Tearing Down the Walls: How Sandy Weill Fought His Way to the Top of the Financial World … and Then Nearly Lost It All (Simon & Schuster, 2003), a lengthy account of the career of Sandy Weill by Wall Street Journal writer Monica Langley, is largely a tale of the by-the-bootstraps rise of the “pudgy deal maker” to the top of Citigroup. But the book opens with an evening of triumph — someone was anointing Weill “CEO of the year” — besmirched by scandal. Jack Grubman, star telecom analyst for Citigroup unit Salomon Smith Barney, has just spent the day testifying before a Congressional committee that was raising a ruckus about WorldCom, and the highlight reel is dominating the financial news.
Nearly 400 pages later (filled with all the details you could ever want about Weill’s deal-by-deal ascension), we come back around to the Grubman disaster. Salomon, Langley writes, was a “closed shop” within the Citigroup empire, and Weill called in powerhouse lawyer Marty Lipton to “find out how we are running our business.” Lipton later reports, in a scene Langley recounts, that it’s not that bad: “There have been industry excesses in which the firm participated.” Another executive questions him: “You’re saying Salomon Smith Barney did what the securities industry had been doing for years — that the problems are the product of an industrywide disease?” Lipton nods. Citigroup eventually pitches in $300 million (“only a week’s worth of profits”) to a global settlement with the New York attorney general’s office, which soon announces there will be no charges against Weill, who promptly gets back to work.
Tearing Down the Walls has value as a record of one remarkable business figure, but its message about the scandal era that nearly pulled Weill into its wake is ambivalent. Does it make sense to excuse Salomon’s behavior because “industry excesses” were widespread? Langley never quite says, and the reader is left feeling that perhaps Weill just dodged a bullet. Which is presumably not a strategy that the rest of us want to pursue.
Enron had a kind of first-mover advantage in the scandal frenzy, making it the subject of more books than any other company. One of the earliest, Enron: The Rise and Fall (John Wiley & Sons, 2003), by journalist Loren Fox, covers the basics in workmanlike fashion: Enron was a transporter of natural gas that aimed to take advantage of deregulation by reinventing itself as a trader of natural gas. Then it sought to reinvent itself again as a trader of other kinds of energy, and, in the long run, of practically anything you could think of. But a reputation for innovation masked deep and fundamental problems.
Power Failure: The Inside Story of the Collapse of Enron (Doubleday, 2003), one of the two truly worthwhile books on the scandal period, is written by Mimi Swartz “with Sherron Watkins.” That billing suggests that the story will largely be told through the eyes of Watkins, the Enron auditor who became famous for her memo to CEO Kenneth Lay warning that the company could be dragged down in an accounting scandal. In fact, Swartz, an executive editor at Texas Monthly, has a wider narrative to offer, and Watkins pops up only on occasion. (Which is just as well, because the sections about her tend to be dull.)
What Swartz shows is that many of the characteristics that eventually got Enron in trouble were the same ones that led to its early success — namely a penchant for daringly bending the rules. “If the regulators didn’t expressly prohibit a transaction, Lay saw it through,” she writes. The company’s use of “mark to market” accounting, which allowed it to immediately recognize the profits from long-term energy contracts at current-market prices, dated back to the early 1990s. Its use of off-balance-sheet “special purpose entities” (SPEs) went back just about that far, too. These tactics were aggressive, but not illegal — and since they worked out, they also probably seemed clever and bold.