What the Dog Saw [67]
Woodward was stunned. Fifty people directed by the White House and CRP to destroy the opposition, no holds barred?
Deep Throat nodded.
The White House had been willing to subvert — was that the right word? — the whole electoral process? Had actually gone ahead and tried to do it?
Another nod. Deep Throat looked queasy.
And hired fifty agents to do it?
“You can safely say more than fifty,” Deep Throat said. Then he turned, walked up the ramp and out. It was nearly 6:00 a.m.
Watergate was a classic puzzle: Woodward and Bernstein were searching for a buried secret, and Deep Throat was their guide.
Did Jonathan Weil have a Deep Throat? Not really. He had a friend in the investment-management business with some suspicions about energy-trading companies like Enron, but the friend wasn’t an insider. Nor did Weil’s source direct him to files detailing the clandestine activities of the company. He just told Weil to read a series of public documents that had been prepared and distributed by Enron itself. Woodward met with his secret source in an underground parking garage in the hours before dawn. Weil called up an accounting expert at Michigan State.
When Weil had finished his reporting, he called Enron for comment. “They had their chief accounting officer and six or seven people fly up to Dallas,” Weil says. They met in a conference room at the Journal’s offices. The Enron officials acknowledged that the money they said they earned was virtually all money that they hoped to earn. Weil and the Enron officials then had a long conversation about how certain Enron was about its estimates of future earnings. “They were telling me how brilliant the people who put together their mathematical models were,” Weil says. “These were MIT PhDs. I said, ‘Were your mathematical models last year telling you that the California electricity markets would be going berserk this year? No? Why not?’ They said, ‘Well, this is one of those crazy events.’ It was late September 2000 so I said, ‘Who do you think is going to win? Bush or Gore?’ They said, ‘We don’t know.’ I said, ‘Don’t you think it will make a difference to the market whether you have an environmentalist Democrat in the White House or a Texas oilman?’ ” It was all very civil. “There was no dispute about the numbers,” Weil went on. “There was only a difference in how you should interpret them.”
Of all the moments in the Enron unraveling, this meeting is surely the strangest. The prosecutor in the Enron case told the jury to send Jeffrey Skilling to prison because Enron had hidden the truth: You’re “entitled to be told what the financial condition of the company is,” the prosecutor had said. But what truth was Enron hiding here? Everything Weil learned for his Enron exposé came from Enron, and when he wanted to confirm his numbers, the company’s executives got on a plane and sat down with him in a conference room in Dallas.
Nixon never went to see Woodward and Bernstein at the Washington Post. He hid in the White House.
4.
The second, and perhaps more consequential, problem with Enron’s accounting was its heavy reliance on what are called special-purpose entities, or SPEs.
An SPE works something like this. Your company isn’t doing well; sales are down and you are heavily in debt. If you go to a bank to borrow $100 million, it will probably charge you an extremely high interest rate, if it agrees to lend to you at all. But you’ve got a bundle of oil leases that over the next four or five years are almost certain to bring in $100 million. So you hand them over to a partnership — the SPE — that you have set up with some outside investors. The bank then lends $100 million to the partnership, and the partnership gives the money to you. That bit of financial maneuvering makes a big difference. This kind of transaction did not (at the time) have to be reported in the company’s balance sheet. So a company could raise capital without increasing its indebtedness. And because the bank is almost