for the company's collapse.

But whether they're criminally guilty is a much more difficult call, and to my mind not as interesting a one, because in the end this really is a story about human nature. And I find that the more interesting part of the story than sort of the more narrow legalistic definitions of criminal guilt.

LAMB: Now the documentary and your book start with a story about a man named Cliff Baxter, why?

MCLEAN: We began the book with the story of Cliff Baxter. He's an Enron executive who committed suicide in the wake of the company's bankruptcy. He was a very senior Enron executive and was also one of Jeff Skilling's close friends. They used to take cigarette breaks together.

We began the book with his suicide because we wanted to signal to readers that this was a story about people, and this was a story about humans. And I think at the time when we were writing our book, there was one presumption that Enron was a story about numbers, about complicated financial transactions that you don't want to understand even if you could.

And I think there was another presumption which is that these were just bad people doing bad things down in Houston, Texas. And none of us could ever do anything like that. And so I think the story we wanted to tell was a story about people and a story of people with very human fatal flaws, so that it becomes more of a story that -- more of an almost -- just more of a tragic tale rather than this story of -- this limited story of bad people and their wrongdoing.

LAMB: How did you find out specifically how Cliff Baxter killed himself? I mean, it's rather detailed.

MCLEAN: Police files, the police did a pretty serious investigation into Cliff's suicide because there was so much furor surrounding Enron at the time that people actually thought it might have been a murder.

LAMB: When did it happen and how did it happen?

MCLEAN: It happened in early 2002, right after the company's bankruptcy. And he shot himself. And there was this belief that, well, it must have been murder, he must have been silenced to keep him from spilling Enron's darkest secrets.

So the police did a pretty thorough investigation as a result of which there was many things, but material available for journalists. And then we talked to a lot of people who went to the funeral and people who are friends of Cliff's in order to piece together an account of what happened.

LAMB: And you said some didn't go to the funeral from Enron company: Ken Lay; Jeff Skilling.

MCLEAN: I think Ken didn't go to the funeral in Houston. It was just a very strange time because it was the wake of the company's collapse. And, you know, the Justice Department was descending and the FBI was everywhere in Houston. And so people didn't -- you know, people who had previously been business associates only six months ago suddenly didn't want to be seen talking to each other in public. It's just very surreal in a way.

LAMB: You learn in the documentary and your book, of course, the India story: a billion dollars down the drain?

MCLEAN: It's a pretty remarkable story. It's part -- this part of the tale isn't really in the documentary simply for time reasons, but one essential part of the Enron story was this woman named Rebecca Mark who for a while was one of the most glamorous figures in American business.

She built power plants in remote areas of the world: from rainforests in Brazil to this plant in India. And Jeff Skilling has always blamed Rebecca for bring down the company because these power plants that were built didn't live up to the very rosy economic assumptions that were made about them. And kind of case in point is Dabhol.

You know, Enron believed that India needed the power, and frankly, India probably does need the power. But whether India would be able to pay for the power or not was an entirely different calculation.

LAMB: You're saying Dabhol?

MCLEAN: Dabhol.

LAMB: And where is that located, do you know?

MCLEAN: It's in Dabhol, India. And it's in the Maharashtra region of India, I believe. The details are a little bit foggy at this point, so excuse me if I've gotten that wrong.

LAMB: And what happened there?

MCLEAN: Well, Enron built this mammoth power plant in two phases, but it became a lightning rod for political activism in India because the plant's power was going to be so expensive.

And the plant was challenged in some 26 lawsuits, all of which Enron won. But I think it wasn't -- it's not so much an example of criminal wrongdoing on Enron's part as it is just a blindness to the rest of the world in this belief we can build a power plant and they'll pay for it because the contract says they have to, even if that power was going to be incredibly expensive.

And it was an example of how Enron paid people, because Rebecca Mark and her team were often paid on the projected value of power plants like Dabhol. So they'd walk away from something like with millions of dollars, even if the plant never made Enron a dime.

LAMB: Where is she today?

MCLEAN: She's living in Houston.

LAMB: No indictment? No¦

MCLEAN: No. And I think it's ver