E N ORDEAL of top management,of including Mr. Lay. washethaton distraught So he arguably didn’t wield, Mr. Palmer for animmediate called gathering reputation. news floored The Mr. Palmer. destabilizing thecompany’s its finances and destroyingwhat wasleft of were true, ’s would obligations into turn debt, further circumvent accounting himself. andenrich thissuspicion rules If finding that Fastow have might improperly Chewco structured to Andythe files of Fastow, the company’s recently CFO, departed were Chewco adeeply be flawed might entity. Enron executives investigating task. Mr. Palmer expected to a get quick answer and move on to his next recently had chairman who CEO. re-assumed of thetitle As for Chewco, believed in the leadership of Kennethbelieved intheleadership of Lay, thecompany’s long-time Chewco, Mr. Palmer believed inEnron’s still to recover. capacity He still sank to below $20ashare. Enron took anunexpected $1.2billion charge equity. against stock The the media, thecompany’s and resigned CEOabruptly charismatic planted sellers skepticism setbacks: Short in of 2001 brought aseries Enron stockthe value of more to thanquadrupled $90 a share. Enron. andtheincrediblethe boldness of growth thattime, During theinnovation, requests with frominterview enthralled journalists spokesman, Mr. Palmer to scrambled had accommodate ever-mounting he would back get to thereporter. O D • But within moments, But within from helearned anEnron executive that n october 25,n october 2001, mark thephone on thedesk of rang of it,”of saidMr. Palmer. Promising to into look Chewco, hesaid Chewco. called entity Enron special-purpose wasa caller Journal reporter about an inquiring Palmer, Vice President Communications for Enron. of The brunswick review U •

As out heset to about information gather • During hisfirst five During years asEnron •

·

Exercising that anauthority 2020 R

•

“Never heard • E But But ner, Mr. Palmer Brunswick Part Now a tigators. theinvescame Then net worth. ing much ofhis bankruptcy, eras employer into mer high-flying palmer's drovesis Unforeseen cri COVID-19. of the standards was dark even by experience that endured an D mark mark for - - - - -

ILLUSTRATION: NIGEL BUCHANAN MARK PALMER

the way to that meeting Mr. Palmer made a detour investigating Mr. Fastow’s deals. to the bathroom to vomit, a delay that cost him a seat During the company’s fall, Mr. Eichenwald at the meeting he had called. So Mr. Palmer sat on the covered Enron for . “Mark floor of a small crowded conference room. During Palmer never even approached the line of being the meeting, when Mr. Lay failed to immediately deceptive to me or I think to any reporter,” says Mr. grasp the Chewco implications, Mr. Palmer took Eichenwald. While covering Enron for the Times, 80

charge by loudly slapping his hand on the floor. “I’ll Mr. Eichenwald said that “If Mark told me I was 70 tell you what’s going on, Ken,” Mr. Palmer shouted going down a wrong path with my reporting, I would 60 AFTER at the Chairman and CEO. “ immediately stop. He had that kind of credibility knows more about what’s going on at your company because, conversely, when I was right, he never told 50 GOVERNMENT than you do!” me I was wrong. Mark understands that credibility 40

INVESTIGATORS Then Mr. Palmer demanded, as he had before, is something you have to build and that the only way 30 that Enron hire an independent investigator. This to build it is by being honest. He’d always do his best 20 SWARMED ENRON, time Enron followed his advice. to get an answer and if the answer was ugly he’d give MR. PALMER Almost twenty years later, Mr. Palmer Is a it to you.” 10 Brunswick Partner and Head of the Dallas office, The Wall Street Journal’s Rebecca Smith and John 0 LAY AWAKE NIGHTS where he offers advice on a range of topics, most Emshwiller played a significant role in uncovering 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 notably how to navigate a corporate crisis. To that Mr. Fastow’s secrets. In their 2003 book, 24 Days, REPLAYING EVERY Mark Palmer (bottom discussion he brings a degree of firsthand experience they said they “didn’t think Palmer had ever right) and his much- COMMUNICATION that he wouldn’t wish upon anyone. The son of a knowingly given them false information.” It seemed reduced staff following HE EVER ISSUED ON Vietnam War Navy attack pilot, Mr. Palmer grew up obvious “that (Palmer) had been trying to be helpful the Enron bankruptcy in believing that hardship should be embraced, tackled and honest.” December 2001. Their BEHALF OF good humor here belies and internalized, rather than just talked about. But A journalism graduate, the difficult times they THE COMPANY the trial he endured as chief Enron spokesman Mr. Palmer worked as a broadcast journalist before were negotiating. during its spectacular rise and scandalous fall joining Fina, an oil-and-gas company, as its all- convinced him that Post-Traumatic Stress Disorder around spokesman and marketing guru. He was 35 story,” says Mr. Palmer. Trust the is a real affliction. Ever since that episode of nausea in 1996 when a headhunter recruited him to Enron, ENRON’S STOCK PRICE An admirer of both Mr. Skilling and Mr. Lay, same amount from August 2000 38% Trust in the Enron bathroom, his gag reflex has been a natural-gas pipeline company that was disrupting From $90 to $0 to January 2002 and a believer in their mission, Mr. Palmer said he more oversensitive. “Before Enron, I could have been a the industry by creating a market for trading natural “bought into the mission, and became like a lawyer 16% Trust less sword swallower. Ever since Enron, if I get just a little gas. This innovation not only was proving to be who zealously defends his client.” Unsure bit stressed my gag reflex is hypersensitive,” he says. profitable but also good for consumers. “Enron had As Enron became more a trading company than 3% 43% The lessons he gleaned from Enron underscore a this idea of a gas bank, and it really improved the an energy concern, its accounting grew increasingly type of risk not always appreciated on the front lines natural gas market in the US. It solved the problem $100 complex, puzzling some analysts and investors. But of corporate communications. After government of there being shortages in one market and surpluses 90 Enron’s deals and books had the blessing of white- investigators swarmed Enron, Mr. Palmer lay awake in another,” says Mr. Palmer. 80 shoe lawyers and a blue-chip accounting firm,

