24 Days by Rebecca Smith & John R. Emshwiller

Author:Rebecca Smith & John R. Emshwiller
Language: eng
Format: mobi
Publisher: HarperCollins
Published: 2009-10-12T14:00:00+00:00

21

“Don’t Approach Their People Again.”

THE LAST WEEK OF NOVEMBER, WITH ENRON’S WORLD CRUMBLING rapidly, Emshwiller flew into Houston. It was the first trip either Smith or Emshwiller had made to the city since Enron’s crisis had begun a month earlier.

As Emshwiller sat on the Continental flight, he thought about his last trip to Houston some twenty years earlier. Then, too, he’d been chasing down an energy industry scandal for the Journal. That one had involved the massive violation of federal oil price controls during the 1970s, when international embargoes and political upheavals had sent petroleum prices soaring. Evidence suggested that a ring of oil traders, including some of the nation’s biggest oil companies, had taken part in a scheme to defeat federal price controls in a series of complex trades known as “daisy chains,” in which the same barrel of oil passed through many hands. Somewhere along the way, the barrel’s classification would be changed illegally from controlled oil, which sold for about $6 a barrel, to uncontrolled oil, which sold for over $30 a barrel. Though this fraud involved hundreds of millions of barrels of oil and hundreds of individuals, only a handful of people ever went to jail.

By the early 1980s, a new gusher of wealth flowed into the Houston economy. As one of his first acts as president in 1981, Ronald Reagan had removed the last tattered vestiges of federal price controls on oil. For a time it was quite a party, a precursor to the one that Enron helped throw in the late 1990s but short-lived. But by the mid-1980s, a lot of Houstonians were riche no more. The skyrocketing oil prices of the previous decade had stimulated oil production and encouraged conservation. By 1986, there was a world oil glut and prices had fallen to around $10 a barrel from above $30. Hundreds of oil-related businesses in Houston went out of business. Real estate prices plummeted. Many of the city’s big banks, burdened by bad oil and real estate loans, either closed their doors or merged with out-of-state institutions. Indeed, the void left by the collapse of the local banking industry gave Skilling and Enron the opportunity a few years later for its great gas bank success.

The weather in Houston was gray and cold with rain threatening when Emshwiller’s plane landed. He navigated his rental car downtown to the Hyatt Regency hotel, a block or so from Enron headquarters. Before coming, he’d made more than a dozen calls trying to set up interviews. Though most of the calls hadn’t been returned, he had arranged meals with two analysts, Olson and Coale. He’d also set up a brief meeting for that afternoon with a person close to Fastow. The person had been reluctant to meet but had agreed after the reporter repeatedly emphasized that he really did want to get Fastow’s side of the story. The source had suggested meeting in the café in the Hyatt lobby. The reporter checked his watch: he still had a little over an hour before that appointment.

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