Compelling Energy Journalism
Silverstein Editorial

Enron Made Suckers of the Media

May 28, 2010
Note to readers: The following story first appeared in UtiliPoint’s IssueAlert on 8-8-03. In recent weeks, I’ve watched a documentary on CNBC regarding Enron’s plight, and this has been coupled with the scrutiny now given to the investment banking world. In thinking about these issues over and over, I have thought about what I would say to readers with respect to the media’s role — only to realize that I’ve written it before. And with UtiliPoint’s permission, Energy Central has decided to re-run this particularly story, with slight modifications to keep it somewhat current.

Inveterate writer Walter Lippman said in 1925 that the “American press is the bible of democracy, the book in which a people determines its conduct.” He not only spoke of the ideals of the Founding Fathers but he lived them as well by providing “trustworthy” information to the American people.

While that sense of altruism is pervasive at many news organizations, it is often clouded by limited resources, tight deadlines and yes — a lack of interest in complicated subjects. Simply put, stories that require an understanding of economics are too complex for many journalists who instead flaunt stories with more allure. Charismatic leadership is more titillating than seemingly mundane corporate policies.

That dynamic was apparent during Enron’s reign. The company and its captivating chieftains were profiled on numerous magazine covers and always with lavish praise. While the company was busy cooking the books, the front men were out taking honors for best this and best that. Sadly, many who dared to challenge those accolades were rebuked by their companies as well as by Enron.

The extent of Enron’s complexity was unknown to all but those in its inner circle and its internal auditors. Still, the journalists covering Enron did fail. They helped provide the tools that Enron used to wheel and deal. As such, media organizations fell into the trap of believing in Enron’s invincibility, or that it could leverage its knowledge of markets and use that to profitably sell any commodity.

It seemed convincing. After all, the stock values of not just Enron but other power marketers were going through the roof. At the same time, the dot-coms were revolutionizing business methods. So, it stood to reason that the new thinkers within the energy sector would be rewarded for their insight. But even as Enron was being toasted from the White House to the investment houses, telltale signs were surfacing among those in-the-know — evidence to which the media would eventually get access.

Enron “was not the press’ finest hour,” Business Week editor Stephen Shepard told the Columbia Journalism Review. While the company had started to come undone in secret, it had only begun its public decent after a hedge fund manager informed a Fortune magazine reporter that things were amiss at the “Crooked E.”

The Slide

According to one analyst, Enron didn’t pass the smell test from the get-go. It was just too difficult to understand how it was making money. That’s why he advised clients to steer clear of the company, even as it was ascending. The analyst, for example, points to one unexplained inner company transfer of $197 million that was booked as revenue in Enron’s retail energy services unit in its 1999 third quarter financials.

Carol Coale at Prudential Securities and John Olson at Sanders, Morris, Harris Group were two other analysts who were not fooled by Enron. They had begun downgrading the stock as others were singing its praise. As Houston residents, they say that the rumor mill had been swirling for a long time about the company’s dubious activities. The concerns led them to question the quality of the company’s earnings and what appeared to be fabricated profits.

The unraveling began in earnest when James Chanos, the hedge fund manager, called Bethany McLean at Fortune to explain his concerns. She then paid Enron a call and subsequently wrote a story titled, “Is Enron Overpriced” — a mission that led to her de facto blacklisting at Enron. In the same fashion, former CEO Jeff Skilling berated Olsen and Coale — ironic, given that they now thrive while Skilling is now imprisoned.

“For all the attention that’s lavished on Enron, the company remains largely impenetrable to outsiders,” McLean wrote in Fortune’s March 2001 issue. In October of that year, the company began its precipitous decline into the abyss.

Why was the press not more skeptical earlier on? For sure, corporate accounting and finance are difficult subjects and not really the domains of the typical reporter. After all, Enron was able to dupe folks paid to know better, such as government regulators.

But such thinking ignores some facts: Certain reporters with limited backgrounds in energy and finance were able to smell a rat. Fortune’s McLean, for example, didn’t rely solely on analysts who may have had inherent conflicts. Instead, she asked others without the direct links the hard questions.

Tough Questions

Consider the California energy debacle of 2000-2001: Reporters were getting amorphous tips that something was amiss. That is, generators were staying offline longer than usual and other forms of manipulation such as phantom transmission line congestion were occurring, all of which contributed to skyrocketing prices in the state.

The loudest voices, however, had cast the blame on fat incumbents that didn’t know how to run utilities as well as on a flawed regulatory design. Initially, it was those strong voices that were heard in the press while the ones with lesser credibility were often shunted aside, reflecting the difficulty in parsing through the layers of conflicting reports.