nights replaying every communication he ever issued Now, a brilliant Enron executive named Jeffrey 70 Arthur Anderson. Meanwhile, Enron’s critics often

on behalf of the company, aware of the potentially Skilling – instrumental in the gas bank concept – was 60 had their own agendas, as short sellers or foes of

criminal implications of a corporate spokesman pushing for deregulation of the electricity market, 50 deregulation, and Mr. PalmerManagemen pushedt backBudget hard. Technology Ecosystem Talent knowingly saying anything wrong or misleading. an effort that required approval of both federal “As spokesperson, I zealously communicated our 40 35 to Mr. Palmer passed that test, in the view of the and state regulators. “You had this patchwork quilt message,” he says. 36% 70% 52% 76% 30 57% media as well as government investigators. of crazy regulation where someone in Long Island “When you’re the spokesman of a company 20 It’s not that every communication he ever made might be paying 22 cents a kilowatt-hour for power whose success played out onOf cybersecurithe freety andCite inadequate open Of threat alerts Say they vet Believe they 10 professionals funding for are improperly ecosystem need to improve on behalf of the company was accurate. He says, “It’s while someone in New Hampshire might be paying market, a company that’s the darlinghave a direct of Wallcybersecurit Streety prioritized by partners their ability to 0 reporting technology systems and for cyber conduct threat awful to look back on statements that I made based 8. We felt like we could do the same thing with and of the media, you develop aline level to the of confidenceor security must be manually integrity and and vulnerability on getting an answer from (an Enron executive) and electricity that we had done with natural gas – even 8.23.0010.23.0012.23.002.23.01 4.23.01 6.23.01 8.23.01 10.23.01 12.23.01 that becomes arrogance,” he says. CE“LookingO back,talent it’s reprioritized preparedness assessments Visibility Investment Accuracy Awareness Training having it end up being wrong.” It’s that the fraud at out supply and generally lower the price.” Data is compiled from Enron Securities Litigation Web Site shocking how full we were of ourselves.” Enron was known to only a few of the energy giant’s As Enron’s stock rose steadily, Mr. Palmer and his The beginning of the end came in the spring of As short sellers became unexpected resignation when CFO tens of thousands of employees. “If corporate fraud team fielded an ever-growing number of interview suspicious about how of CEO in resigned under pressure 2001 when Fortune ran a story asking whether weren’t limited to particular individuals with a requests initially from trade journalists, then from Enron made its profits, August of that year, shook one day after CEO Ken Enron was overpriced. The story pointed out that particular level of power, then it wouldn’t be a secret,” the world’s top business publications. “We became the stock of the much- investors, whose fears Lay expressed confidence few analysts understood how Enron actually made admired company seemed vindicated when in him. The end came says , whose 700-page masterpiece a Wall Street darling, and a media darling. That the money. The stock began to fall. In August, the stock began to fall. A Fortune Enron took a $1.2 billion when lenders lost faith, on Enron, , conveys the shock most innovative company in America was a former article in the spring of charge against equity ultimately forcing Enron took a steep dive when Mr. Skilling, CEO only since

awaiting those at the company charged with natural gas pipeline company – that was just a great HOEY PETER CHART: 2001, followed by the in October. It didn't help into bankruptcy. February, resigned, citing personal reasons. Then

