Introduction

Normalcy and steady growth had eluded Enron since the merger. The Peruvian nationalization ruined 1985. The collapse in wellhead prices—nearly one-half for crude oil and one-fourth for natural gas—dampened 1986. Buying out Irwin Jacobs was expensive. What else could go wrong?

Now, surely, it was Enron’s time to shine. The core assets in the gas divisions were in place. Top leadership had Jim Rogers over the interstate pipelines, Gerald Bennett over (Texas) intrastate pipelines, John Esslinger over wholesale marketing, Michael Muckleroy over liquids, John Wing (either as an employee or a consultant) over cogenerated power, and Forrest Hoglund running exploration and production. Richard Kinder, executive vice president and chief of staff, was increasingly complementing the Big Six, a good thing given the mediocre presidency of Mick Seidl and the external proclivities of Ken Lay.

Yet something suspicious was going at the high-flying Enron Oil Corporation in Valhalla, New York. The stand-alone, speculative oil-trading unit was reporting large, consistent profits—and bragging about them at management get-togethers. Experienced traders in Houston did not think that such profits were possible, quarter after quarter. And Mike Muckleroy was raising a stink about it.

What was too good to be true became just that in 1987, when Enron was hit by a major scandal—the story of chapter 4. In their annual report for the year, Lay and Seidl could claim only “progress” toward becoming “the premier natural gas company in North America,” owing to “a number of unexpected events which hindered but failed to diminish achievement of that goal.”

A second try at normalcy and progress was necessary—and accomplished to some degree in 1988–89. Still, as described in chapter 5, heavily indebted Enron was relying on nonrecurring earnings to report profitability. Young Enron was living on the edge, reflecting the ambition and nonstop drive of its founder and CEO, and thus foreshadowing the fate of a company that would die far too young.