Former Gov. Gray Davis’ press secretary, for example, complained early on that his office was unable to get information from power marketers and was asking just what those traders had to hide. At the same time, consumer groups were also sounding alarms that power marketers were gaming the system. One charged that the energy crisis “wasn’t a shortage, (but) was a shakedown.”

As more and more evidence has come out and given credence to reports of marketplace manipulation, journalists began receiving an increasing number of calls from people who explained how such exploitation occurred. And the volume of mail that each receives from those hurt financially by the deception has left an indelible impression. “In a democracy with a Free Press, it will eventually all come out,” one analyst says, although the damage in the interim can be ruinous.

The press, unfortunately, is often behind the curve. It’s a problem partly of its own making as many organizations are more intent on focusing on the sensational instead of matters of real substance.

In the case of Enron, the hype got out of control. At some point, more journalists should have departed from the herd to ask the tough questions. At the other extreme and as the California debacle shows, journalists often report attacks and counter-attacks and the truth becomes a victim amidst the mudslinging.

“Journalists are always tempted to put powerful people, like CEOs, on ever loftier pedestals,” Gretchen Morgenson of the New York Times told this writer. “But when reporters start to worship the people they are supposed to cover, they lose their objectivity and can’t even question what the executives tell them. When this occurs, journalists become little more than an arm of the company’s public relations machinery. And that happened all too often during the bull market of the 1990s.”

Those are powerful words. If heeded, the wisdom might have mitigated some of the problems that helped derail the energy sector — and perhaps the global economy in 2008 and 2009.

Guns, Energy and Free Speech

November 2013

With the holiday season upon us, it is time for joy and warmth. But it is also time to recollect — time to consider the tragedy of what occurred nearly a year ago when a deranged man gunned down small children and their teachers in Connecticut.

Like everyone else in this country and around the world, I went into a state of sadness and admittedly, depression. Children symbolize innocence and purity, and give hope to any civilization. Anyone with a connection to kids could feel the immense pain endured by each and every mother, father and sibling. The dark place from which I emerged — in the spirit of confession — transformed into anger, which in my case centered on the gun culture and the subsequent political clout that has rooted itself in American culture.

As an energy analyst, I don’t base my conclusions on emotion but rather, on an assessment of the facts. Any biases I might have are set aside in an effort to properly investigate a given topic. Because I do not earn a living covering guns and ammo, I’m able to loosen those restraints and to discuss those specific biases:

I despise the National Rifle Association’s leadership and especially its leader Wayne Lapierre, who dodged the Vietnam War by allegedly getting his doctor to say that he had a mental illness. To me, this man’s defiance and his inability to compromise represents the very worst in American culture,  making it impossible for me to fathom how he rest peacefully at night.

Suffices to say that my views on the subject and on this man are visceral. And, yet, I’m instilled with a sense of freedom and fairness — that doesn’t center on the right to bear arms but rather, on the right to free expression. Lapierre and his gang of highly paid cronies are at liberty to pitch the American people and to deliver their own messages, which I find to be highly objectionable. The First Amendment is absolute and it protects those rights despite my own sentiments. I recognize that good people will disagree with my views — those appreciative of America’s roots but also ones who understand that times and technologies have changed, necessitating much more moderation.

Through discussion and dialogue, We the People are able to reach an understanding and perhaps a middle ground. Eventually, free speech produces stronger societies. If it is important, people will tune in and make their voices heard, notably through their votes. Elected leaders will listen or they will get tossed from office. In this case, families love their kids above all else.

This is a circuitous way of making similar points with regard to the industry and the issues with which our readers are so deeply attached. The divide among readers is as apparent as the split is among the American people: Conservatives, liberals and moderates have different positions on everything from climate change to nuclear energy to hydraulic fracturing. And just as I think my views are “morally superior” when it comes to guns, others may think that their beliefs are also sacrosanct, no matter the issue.

I get that. Don’t forget, I moderate our forums and I speak with various sources on a whole host of topics. Being an editor or a reporter is not a perfect science. In point of fact, it is a subjective process that entails making judgement calls with regard to each story and how it is presented. As an analyst, I have more leeway when it comes to such construction. But I do not have the moral power to determine which views get elevated and which get rejected.

For that, a higher authority has determined the code: the U.S. Constitution, which says that Congress shall make no law that abridges the freedom of expression or the freedom of the press. We may not like what others have to say — we may even abhor their words — but we resolve matters through debate and elections.

To be sure, money can trump everything. One could argue that the gun manufacturers’ lobby uses its heft to keep weak politicos in check — even if a majority of their constituents favor reasonable controls. The same can be said for those who lobby Congress on other issues. And perhaps there is an argument to be made for major campaign finance reform to keep all voices alive — and not just those with the money and the power to be heard.

