SAMPLE EXCERPT – Nonfiction

This is from a manuscript written for a law school course. The course was structured around the Enron case.

© 2002 by Lynne Rhys-Jones. All rights reserved.

Prologue

In recent years, the Houston bedroom community of Sugar Land, Texas has transformed itself from a sleepy company town to the fastest-growing town in Texas. From 1999 through most of 2001, the stock market boom was in full swing, and it seemed nothing could stop the upward climb. The economy – and therefore those who had money to invest in American industry -- seemed positively invincible. Thanks to the vigorous economy, Sugar Land’s population rose dramatically along with the average income of its residents. Sugar Land was a new American boom town.

One citizen of Sugar Land had a particularly good run of luck in the stock market, making over $21 million in just six months. J. Clifford Baxter was a family man who lived with his wife and children in one of the wealthiest subdivisions of the town. He drove a Mercedes, went to church, and had the respect of his community.

Yet at 2 a.m. on a clear, cold Texas night, an officer of the Sugar Land police department found Baxter dead his Mercedes with a bullet in his brain. A gun was in Baxter’s hand and a note lay nearby. Two days later the Harris County coroner ruled Baxter’s death a suicide.

Because Baxter had recently found himself in the public eye, his death was reported in newspapers all over the world. While there was considerable conjecture over what was in his suicide note, all sources confirmed that the note mentioned the Enron Corporation. Enron was a wildly successful energy company, and Baxter was reportedly highly critical of the company’s financial arrangements.

Meanwhile, in Portland, Oregon, Gary Kemper had spent many years working for Enron. Through Enron’s 401k contribution program, he had built a retirement pension worth nearly half a million dollars. Part of the pension came from his own contributions, and part of it, contributed through Enron’s matching program, was in the form of Enron stock. Optimistic about Enron’s prospects, and encouraged by the increasing value of his stock portfolio, Gary planned an early retirement.

But it was not to be. On October 16, 2001, Enron announced that it was taking a $544 million after-tax charge against earnings. The charge related to transactions with special partnerships created and managed by Enron executives. Enron also announced a reduction of shareholders’ equity of $1.2 billion related to the same partnerships.

Within days, Enron imposed a “lockdown” on its employee stock plan, preventing employees from selling their shares. When the lockdown was lifted a month later, Enron stock had lost three fourths of its value. In a matter of weeks, Enron stock was nearly worthless, and the company was forced to declare bankruptcy.

Before it was all over, one of the most respected and prominent accounting firms in the world would be charged in a criminal indictment for obstructing justice. Enron’s 19,000 employees would lose most – and in some cases all – of their retirement accounts. Over 4,500 employees would be laid off in Houston alone. Allegations of self-dealing and political influence peddling would reach all the way to the White House. Gary Kemper’s $440,000 nest egg would be worth $4,000. And Cliff Baxter would be dead.

This is the story of relationships: relationships between employees and employers, between attorneys and clients, between accountants and business firms. It is the story of relationships between what we call “fiduciaries” or “agents” – the people or institutions in whom we put our trust – and “beneficiaries” or “principals” – the people who delegate authority to make critical business and personal decisions. It is the story of how those relationships can go horribly wrong when money is at stake.

This is the story of Enron.

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