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BOOK REVIEW
How questionable business decisions and a culture of corruption did Enron in

By Diego Ribadeneira, Globe Staff, 12/4/2002

It might seem an odd way to try to understand the shocking collapse, amid rampant financial wrongdoing, of Enron, once this country's seventh-largest company. But in Texas journalist Robert Bryce's entertaining, irreverent, and compelling account, ''Pipe Dreams,'' the numerous extramarital affairs at Enron's upper echelon were symptomatic of a sordid corporate culture.

Illicit romances ''became another facet of Enron's corrupt leadership - one that went hand in hand with the company's corrupt bookkeeping practices,'' Bryce writes. ''`The marital misconduct created an atmosphere where things had to be covered up,''' said one member of Enron's executive committee. ''`Having secrets, having things not be public, having things be suspected and not known, was part of the deal. ...' There were no lines being drawn at Enron.''

Indeed, one theme that keeps pulsating through this wonderfully readable book is the unbridled hubris displayed by the Houston company's leaders, beginning with disgraced CEO Ken Lay. They dismissed or ignored sound business rules, believing they were building a company that was not only bigger but smarter than any competitor. Enron spent money in outrageous fashion - it bought a $41.6 million Gulfstream jet within nine months of declaring bankruptcy. One top executive bought a $30,000 motorcycle, at company expense, to decorate his new office. Ultimately, the executives' arrogance and poor business decisions left Enron buried in a heap of financial fraud and skulduggery.

''Enron failed because its leadership was morally, ethically, and financially corrupt,'' Bryce writes. ''Whether the question was accounting or marital fidelity, the executives who inhabited the 50th floor at Enron's headquarters became incapable of telling the truth, to the Securities and Exchange Commission, to their spouses, or to their employees. That corruption permeated everything they did, and it spread through the company like wildfire.''

Bryce does a skillful job of translating the complex financial shenanigans that led to Enron's downfall, including the off-the-balance-sheet deals with colorful names like Chewco and Raptor that helped hide the firm's increasingly dire condition.

But Enron was also wrecked by inexplicably poor business moves. Take for example its bid - through a subsidiary - to provide drinking water to Buenos Aires. Enron's winning offer was $438.6 million. The next highest bid was about $150 million. ''The stupendously high bid was the result of poor planning, poor communication, and poor judgment,'' Bryce notes. The deal was an embarrassment. The bid did not, for example, include the water company's headquarters (where many customers were used to paying their bills in person) or the billing and collection systems. The new company hired comely women to redirect confused customers to the new headquarters.

And the woman who guided Enron's water ventures straight into the ground? Rebecca Mark, literally a high-flying exec who would travel only in corporate jets, eventually walked away from Enron, according to Bryce, with about $100 million in salary, stock options, and no-payback loans. Not bad for someone who, as Bryce notes, will probably ''never get another job in corporate America'' and whose misguided deals at Enron cost investors at least $2 billion. Mark is one of the many top Enron executives who ended up cashing in handsomely despite their role in wrecking the company.

Bryce also recounts the appalling lack of oversight of Enron's venal bookkeeping by its accounting firm, Arthur Andersen. As is now well known, Andersen also received lucrative consulting fees from Enron, so it had little incentive to diligently audit the firm's finances. ''By the late 1990s Andersen had become so reliant on Enron that it simply could not afford to lose the company as a client,'' Bryce writes. ''Enron understood that and used that fact to its advantage.'' The ties between the two were so tight that Andersen's lead partner on the Enron account worked out of Enron's building.

Enron's implosion also carried with it a staggering human toll - thousands of employees who suddenly lost their jobs and their retirement savings, even as the top bosses continued to live in their tony houses in Houston's most exclusive neighborhoods.

Enron's failure and the outrageous behavior of its executives and outside consultants generated a huge outcry for reforming corporate America; requiring more independent boards of directors, forbidding auditing firms from consulting companies they are supposed to monitor, and changing the financial reporting of stock options are some key measures. But there is no indication that the system that allowed the Enron debacle will change any time soon. Corporate America is an important banker for the nation's political parties. Corporate greed, it seems, will remain part of the American way.

Pipe Dreams: Greed, Ego, and the Death of Enron

By Robert Bryce

PublicAffairs, 394 pp., illustrated, $27.50