As your editor, my vow to you is to ensure that your reasoned convictions are printed. By extension, my aim is also to present a fair critique from readers. The overall goal is to be intellectually honest. And if there are voids or mistakes in my stories — certainly possible given the spacial and time constraints involved — then I welcome your comments. That’s especially true if you disagree with the premise that I’ve laid out, or that of one of our guest writers.

We live in a society that is committed to the protection of free speech — so very important when there are those around us who seek to intimidate and to snuff out competing views.

Political Graft Shrouds Climate Debate

Academics are not lobbyists. Or are they? The Heartland Papers are teaching us that the field of science is awash in cash — money that is being supplied by vested interests that are trying influence public policy, and even the school curriculum.

People of goodwill often disagree passionately about scientific hypotheses and subsequent conclusions. It’s true for any policy debate and it’s true when it comes to understanding climate science, which is at issue here. But this type of honest dialogue has been hijacked and obfuscated by those with a financial stake in its outcome. Indeed, the political hacks have infiltrated the debate and are wielding huge sums to either buy off or to bully those who would disagree.

The Heartland Papers are revealing in that the group expects to raise $7.7 million this year to fund a variety of causes, including a campaign to debunk the thinking that the earth’s warming is a man-made phenomenon and caused by the burning of excessive fossil fuels. Where’s it getting the money? Less certain. But it’s no secret that the oil and coal companies are funding similar efforts.

Others, meanwhile, are noting that those behind the creation of the green energy economy are donating big dollars to get their technologies into the market by creating a “false alarm” that the earth’s temperature is rising at a dangerously rapid rate.

Science should trump politics. To that end, the National Academy of Sciences released a survey in 2010 asking 1,372 highly acclaimed climatologists whether climate change is caused by the burning of excessive fossil fuels or whether it is naturally occurring. More than 97 percent of them fingered the human factor.

Are they all bought? If not, the next question then becomes whether the effects of climate change will come gradually or whether are they are perilously close?

Given the harsh economic realities, the most practical option is for global leaders to take prudent steps — much like buying an insurance policy to protect oneself against floods or earthquakes. Betting wrong won’t break the bank. But if the “unthinkable” is to occur, you are prepared.

It’s the middle ground but it is better than the all-out brawl we are witnessing. These interest groups are sneaky. In the case of Heartland, it has been bankrolling scientists who have remained mum until now as to whom exactly is supporting them. Consider Craig Idso and Fred Singer, who have been on Heartland’s payroll: Idso gets $11,600 a month while Singer gets more than $5,000 a month, all on top of their day-jobs. Who else pays them? Are they scientists or lobbyists?

“Our current budget includes funding for high-profile individuals who regularly and publicly counter the alarmist (global warming) message,” says a Heartland document.

Another one of Heartland’s pursuits is to fund a fellow named David Wojick, who has a doctorate in philosophy and is now a consultant for the coal industry. His job is to ensure that both sides of the global warming debate are taught in the public schools. But what makes this argument specious is that Heartland had been preparing to secretively give $200,000 to the cause. Is Wojick’s motivation to broaden the minds of students or to extend the economic lives of coal and oil?

Some of the graft is shrouded and some of it has to be publicly declared: The Center for Responsive Politics is reporting that the coal industry gives 73 percent of its money to Republicans while giving the rest to sympathetic Democrats. Oil and gas interests, meantime, give 75 percent to Republicans. Is it a coincidence that the two parties have taken opposing views on global warming?

What the Heartland Papers are teaching us is that these groups intentionally mix science and politics and then try to hide the fact that they are funding people who masquerade as being intellectually independent. The same statement can and should be made about where the other side gets its money and to whom it pays. The issue is one of transparency and revealing exactly who is being paid what and by whom so that the public can determine if their views are for sale or whether they are true-believers.

Public policy debate is healthy. Politicizing the field of science is not. Even if one accepts that global warming is less than “urgent,” slamming the door and hoping for the best is untenable. The proper tack is not to drown out or demonize the other’s position. It is, instead, to listen carefully to what their solutions are — and to incorporate a practical path forward that heads off a potential problem in a cost-effective manner.

Hopefully all sides will heed the message, especially the Heartland Institute.


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Penn State, Enron and the Golden Rule

Penn State’s story is a national lesson. While the facts surrounding that tragedy are different from what the energy sector had endured, the analogy remains pertinent.

A decade ago, the “prototype” for Business 2.0 collapsed. Enron, of course, had been toasted throughout the corporate community. But its exclusive focus on profits led otherwise reasonable people to become blinded. And while the company’s mission statement said all the right things, those worthy goals were ignored. Eventually, though, the light came shining through — and Enron’s downfall was as hard as they come.

