David Hale Smith had a good story, but no one wanted to hear it. The Dallas-based literary agent was telling publishers in fall 2001 that the fading-star tale of Houston's Enron Corp. would ultimately produce a good book. No one bit.
"The book editors in New York would say things like, 'What the hell is Enron?'" Smith says. "It hadn't hit nationwide yet. Then, of course, the story hits The New York Times, and they call back frantically looking for folks who have an inside take on this so they can throw money at someone, so they can get their book out first."
And once the book publishers get involved in a developing news story, the race commences to find the perfect writer for the project, someone who has the contacts, time, prestige and experience to produce not only the best book but the best book that can be written in three to six months. In short, the claim game is on.
"In terms of making your name on a story and turning it into a book deal, it's enormously important to have broken some aspect of the story," Smith says, "but it's important in two ways. First, you can simply be the person who actually breaks the stories for your newspaper or magazine. They like that. But there's also the other way to get a deal, which is to be the reporter who owns the story. In other words, your name and your reporting become associated with it for whatever reason. Then you can cash in in a major way with a book deal or even with Hollywood."
Even as the new angles to the Enron tale continue to emerge, a full review of which reporters won "ownership" of the story has been conducted and signed off on by the national press and publishing houses. The winners--first Jonathan Weil then later Rebecca Smith and John Emshwiller of The Wall Street Journal, Bethany McLean of Fortune and Mimi Swartz of Texas Monthly--have been rewarded with industry praise and, in some instances, lucrative book deals. (McLean, along with former Dallas Observer editor Peter Elkind, now a Fortune staffer, and their editor received a reported $1.4 million for their book contract. Swartz is on leave while she works on her book.) Stories highlighting the squabble between publications concerning who first broke the story have been in The New York Times, New York magazine and The Washington Post, as well as both the Columbia Journalism Review and the American Journalism Review. Yet the posthumous Enron attention has never sufficiently answered the question, Did anyone really "break" the Enron story?
"Everybody's hindsight is extraordinarily clear, because people's memories of their own fabulousness get clearer as the story gets more interesting," says Texas Monthly editor Evan Smith, whose publication ran Swartz's story on the Enron culture, "How Enron Blew It," in November 2001. It followed McLean's Fortune stock-price story "Is Enron Over-priced?" by several months. "Bethany [McLean]'s and Mimi [Swartz]'s pieces were the two stories that really called the company into question. But no one really 'broke' it, although lots of people are trying now to say they did. You know, [Washington Post media reporter] Howard Kurtz called and asked if the [Houston] Chronicle did a bad job on Enron, and I said, 'Compared to whom?' The truth is, you can spend too much time navel-gazing about this. The reality is, you get to the story when you get there, and once you get to it, you cover it with all your might."
The person most media navel-gazers identify as getting there first is Jonathan Weil. Weil, who covers accounting for The Wall Street Journal, is a Southern Methodist University law school graduate and former Dallas Morning News intern who spent three years working for the Journal's once-a-week regional insert, Texas Journal. In September 2000, nearly six months before McLean's Fortune piece ran, Weil wrote a lengthy story headlined, "Energy Traders Cite Gains, But Some Math Is Missing." In the story, Weil scrupulously questioned the fuzzy math used by Enron and two other energy companies. The lead paragraph, in a time when the business press and Wall Street were championing Enron, was straightforward and damning: "Volatile prices for natural gas and electricity are creating high-voltage earning growth at some companies with large energy-trading units," Weil wrote. "But investors counting on these gains could be in for a jolt down the road." He went on to explore the controversial "mark-to-market" accounting procedure that gives laymen who try to understand it a bad case of tired head but that nevertheless contributed mightily to the false euphoria Enron had created among investors.
"I just simply wanted to know, What is the quality of their earnings?" Weil says. "And when I looked at them closely, the earnings were all based on hypotheticals--and seemingly unknowable hypotheticals."
The Journal never ran Weil's story in its national edition, and once he saw McLean's Fortune piece, he dropped a follow-up he was working on that would have gone over some of the same points. Nevertheless, he takes pride in the fact he was first to look at publicly available documents and question them.
"Go as far back as you want," Weil says. "I could not find another story by any other reporter or Wall Street analyst that was skeptical about Enron's earnings before September 2000, and earnings is what was driving Enron's stock price. Now, I didn't write about the issue that drove it into a death spiral. But it was an issue that showed the company was not as strong as it presented itself to be. And looking back at that story, it's clear the death spiral shouldn't have been that surprising when it came, because this company probably was never really profitable in the first place.
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"Look, all sorts of people were 'first' on this thing," Weil says. "When stock was trading for $90 a share, no one reporter could identify every area of corruption in the company...My view is that I wrote this story for a publication with a circulation of 100,000 that was closely read in Texas and on Wall Street, I did this story on one element, I put it in context, and I showed that this accounting technique had been used before and that it was a huge problem."
Two other Journal reporters, Smith and Emshwiller, would go on to break major Enron stories. ("Their reporting drove the stake through the heart of that company," Weil says.) Now the Journal is making a strong push for a Pulitzer Prize based on the totality of the paper's Enron coverage. That effort and a backlash against the young (31) McLean seems to have quashed some of the early efforts by the press (the Post and the Times, specifically) to award McLean the reporting gold on Enron.
McLean, to her credit, is not caught up in the claim game. "Some people told me it prevented them from investing in Enron, which was very gratifying in retrospect," McLean says. "But no, I've never said I broke the story. I raised some questions--and I'm glad my piece saved some people a lot of money--but I'm embarrassed about how much I missed...But, while I think a number of reporters have done great work on the story, I don't think anyone has really explained what happened yet."
Which is, one hopes, what a good Enron book will do. Ladies, gentlemen, start your writing. You have three to six months.