Until the spring of 2001, the Houston energy giant Enron epitomized the triumph of the new economy. Feared by rivals, worshiped by investors, Enron seemingly could do no wrong. Its profits rose every quarter; its stock price surged ever upward; its leaders were hailed as visionaries.

Then a young Fortune writer named Bethany McLean wrote an article posing a simple question — How, exactly, does Enron make its money? — and the company's house of cards began to collapse. Though other business scandals would follow, none has had the shattering effect of Enron's bankruptcy, which caused Americans to lose faith in a system that rewarded top insiders with millions of dollars while small investors, including many Enron employees, lost everything.

Despite enormous media coverage of Enron, the definitive story of its astonishing rise and fall comes alive for the first time in this gripping narrative, by McLean and her Fortune colleague Peter Elkind. Drawing on a wide range of private documents and well-placed sources, many of them exclusive, McLean and Elkind lead you behind closed doors and deep into Enron's past, to pierce the veil of secrecy that has surrounded the company's inner workings and corrupt culture.

The Smartest Guys in the Room is fundamentally a human drama — of people drunk on their own success, people so ambitious, so certain of their own brilliance, so fueled by greed and hubris that they believed they could fool the world. The book explores the motives, thoughts, and secret fears of a fascinating array of characters, including:

• Ken Lay, the genial but clueless CEO who reveled in the trappings of his office but ducked the responsibilities. From the earliest days of Enron, his weakness allowed greedy lieutenants to run amok.
• Jeff Skilling, the brooding, mercurial genius who was the architect of Enron's greatest triumphs — and its ultimate disgrace. "I am Enron," he once boasted. As the company unraveled, so did Skilling.
• Rebecca Mark, the glamorous "It" girl of Enron International who raced around the globe in high style and battled Skilling for control of the company.
• Andy Fastow, the brutally ambitious, deeply insecure whiz kid. Inside Enron his colleagues marveled at how his complex schemes allowed the company to scam Wall Street — not realizing that he was secretly scamming Enron.
• Ken Rice, the Midwestern farm boy who was seduced by Enron's fast-money culture and who cashed in while hyping a high-tech business that didn't exist.
• Cliff Baxter, the manic deal maker and Skilling confidant who resented Fastow's murky self-dealing. "He's a goddamn master criminal," Baxter would rail.

Just as Watergate was the defining political story of our time, so Enron is the biggest business story of our time. And just as All the President's Men was the one Watergate book that gave readers the full story, with all the drama and nuance, The Smartest Guys in the Room is the one book you have to read to understand this amazing business saga.

"The book's sober financial analysis supplements that of Mimi Swartz's Power Failure, while offering additional perspectives that flesh out the details of the Enron story." Publishers Weekly

"The portrait of the narcissistic culture fostered by Enron's president, Kenneth Lay...is so vivid that the reader is amazed but not really shocked when the boom of the late 90's provides the spark that ultimately engulfs the entire enterprise in flames." Jonathan A. Knee, The New York Times Book Review

"Masterful....News junkies and mystery lovers who enjoy financial scandals will devour this multilayered book." USA Today

"This is the most thorough examination of Enron to date....Laying extensive groundwork, the authors ably convey the multidimensional nature of this story." David Siegfried, Booklist

"Compelling....[A] cautionary tale about highfliers who weren't as clever as they thought." Entertainment Weekly

"The biggest and most shocking business story of our time is the Enron debacle, and Fortune's senior writers Bethany Mclean and Peter Elkind have dug up the full story of the players and the plays that created the scandal of the century." Soundview Executive Book Summaries

The definitive volume on Enron's amazing rise and scandalous fall, from an award-winning team of Fortune investigative reporters.

There were dozens of books about Watergate, but only All the President's Men gave readers the full story, with all the drama and nuance and exclusive reporting. And thirty years later, if you're going to read only one book on Watergate, that's still the one. Today, Enron is the biggest business story of our time, and Fortune senior writers Bethany McLean and Peter Elkind are the new Woodward and Bernstein.

