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Wednesday, 13 February, 2002, 02:34 GMT
How Enron played the media
Former Enron CEO Ken Lay
Ken Lay and Enron were media darlings up until the company collapsed
Kevin Anderson

The collapse of Enron is so stunning because it fell so quickly from such great heights, from media darling to a disgraced icon of deception.

As the scandal unfolds, it is clear that Enron worked hard to maintain its high-flying image, which the company maintained even as its stock plummeted.

Enron lavished money not only on Washington insiders but also on pundits and opinion makers, and it invested greatly in its public image, maintaining an extensive public and investor relations departments.

It helps explain how the media missed warning signs until the company collapsed in the largest corporate bankruptcy in US history.

Media darling

The New York Times called Enron a "model for the new American workplace" even as it investigated the company's political contributions.
Enron corporate logo
Enron had a large and well funded investor and public relations operations

On one of its corporate websites, Enron still crows about how a Fortune magazine survey named it "America's Most Innovative Company" for six years running.

Fortune also ranked the company 22nd in its 100 Best Companies to "Work for in America" in the year 2000.

Well after the shakeout, EnronOnline was touted as a company that got e-commerce right.

And late in October 13 of 16 analysts still told investors to buy Enron stock even after the company had announced a staggering $1.2 billion drop in equity after hundreds of millions of dollars in losses.

'Gaming' the system

On December 2 2001, Enron declared bankruptcy. By that time, the press had turned on Enron, but why not earlier?

John Olson is an investment analyst in Houston with the Sanders Morris Harris Group and was one of the few who was sceptical of Enron.

"Enron was great at gaming the system and they gamed us on Wall Street. They gamed the media. The gamed their accountants and they may have gamed their lawyers. In the end, may have gamed each other," he said.
Ken Lay
Mr Lay paid $50,000 to influential commentators to be on his board of advisors

Enron spent a lot of money on investor and public relations he said. "They had big lobbying staffs to make sure that they got their point across," he said.

Enron paid influential commentators $50,000 a year to be a part of what CEO Ken Lay called his board of advisors.

William Kristol, editor of the Weekly Standard, and economist Paul Krugman, a New York Times columnist, were part of this group of advisors.

The warning signs were there, said Mr Olson, but most journalists did not have the time or expertise to dissect the complex set of business relationships that made and unmade Enron.

"(Journalists) will take the line of least resistance, and they had a media relations staff to feed you the party line," he added.

Warning signs

But the warning signs were there for the media to see.

Mr Olson heard the whispers in Houston.

"This is a small town. Everyone knows everyone else, and there were too many people on the street shaking their head, saying that this company is dangerous, that this company is not fairly reporting their numbers."

Barbara Shook has been covering Enron since it was formed in 1986 with the merger of two natural gas pipeline firms.

She said that most of the media bought Enron's hype, and they kept coming up with the numbers.

But she said that she was close enough to their operations to question the numbers. "They didn't seem to be performing in any way that would support the numbers they were reporting," she said.

And Mr Olson said, "They were consistently good at levitating the numbers."

But Enron could not keep up the illusion forever, and inflated numbers collapsed in what Mr Olson called a $60bn debacle.

See also:

12 Feb 02 | Business
Former Enron boss refuses to testify
12 Feb 02 | Business
Enron resurrects trading arm
11 Feb 02 | Business
Wakeham 'not party to Enron fraud'
08 Feb 02 | Business
Key Enron witness 'to testify'
07 Feb 02 | Business
Former Enron boss declares innocence
05 Feb 02 | Americas
Pleading the Fifth
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