Chairman Joseph Salucci had just stood up to head out for a lunch appointment and was pulling a jacket from the wardrobe on one side of his office when a sudden knock sounded.
Knock, knock, knock!
Before he could even respond, the door swung open and CIO Scott Reckler strode in with long, urgent steps.
"Mr. Chairman, have you heard the news?"
At the anxious look on his face, Salucci fastened the buttons of his jacket and asked,
"What is it?"
"The SEC has begun a preliminary internal investigation into Enron's accounting fraud."
It was bad news, but also something he had half expected. Standing beside his desk, Salucci reacted with relative calm.
"The Eldorado Fund formally filed an accounting fraud complaint and submitted evidence. There's no way they could just ignore it."
"That's true, but the situation seems to be unfolding much worse than we anticipated."
"Explain it in a way I can understand."
As Salucci frowned and pressed him, CIO Reckler began to explain the situation with a grim expression.
"They've launched a preliminary investigation not only into Enron, but also into Arthur Andersen, which handled its accounting advisory work."
"...!"
"On top of that, the Los Angeles Times has broken a story alleging that the frequent blackouts in California since last year were deliberately engineered by Enron to drive up electricity prices."
"You're saying Enron intentionally caused blackouts?"
Chairman Salucci asked sharply, and CIO Reckler replied with a flustered look.
"Yes. The allegation is that Enron, which dominates the wholesale electricity market, bought power cheaply in California, where production price caps were in place, then sold it at much higher prices in other states. They also intentionally inflated demand for transmission capacity to push consumer prices higher."
This had only been possible because the California state government had separated power generation and transmission in order to prevent collusion among private electricity companies.
"Even though California's total generation capacity is 45 gigawatts, far exceeding demand of 28 gigawatts, the state still suffered multiple blackouts last year and this year. Wholesale electricity prices surged by as much as 800 percent, and the claim is that Enron's market manipulation was the cause."
As he listened, Chairman Salucci's face twisted sharply.
"Accounting fraud wasn't enough. They went as far as market manipulation too. This is insane."
Watching Salucci's face flush red with anger, CIO Reckler spoke cautiously.
"If the market manipulation allegations are proven true, they could be hit with massive fines and dragged into large-scale lawsuits."
"Hm."
This was the United States, a country known for litigation, and unlike Korea, it allowed punitive damages. If lawsuits were filed, the compensation awarded could reach astronomical levels.
With a grave expression, Salucci looked at CIO Reckler standing in front of his desk.
"How much damage did California suffer from this power crisis?"
"It's estimated at around forty to forty-five billion dollars."
"Ghh…."
As Chairman Salucci let out a pained groan, CIO Reckler spoke again, sounding increasingly anxious.
"If word gets out about the SEC's internal investigation and the allegations of collusion involving Arthur Andersen in this situation, market disappointment in Enron will only deepen."
Which was to say, the stock price would inevitably plunge.
With one major piece of bad news after another crashing down, Salucci couldn't help but curse under his breath.
"Damn it!"
Covering his face with his palm, he barely managed to rein in his rising anger. Then, running a hand through his hair, he asked,
"Is the Eldorado Fund still pressing on with its short selling?"
Reckler nodded heavily.
"Yes. They sold tens of millions of dollars' worth of Enron shares again today."
"Ha… nothing ever goes the way you want it to."
Salucci scowled and bit down hard on his lower lip.
After a moment of grim deliberation, he seemed to steel himself. Lifting his head, he asked Reckler in a low, steady voice,
"What's Enron's stock price right now?"
"The last check showed forty-nine dollars and thirty cents per share."
At the answer, Salucci clicked his tongue.
He had invested a massive 3.6 billion dollars, and was already sitting on a loss of over thirty-four percent. It was no wonder he was seething.
And the real problem was that once the newly surfaced scandals hit the market, Enron's already halved stock price was bound to fall even further.
"Fuck!"
Cursing once more, he finally barked out in an irritated voice,
"Liquidate all of our current positions immediately!"
Reckler, who had been nervously afraid Salucci might stubbornly hold on, let out a silent sigh of relief and answered at once.
"Understood. I'll also reach out to Merrill Lynch and the other investment banks."
"No. There's no need to do that."
CIO Reckler paused and looked up. Chairman Salucci spoke with a cold expression.
"If everyone else dumps Enron stock at the same time, the price will collapse even harder. Worse, there could be so much volume that we might not even be able to unwind our position."
"Th-that's true."
"Even if we get cursed out later, the priority right now is to cut our losses as much as possible and get out. So before the other investment banks make the first move, dump every last share of Enron stock we're holding. Immediately."
Reckler instantly understood that Salucci was planning to stab the other major investment banks, the ones he had been working with, in the back.
It might have been a cowardly move, but on Wall Street, the greatest virtue was money. Without the slightest hesitation, Reckler nodded.
"Yes. I understand."
As Reckler hurried out of the office, Salucci was left alone. He sat back down in his chair and pressed the intercom button installed on one side of his desk.
[Yes, Mr. Chairman.]
When the female secretary's voice came through the speaker, Salucci spoke in a slightly hoarse voice.