Institutionally, Penn State has also suffered from moral failures. Those misjudgments are not the result of massaging income statements and balance sheets. But they are the apogee of covering up alleged human disgraces. Because Penn State ignored the needs of small children and tried to keep its personnel matters “in the family,” it merely allowed an out-of-control situation to become even more reckless. Now, the university is mired in what has been described as the worst crisis in American sports history.

Enron, Penn State — and countless others that will follow in their footsteps — should heed two lessons: Ensuring that their mission statements are fully understood and subsequently upheld and then putting in place a crisis management program that gives the effected communities full access to the available information. Failure to do either will result in a catastrophic situation.

Undoubtedly, Penn State and its former head football coach, Joe Paterno, have been as honorable as they come. But for years they seemingly put sports, or indirectly, the profits that drive that university, ahead of people. If each would have acted more forcefully, they would still have gotten stung. But both the program and its coach would have rebounded. Now, it’s questionable as to when this university and its football team will recover. For the record, Enron no longer exists and its ex-leader remains imprisoned.

Corporate cultures and unclear standards certainly play a part in some of these illicit activities. But individuals who cross the line or who fail to act responsibly must still be held to account. And while moral and legal shortcomings within the institutional world will continue, past history must serve as a guidepost.

Like Enron, Penn State will also suffer. But if this tumultuous experience ultimately serves to reawaken the most basic of human principles, the Golden Rule, then similar calamities may be averted.




Journalistic Principles

Another lifetime ago, I was a senior in high school. I took what would become a transformative class: Great Books, which started me on a course of becoming an avid pursuer of knowledge.

Plato’s Republic was first up. And the one passage coming from that book that has stood with me all these years was proffered by Socrates, who said, “I know only that I know not” — good words to live by not just in my daily life but also in my professional, journalistic one.

While the precept was planted in my teens, it had become rooted in my twenties. It was then I got my first journalism job working for the McNeil-Lehrer News Report in New York City. Each morning, I’d take the “A Train” four stops from Greenwich Village to Columbus Circle and go perform my duties as an intern. And while the responsibilities were mundane, the lessons were profound.

Robin McNeil was not a recluse. The anchor involved himself with everyone in the newsroom, including the newbies who had no clout. Besides putting a show on the air each night, he felt an obligation to leave a lasting impression on the field of journalism as well as the people lucky enough to work for him.

One summer day he took his interns to lunch, four of us in all. During the roughly two-hour time period, the youngsters all traded places multiple times so that we could each have a turn sitting next to Robin. And just as I recollected Socrates’ words of wisdom — so forgive me if there is another variation of the quote — I will try to do the same with the legendary newsman’s creed.

His general message was that the news should inform and it should appeal to the intellectual side of humankind. It was not the show’s role to entertain. It was not his nature — much less his job — to condescend. Instead, it was the responsibility of the program to look carefully into meaningful issues and to try and ensure that viewers learn something new.

Not too long after that, the show expanded from 30 minutes to 60 minutes. It also evolved, recognizing that pictures don’t minimize the news; rather, they help punctuate it. The program learned how to draw in more people without sacrificing its journalistic beliefs.

Passing the Torch

The last time I saw Robin McNeil was in the press room in 1988 at the Republican National Convention in New Orleans. He had invited me to watch how the then-MacNeil-Lehrer News Hour produced its coverage. The same sense of fairness prevailed then, as it does now, and will continue to do in the future.

In the last decade or so, the show has been led by Robin’s business partner, Jim Lehrer, who is based in Washington, D.C. I, too, had the opportunity to meet Jim, who treated me as respectfully as he did his co-news anchor. Jim has now announced his gradual departure and that a newer generation of those whom both he and Robin have helped groom will assume the lead.

It’s a philosophy of the news that teaches modesty — that the story has higher value  than the people who deliver it. Recently, the National Press Club gave Jim its Fourth Estate Award. In accepting it, he laid out the tenets of what makes journalists and journalism respectable:


  1. Do nothing I cannot defend;
  2. Cover, write and present every story with the care I would want if the story were about me;
  3. Assume there is at least one other side or version to every story;
  4. Assume the viewer is at least as smart and caring and as good of a person as I am;
  5. Assume the same about all the people on whom I report;
  6. Assume personal lives are a private matter until a legitimate turn in the story absolutely mandates otherwise;
  7. Carefully separate opinion and analysis from straight news stories … and clearly label everything;
  8. Do not use anonymous sources or blind quotes, except on rare and monumental occasions;
  9. No one should ever be allowed to attack another anonymously, and
  10. We are not in the entertainment business.

Journalists perform different functions. Some are straight news reporters. Some are analysts and feature writers while others investigate. In any case, it is their job to be fair and to ensure that their audience is fulfilled — objectives that are more attainable if they follow Jim Lehrer’s principles, or are humble enough to heed the maxims of the ancient Greek philosopher, Socrates.