"An era of near madness in finance"

So writes Kurt Eichenwald in the New York Times, describing the era that came to an end with the collapse of Enron.
Ken Lay and Jeff Skilling tried to convince the jury that there was nothing wrong with Enron, and that the company's failure was brought about by the shenanigans of CFO Andrew Fastow and a "run on the bank" fueled by negative stories in the Wall Street Journal and other business periodicals. Their inability to admit that anything was wrong at Enron effectively shifted the burden of proof to the defense. Writing in Fortune, Bethany McLean and Peter Elkind summed up the failure of the defense strategy:

Needless to say, the defense did not prove their ludicrous theory.

Eichenwald writes that Enron's leaders came to believe that reporting big profits was the same as actually making money, and ran the company accordingly:

Paula Rieker, an executive with the company's investor relations group, testified to her fear of correcting Mr. Skilling when he made what she considered to be false statements to investors. Vince Kaminski, a top risk analyst, spoke of how Mr. Skilling became increasingly difficult to contradict as Enron won plaudits from the marketplace. And Ben F. Glisan Jr., the treasurer, portrayed an "Emperor's New Clothes" culture, where no one was willing to challenge the rule-bending and recklessness as the company's executives charged into one ill-considered business line after another.

Houston Chronicle columnist Loren Steffy writes that Lay seems to have drunk his own Kool Aid and doesn't understand why others no longer believe him when he speaks:

From the witness stand, Lay, the man who was used to people jumping when he spoke, still seemed to believe that telling his version enough times would make it true.

Just as Scotty on Star Trek used to protest "I canna change the laws of physics," Lay and Skilling have discovered that they couldn't change the laws of economics.

Photo: Nick de la Torre, the Houston Chronicle