Enron: Picking Over the Carcass

By Daren Fonda With Reporting by Deborah Fowler/Houston and Sean Scully/Los Angeles

Take in a ball game at the stadium that bore Enron's name, and you'll be sitting in a place now called Minute Maid Park. The tilted E that blazed in front of Enron's Houston headquarters is gone, sold at auction. At its offices, a pared-down staff administers old contracts and remaining assets like gas pipelines and power plants. It's nothing like the days when secretaries received gifts of Waterford crystal and executives jetted to luxury resorts to party. Enron's Christmas bash this year: an afternoon gathering in the lobby with coffee, cookies and music by an employee choir.

Although Enron may be finished as a company, the fallout from its collapse is rolling on. The firm says it's facing 22,000 claims totaling $400 billion; everyone from investors to ex-employees wants a piece, including folks who worked at its Old Economy power companies and lost their life savings. Enron's profiteering from California's power crunch (along with that of other energy traders) saddled Golden State residents with an $11.3 billion bill. Legal experts say it may take five years to prosecute the wrongdoers. The debacle's winners? All those lawyers probing and pecking at Enron's carcass.

Given that legacy, it's worth recalling how revered Enron once was. The firm tried to put into practice the idea that nearly anything can be turned into a financial product and, through complex statistical modeling, traded for profit. Asset-light and heavily reliant on intellectual capital, Enron rewarded innovation and punished employees deemed weak. Those ideas were New Economy chic, and to some extent retain currency. Energy traders still use financial instruments that Enron pioneered in order to hedge against price swings. As for those notorious off-balance-sheet partnerships, "they can be used legitimately for financing projects in high-risk countries," says Michelle Michot Foss, an economist at the University of Houston.

What the public would perhaps most like to see is Enron's top executives do some jail time. So far, only one of them, former chief financial officer Andrew Fastow, is facing criminal charges, for conspiracy, wire fraud and money laundering (he denies wrongdoing). Ex-chairman Ken Lay is expected to be charged with insider trading before long. But lengthy prison sentences for white-collar crimes are rare.

Prosecuting former CEO Jeffrey Skilling, widely seen as Enron's mastermind, will probably be the trickiest case. Skilling was so sure he had committed no crime that he waived his right against self-incrimination and testified before Congress that "I was not aware of any inappropriate financing arrangements." Prosecutors may try to nail him for perjury, and they have reportedly widened their probe to investigate his role in Enron's broadband venture.

But proving what he knew and when he knew it won't be easy. "Skilling used words like 'Get this structure to work' when he knew the only solution was to break the rules. But he never said, 'Do it,'" says a former employee. Pretending it was all a game helped too. A videotape of a 1997 party surfaced this month, showing Skilling joking that Enron could make "a kazillion dollars" through an exotic new accounting technique. It was close to true, and not so funny. --By Daren Fonda, with reporting by Deborah Fowler/Houston and Sean Scully/Los Angeles