"Something's come up, so I won't be able to make it to the lunch appointment. Contact Chairman Hank and ask for his understanding."
[Understood.]
After lifting his finger from the intercom button, Chairman Salucci let out a long, heavy sigh.
"Hoo… I lost again."
He had been certain he could push the Eldorado Fund into a short squeeze and force them to their knees, but instead, it was his side that now faced massive losses.
Leaning his elbows on the desk, Salucci clasped his hands together and rested his forehead against them, his expression dark.
A deep sense of defeat washed over him, along with an overwhelming uncertainty about how he was going to deal with the enormous losses this failed investment had saddled him with.
"I shouldn't have moved against Chairman Park so rashly."
Crushing regret weighed down on his shoulders, but it was already far too late to turn anything back.
***
Merrill Lynch headquarters, World Financial Center, Lower Manhattan, New York.
Chairman Dan Perry sat behind an extravagantly furnished desk, frowning as he stared at the stock trading screens displayed across four monitors in front of him.
He immediately grabbed the handset of his desk phone and punched in a speed-dial number.
After a brief ring, Paul Adams, head of the trading center, picked up. Perry barked into the phone without preamble.
"Where the hell did that massive sell-off come from all of a sudden? Don't tell me it was those Eldorado bastards!"
Perry's voice was thick with irritation.
The moment he received reports that the SEC had begun an internal investigation into accounting fraud, along with allegations that Enron had deliberately engineered the California energy crisis, Perry decided to cut his losses and dump all the Enron shares he was holding.
But before he could sell, someone else had beaten him to the punch, unleashing a flood of massive sell orders.
As a result, Enron's stock was plunging, carving out a long bearish candlestick on the chart, and Perry couldn't help but be furious.
"I was just about to report it," Adams replied, his voice tense. "Goldman Sachs just dumped well over forty million shares of Enron in one go!"
"What?!"
Perry shot to his feet, clutching the handset to his ear, his eyebrows shooting up.
"It looks like Goldman Sachs is liquidating their entire long position!"
"Shit!"
In an instant, a sinister sense of being set up ran down Perry's spine.
Chairman Perry spat out a harsh curse and clenched the hand holding the receiver.
He, too, had planned to sell Enron shares first without consulting the other investment banks he was allied with. But being beaten to the punch sent a surge of bitter betrayal rushing through him.
As the image of Chairman Joseph Salucci flashed through his mind, the man who had first proposed the reverse short at a tennis match at his Southampton estate, Perry ground his teeth.
"Joseph Salucci, you son of a bitch. You dare stab me in the back? You were the one who talked us into a reverse short, and now you run off first to save yourself!"
At the urgent shout that followed from Director Adams, Perry's face twisted even further.
"Chairman! Enron's stock is down more than five percent, and JP Morgan and Bear Stearns have started dumping their shares too!"
At the report, which sounded almost like a scream, Perry sprang to his feet and hurriedly checked the monitors.
Sell orders were pouring in as if the stock were plunging off a cliff, and Enron's share price was nosediving at a terrifying speed.
If this continued, Merrill Lynch alone would be left holding the full brunt of the losses from the collapse.
With the prospect of being stuck with the bill, Perry's face flushed red, then pale. Gripping the receiver tightly, veins bulging in his neck, he roared,
"Stop dragging your feet and dump every last Enron share we have right now! Sell before the other investment banks do!"
"We're placing orders, but the buy side has completely vanished. Nothing is getting filled."
Director Adams spoke in a strained voice, but Perry yanked at his tie knot as if tearing it off and raised his voice even higher.
"So what if it's not getting filled? Are you just going to sit there and watch? Drop the asking price if you have to and get us out of the position. Do you understand me!"
Shouting furiously, Perry slammed his palm down on the desk.
As the Enron stock chart on the monitors kept plunging endlessly downward, his own nerves burned away just as fiercely.
"I don't care what price we sell at. Use any means necessary and dump the stock!"
"Yes, sir!"
Slamming the phone down as if he might smash it, Chairman Perry paced, breathing hard.
Just like the sell orders piling up relentlessly on the trading screen, his fury kept stacking higher and higher.
"Salucci. You damn bastard!"
The alliance was shattered. From this point on, it was nothing but a vicious scramble over who could escape the sinking ship first.
Eyes bloodshot, Perry stared daggers at the monitors, regretting that he hadn't pulled out much earlier.
"I never should have listened to Salucci."
He wanted nothing more than to storm over, grab Salucci by the collar, and unleash a torrent of curses. But right now, escaping this quicksand by any means necessary took priority.
As he watched the trading screen, where the plunging stock price had completely wiped out even the occasional bargain hunters, leaving sell orders stacking endlessly with virtually no executions, a chilling thought suddenly crossed Perry's mind, sending a shiver through him.
'Can I even get out of this?'
Swallowing hard, he stared anxiously at Enron's stock price as the bearish candlestick kept growing longer and longer, and cried out desperately,
"No. I have to get out of here."
But contrary to Perry's hopes, Enron's stock saw almost no trades being executed.
By the end of the day, it had plunged more than 28 percent, closing at thirty-five dollars and forty-four cents a share.
Enron's stock had fallen into the abyss.