Remarkably, it was just two years ago that Enron was thought to epitomize a great New Economy company, with its skyrocketing profits and share price. But that was before Fortune published an article by McLean that asked a seemingly innocent question: How exactly does Enron make money? From that point on, Enron's house of cards began to crumble. Now, McLean and Elkind have investigated much deeper, to offer the definitive book about the Enron scandal and the fascinating people behind it.

Meticulously researched and character driven, Smartest Guys in the Room takes the reader deep into Enron's past — and behind the closed doors of private meetings. Drawing on a wide range of unique sources, the book follows Enron's rise from obscurity to the top of the business world to its disastrous demise. It reveals as never before major characters such as Ken Lay, Jeff Skilling, and Andy Fastow, as well as lesser known players like Cliff Baxter and Rebecca Mark. Smartest Guys in the Room is a story of greed, arrogance, and deceit — a microcosm of all that is wrong with American business today. Above all, it's a fascinating human drama that will prove to be the authoritative account of the Enron scandal.

Until the Spring of 2001, The Houston energy giant Enron epitomized the triumph of the new economy. Feared by rivals, worshiped by investors, Enron seemingly could do no wrong. Its profits rose every quarter; its stock price surged ever upward; its leaders were hailed as visionaries. Then a young Fortune writer named Bethany McLean wrote an article posing a simple question — How, exactly, does Enron make its money? — and the company's house of cards began to collapse. Though other business scandals would follow, none has had the shattering effect of Enron's bankruptcy, which caused Americans to lose faith in a system that rewarded top insiders with millions of dollars while small investors, including many Enron employees, lost everything. Despite enormous media coverage of Enron, the definitive story of its astonishing rise and fall comes alive for the first time in this gripping narrative by McLean and her Fortune colleague Peter Elkind. Drawing on a wide range of private documents and well-placed sources, many of them exclusive, McLean and Elkind lead you behind closed doors and deep into Enron's past, to pierce the veil of secrecy that has surrounded the company's inner workings and corrupt culture.

The Smartest Guys in the Room is fundamentally a human drama — of people drunk on their own success, people so ambitious, so certain of their own brilliance, so fueled by greed and hubris that they believed they could fool the world. The book explores the motives, thoughts, and secret fears of a fascinating array of characters. No matter how much (or how little) you already know about Enron, the revelations in The Smartest Guys in the Room will shock you. You'll witness the astonishing extent to which Enron's business was an illusion. You'll meet the enigmatic Enron executive who seemed interested in only two things: money and strip clubs. You'll learn the truth about the California power crisis. You'll see how much Wall Street knew about Enron's shenanigans and why the Street chose to look the other way. You'll learn the dirty secrets that Merrill Lynch, Citigroup, and J. P. Morgan Chase have kept out of the headlines to this day. Just as Watergate was the defining political story of our time, so Enron is the biggest business story of our time. And just as All the President's Men was the one Watergate book that gave readers the full story, with all the drama and nuance, The Smartest Guys in the Room is the one book you have to read to understand this amazing business saga.

Bethany McLean and Peter Elkind are both senior writers at Fortune magazine. McLean is a former analyst for Goldman Sachs. Elkind is the former associate editor of Texas Monthly.

Authors' Notes and Acknowledgments vii
Cast of Characters xiii
Our Values xix
Introduction xxi
1. Lunch on a Silver Platter 1
2. "Please Keep Making Us Millions" 15
3. "We Were the Apostles" 27
4. The First Prima Donna 44
5. Guys with Spikes 55
6. The Empress of Energy 70
7. The 15 Percent Solution 85
8. A Recipe for Disaster 100
9. The Klieg-Light Syndrome 114
10. The Hotel Kenneth-Lay-a 132
11. Andy Fastow's Secrets 150
12. The Big Enchilada 171
13. "An Unnatural Act" 189
14. The Beating Heart of Enron 212
15. Everybody Loves Enron 229
16. When Pigs Could Fly 246
17. Gaming California 264
18. Bandwidth Hog 284
19. "Ask Why, Asshole" 313
20. "I Want to Resign" 337
21. The $45 Million Question 352
22. "We Have No Cash!" 378
Epilogue: Isn't Anybody Sorry? 406
Index 415