As I’ve mentioned several times before, Conspiracy of Fools by Kurt Eichenwald has been a fascinating read. He dug so far into the details of the demise of the company and its executives.
The company was in a downward spiral, and a merger with another energy company, Dynegy, was seen as the only way for the company to survive. Dynegy injected some cash into the company, but immediately thereafter, Dynegy executives started finding out about Enron’s true financial picture. Undisclosed debt and secret related party transactions put the merger in jeopardy.
Finally, Dynegy called off the entire deal. It was clear that Enron’s only option was bankruptcy. Ray Bowen, treasurer of Enron, raced to a telephone.
He had to move fast. Some $400 million was sitting in accounts at Citibank, which would now be owed far more than that in the bankruptcy. The bank might seize the money as its own. Bowen needed to move it. Enron owed basically nothing to Goldman Sachs. That’s where it would go. He dialed the number for Mary Perkins, the assistant treasurer.
“Pull every penny we’ve got out of Citibank and wire it over to Goldman Sachs,” he said. “Do it now.”
McMahon immediately called the ratings agencies to let them know. Standard & Poor’s was the first to downgrade the company. Its debt was now rated at junk levels. Trading in Enron shares was suspended. When it resumed, the price plummeted 75 percent, to just above one dollar.
Computer-support technicians at Enron watched as the commands went through. Millions and millions of dollars were moving out of Enron’s bank accounts. They had no doubt what was going on. Someone was stealing all of Enron’s cash.
One executive made a decision. He had to stop it. He telephoned the first reporter he could think of.