Peter Elkind Discusses ‘Rise and Fall’ of Eliot Spitzer and Enron

At the fi360 Conference, the best-selling author offers lessons on Eliot Spitzer’s shortcomings and the dangers of Enron’s Skilling and Lay's management styles

When It comes to regulation in Washington, "government alone doesn't particularly do the job very well; regulators are often under funded, underpaid, short on energy and short on initiative. “Eliot Spitzer, who is an exception to the rule, fell down for other issues." With that last sentence, journalist and author Peter Elkind had the crowd at the 2011 fi360 Conference, in San Antonio on Friday, in the palm of his hand.

Elkind, speaking about “Business Ethics and Washington Regulation” before this gathering of fiduciaries, is editor at large at Fortune, and author of a number of books. He co-wrote "The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron," (Penguin, 2003), with Bethany McLean; and wrote "The Death Shift: The True Story of Nurse Genene Jones and the Texas Baby Murders," (Onyx, 1990); and "Rough Justice: The Rise and Fall of Eliot Spitzer," (Portfolio Hardcover, 2010). Both the Enron book and the Spitzer books have been made into movies.

Enron: A 'Culture of Corruption’

At Enron, “Jeffrey Skilling [Enron’s former president] creates a culture of corruption, does things that people don't understand,” Elkind said. “One lesson is, when people are doing things,” that can't be understood, "run the other way." Elkind went on to say that at the doomed company, a culture of “corruption” was led by executives at the very top.

Most surprising, Elkind told AdvisorOne in an interview after his keynote speech, was that, “it wasn’t about the numbers, it was about the personalities and how a charismatic leader can infect an entire corporate culture.” He added, “Skilling was much more actively malevolent. [CEO and Chairman Ken] Lay sat back and got all the perks of office and watched it all happen—kept it going until the bitter end.”

Although Lay was found guilty, as was Skilling, Lay “never went to prison,” Elkind noted in his speech, because “he died before he started his sentence.” And, since he "went to his grave before exhausting his appeals," Elkind continued, Lay was "not convicted in the record books." Skilling, convicted in 2006, did go to prison, Elkind said in the speech.

"Corporate culture," plays a part and "if a guy like Skilling hires people willing to go along with him on things," bright, but passive, that makes a difference. "It's really a story about the power of the CEO," Elkind asserted.

Is He Actually Dead?

As with Elvis, there is some speculation that Lay is “not dead,” and there is even a website, “KenLayisAlive.org,” devoted to Ken Lay sightings—according to Elkind. According to the website, Lay may be living in Cuba, impersonating Fidel Castro.

And Now, for Something Truly Different…

The subject of Elkind’s more recent book, Eliot Spitzer, "exposed" Wall Street analysts who were touting securities as “buys” but saying in private emails that these were "POS, piece of s[***]," securities, he told the audience. Elkind said he knew Spitzer in college (Princeton), and that Spitzer "always seemed like the most unlikely man to go down in a sex scandal."

Spitzer is married to "lovely woman, [with] three lovely daughters," and always seemed like a "straight arrow," Elkind added.

"It's usually the case that politicians get ahead by making powerful friends; Spitzer got ahead by making powerful enemies," Elkind explained in the speech. When he ran for Governor of New York, he said, Spitzer "won the election by a landslide." Spitzer, known to have a "temper," campaigned on the slogan "bring some passion back to Albany; it turned out it was a little ironic," Elkind noted, when the scandal over Spitzer “patronizing prostitutes was uncovered.”

The surprise, Elkind said after his speech, was that Spitzer “had done this in the first place—that he had a secret life—and that he’d destroy his career when it meant everything to him. He’s not the sort of man you’d think of as succumbing to urges. [He] seemed like the ultimate rational human; he’d weigh the pros and cons and proceed. [This was] incredibly self-destructive, crazy behavior.”

Elkind also told AdvisorOne that, regarding Spitzer’s use of prostitutes, he was ”surprised how long it had gone on and the extent of the deceit involved.” It was “not one or two times,” but “20 or 30 times,” he added. “When Spitzer became Governor, he tended to see escorts when he went out of town,” when there was “less security with him.”

Spitzer had a “set routine,” according to Elkind: At the hotel, he would “say he was going to bed [and] send the security patrol [away] instead of [having them] guard the outside of his door, and sneak off to a room he or the escort had rented and have his rendezvous. He had to get money, in advance, to the escort. He had to get wire transfers [or in one case, he] put a money order in the mail—it was a frantic, clumsy act to get the money into the hands of the escort service,” Elkind told AdvisorOne.

At one point, Elkind said Spitzer asked a “bank to get his name off of a transfer.” It was, Elkind concluded, a “circus to get money to them.”

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