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Enron’s “road map of the possible”

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Elizabeth Holmes, the founder of blood-testing startup Theranos, was once hailed as a “visionary.” Now prosecutors say Holmes intentionally deceived investors and patients about the capabilities of her company’s technology. It’s easy to draw parallels between the federal fraud trial du jour and the Enron scandal. As we hear in this month’s documentary, Enron’s maneuvers “captivated Wall Street.” The word “visionary” was applied to former CEO Jeffrey Skilling more than once. He was eventually sentenced to 24 years in prison.

What’s the line between a visionary and a fraudster? It’s a question that interests Bethany McLean, the financial reporter who lifted the lid on Enron. She co-authored the book on which “Enron: The Smartest Guys in the Room” is based. “Sometimes I think the only real difference is that the visionary is able to prevail through these periods where they’re faking it,” McLean told David Brancaccio this morning. “And they’re able to keep getting money from investors so that they can get to the ‘making it’ stage.”

Brancaccio asked McLean whether, 20 years and successive corporate financial scandals later, anything meaningful has changed, whether regulatory reform has made a difference. She described her conclusion as “quite upsetting.” 

“Where there’s a will, there’s a way, and where there’s money to be made, people will find ways to manipulate the existing rules,” McLean said. “What Enron really excelled in was using the existing rules and regulations as a road map of the possible. I’ve described it, at times, as ‘a legal fraud.’” You can read or listen to the full interview here.

“Enron: The Smartest Guys in the Room” is available with a library card or university login on Kanopy and for rent for a small fee on various streaming platforms. If you’ve seen the film, we’d love to hear from you: extracredit@marketplace.org. We’ll feature some of your responses in next week’s newsletter.

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