Conspiracy of Fools

Conspiracy of Fools (2005) is Kurt Eichenwald’s historical analysis of the fall of the U.S. energy and commodities conglomerate, Enron. Published four years after Enron filed for bankruptcy in New York, it follows the entirety of its catastrophic scandal through the beginning of Enron’s liquidation in 2004. The scandal came to a peak early in 2001, when investigators found that it had conducted organized accounting fraud for years to embellish and falsify reports about its financial state. Before the scandal, Enron had been showered with accolades, including “America’s Most Innovative Company.” Sifting rigorously through Enron’s trail of evidence, Conspiracy of Fools explains the reasons behind the collapse of Enron’s fraudulent empire, which tragically led to the loss of 29,000 jobs and the life savings of thousands.

Early in his analysis, Eichenwald positions Enron’s Chief Financial Officer, Andrew Fastow, as Enron’s greedy figurehead. Fastow was an expert at masking illegal activity behind a facade of seemingly legitimate businesses, reports, and partnerships. In many cases, he appointed himself a consultant to the businesses he himself created in order to draw in many times more wealth than he was legally entitled to. At the same time, he falsified Enron’s accounting data such that it seemed the company was reaping unprecedented profits under his leadership. Enron’s illicit practices began in the 1980s, but though it raised several red flags, it was never questioned by any lawyers or regulatory bodies.

While he acknowledges its shady earlier years, Eichenwald focuses on Enron as it behaved during and after 1997, its most egregious era of fraud. He shows that Fastow’s lies were upheld and concealed by an organized network of underlings. These included Enron’s lawyers, their senior staff, especially Jeffrey Skilling and Kenneth Lay, and even its auditors, who had been effectively paid off with financial incentives. Fastow’s partner-in-crime was Michael Kopper, and they worked with the full and knowing support of Enron’s board.



Though Enron’s conspiracy flew under the radar for years, its crimes ultimately caught up to it. Eichenwald shows that suspicious investigators began to see that the cutthroat corporate culture was a symptom of a much deeper malaise: Enron blatantly ignored basic business ethics and transformed into a vehicle for its uber-rich executives’ further enrichment. The company was obsessed with reporting profits and cared relatively little about its actual growth. As a result, a select few insider executives could reap huge rewards, while the rest of the company suffered.

This unsustainable system eventually collapsed under its own weight: Enron’s losses became impossible to conceal, its dubious partnerships fell under scrutiny, and its bad investment decisions generated public pressure to investigate its inner workings. Shortly before its bankruptcy, Enron concealed losses of billions of U.S. dollars and had few real assets. At this point, many of its top executives tried to subtly quit and cash in their stock. The flight of so many key figures stirred further alarm. The men who tried to pull out and slink into the shadows scot-free and wealthier than ever were later indicted with many counts of fraud, lying under oath, and insider trading, and received long prison sentences.

Eichenwald’s incisive reading of Enron’s collapse shows that no fraudulent system can survive indefinitely. It also contextualizes the swift fall of one of America’s biggest conglomerates within ongoing national debates about corporate oversight and regulation.