This is, after all, the man who when asked in his entry interview to Harvard “Are you smart?” he replied “I’m f*****g smart”.

From there the film lays out the whole story of Enron, from its creating in 1995, to its catastrophic collapse in 2001, which the loss of 100,000 jobs and a similar number of pensions. It spawned the Californian energy crisis and the recall of governor Gray Davis which then led to the election of Arnold Swarzenegger as governor. All while Enron executives dodged litigation and squirreled away millions.

Director Alex Gibney frames the story with great skill, presenting a timeline from 1985 and taking in the 1987 Valhalla rogue trading scandal (after which Enron chairman Ken Lay increased the traders limits, despite the fact they were keeping two sets of accounts, destroying records and manipulating accounts to give the impression of huge profit), the firm’s creation of huge new trading markets, the spectacular rise of Enron’s stock, it’s role in creating the California energy crisis and finally the collapse.

Throughout the story, one constant is the unquestioning support of stock analysts, investment banks, Enron employees and even the US Government — Ken Lay’s relationship with the Bush family is closely examined, with disturbing results. It was only because of one young reporter — Bethany Mclean of Fortune magazine — that questions about Enron’s success first arose. McLean was the first to ask “why don’t your numbers add up”.

The film also details the single most determining factor of Enron’s collapse: Securities and Exchange Commission approval for mark-to-market accounting. This effectively allowed Enron to book future profits that had not been realized on the basis of marking assets to models, rather than fact, but with accurate market prices for Enron’s new markets virtually impossible to calculate, stock analysts just kept tipping the stock and up it went, even though the ‘real’ profits were another story.

As the scandal deepens, we see Skilling start to fall apart. The first warning signs show in an analyst briefing where Skilling labels a respected analyst an “asshole” for questioning Enron’s profits. Gradually, the house of cards begins to fall and Skilling resigns, but not before selling more than US$70 million in stock since 2000.

Ultimately, the numerous Enron executives — chiefly Skilling and Lay — responsible for the moral vacuum created in the company turn on Andy Fastow, Enron’s CFO and the architect of the now infamous LJM private equity funds, which were set up to recycle money around the company allowing Enron to window dress its balance sheet.

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But the executives are undone by whistleblowers and the numerous investigations ordered and we see the true depth of the scandal.

Alex Gibney has created a fascinating account of Enron’s demise as a modern day Greek tragedy. The film features an excellent soundtrack and interviews and footage from the Senate hearings and inside Enron are skillfully cut together to keep the film moving quickly. Gibney’s direction also adds a much needed black comedy element to the story.

If you’re wondering why the Sarbanes-Oxley Act ended up so prescriptive, see this film. In fact, you should see this film anyway. Even if you think you know everything about Enron, you will be shocked.

Enron: the Smartest Guys in the Room is released on 14 October.

See the September issue of Risk Management magazine to win double passes to pre-release screenings of ‘Enron: the Smartest Guys in the Room’. Contact This email address is being protected from spambots. You need JavaScript enabled to view it. or call (02) 9422 2916 for a Risk Management subscription.

Stuart Fagg is the Editor of Risk Management magazine, Lawyers Weekly’s sister publication.