The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron

by Bethany McLean

The money Enron poured into projects that never were built—and such a failed deal could soak up tens of millions—was supposed to be written off. In Vietnam, for instance, one accountant says that Enron spent some $18 million trying to build a power plant, only to see the project canceled. Yet Enron International often booked such costs as an asset on the balance sheet, in what came to be known around the company as “the snowball.” Usually the rationale was that there was no official letter saying the project was dead, so therefore, officially, it wasn’t. Rich Kinder had a rule: the snowball had to stay under $90 million. But it eventually ballooned to over $200 million. A second problem: the assumptions Enron made to justify its deals assumed that nothing would ever go wrong. Of course, the banks financing the deals were making the same assumption; this was a mania, after all. But building energy projects in poor countries—often run by dictators and where capitalism was still a new concept—was absolutely fraught with peril,