brunswick review · 2020 brunswick review · 2020 MARK PALMER

The Wall Street Journal began questioning the into Enron, and as the company’s own executives accounting behind certain limited partnerships set turned up ever-grimmer details about its slipshod “KEN, up by Mr. Fastow. financial structures and in many cases improper As the stock continued to slide, Mr. Palmer felt accounting, Mr. Lay kept exhorting Mr. Palmer to responsible. Many of his superiors told him that somehow improve media coverage. That prompted Enron was suffering only a perception problem, the financial team that had replaced Mr. Fastow initiated by short sellers and perpetuated by to sit Mr. Palmer down and show him what they journalists who did not understand the company’s had discovered to be the true state of affairs: The complex accounting methods. company had little in the way of cash flow and the When the WSJ persisted, raising questions value of its equity paled beside a potentially $40 40 about the limited partnerships, Mr. Palmer asked billion load of debt triggered by its falling stock price BILLION DOLLARS Mr. Fastow to provide an interview about them. and lowered credit ratings. For Mr. Palmer, that IN OBLIGATIONS Mr. Fastow refused, yelling on the phone that the horrible news brought relief. idea was idiotic and questioning Mr. Palmer’s “I had thought this was my fault. I had thought AND NO competence as a spokesman. “Looking back, I realize that all of our 401(k)s were going to zero because I CASH FLOW IS A that Andy Fastow screaming at me should have been couldn’t convince the media that they were wrong,” a tell-tale sign,” says Mr. Palmer. “I know that dogs he says. Later that evening when Mr. Lay again PR PROBLEM, don’t bark because they’re going to bite you. They beseeched Mr. Palmer to silence the WSJ, Mr. Palmer Former Enron chairman and CEO Ken Lay, center, BUT BAD PR bark because they’re afraid.” replied, “Ken, $40 billion in obligations and no cash and his attorney Mike To make matters worse, Mr. Palmer recalls, flow is a PR problem, but bad PR didn’t cause it and Ramsey in 2006, about DIDN'T CAUSE IT Mr. Lay told him, “Mark, what are you doing to get good PR can’t fix it.” As Mr. Palmer puts it now, “You to enter a courthouse in the Journal to quit writing these stories? They’re can’t spin your way out of trouble you acted your , , for the AND GOOD second day of a trial on killing us.” way into.” fraud and conspiracy PR CAN’T FIX IT” Even as the SEC announced an investigation Enron’s falling stock price was creating havoc charges against Mr. Lay.

at a company that had heavily used its shares as in the Houston area. The accounting firm Arthur collateral, and rising doubts about the company’s Anderson collapsed under the weight of an Enron- KURT EICHENWALD ON WRITING “CONSPIRACY OF FOOLS” financial integrity prompted its trading partners to related obstruction-of-justice conviction that was insist upon more and more onerous terms. Growing reversed years after the closing of the firm. Enron’s demise inspired more than Every document and every counterparty distrust of Enron and its CFO forced All the while, Mr. Palmer and his team continued a dozen books. The best of them is description of an event from those Mr. Lay to fire Mr. Fastow. Because that action came running the Enron communications department. arguably the best business book records is then listed in a timeline, ever written: Kurt Eichenwald’s which usually runs between 500 only a day after Mr. Lay had publicly expressed After Enron filed for bankruptcy protection in late Conspiracy of Fools. Mr. and 1,000 pages long. Each entry confidence in his CFO, the firing hardly calmed 2001, Mr. Palmer’s communications staff got slashed Eichenwald, who had covered Enron describes which document in nerves, inside or outside the company. to seven from 27. Since August, that team had for The New York Times, describes which binder contains the cited Then came the Wall Street Journal call asking handled the resignations of the CEO and CFO, new here his book-writing process. information and on which page. His fifth book, A Mind Unraveled, But documents aren’t a story Mr. Palmer about a partnership called Chewco. It president and CEO announcements, Sept. 11-related will be published in October by – that comes from people who turned out that some of the structures Mr. Fastow announcements, a $1.2 billion-charge against Ballantine Books. experience the events. For each and his co-conspirators had set up were being used to equity, news about Enron credit crunches and now In the 12th hour of our interview, of my books I have interviewed disguise bad business decisions, create phony income bankruptcy, among other big announcements. The the former Enron executive at least 100 people, often for an described the morning he climbed exhausting number of hours. My and funnel money to Mr. Fastow and other cronies. remaining seven team members worked around the out of bed and drove to the office sessions with Ken Lay, the late In the days, weeks and months that followed, clock often without going home, fielding as many as to face the unraveling of the energy Enron chairman, lasted more than Enron filed for bankruptcy protection, Mr. Lay left 400 calls a day. giant. Responding to my question, 70 hours. Then the information is both the board and then the company under pressure Mr. Palmer slept on a boardroom couch while he said a digital alarm clock entered into the timeline, with each awakened him. that reads like a novel, but interview subject listed under a from creditors, Congress ran rote show hearings, and another member of his team slept under her desk. “What color were the clock’s the details that can simply be code name. federal prosecutors investigated and then brought He showered in the company gym and saw his wife, digits?” I asked. imagined by a fiction author Ultimately, I stitch all of the criminal charges against Messrs. Fastow, Skilling Cozy, when she arrived to bring him fresh clothes. In all have to come from either an He threw up his hands. “Why do information in the timeline into and Lay, in addition to dozens of other Enron the last three months of that year, he lost 35 pounds. you need to know that?” interview or a document. a first draft that can run to 2,000 To portray the kind of visual The main story emerges pages. Once that is finished, I executives forced to plead guilty to crimes rather Recruited to take charge of Enron a month image common in fiction, I often from hundreds of thousands of read it and often, for the first time, than risk defending themselves. How much Mr. Lay after its bankruptcy, turnaround specialist Steve have to ask questions that can documents I obtain. An assistant discover what the book is about. and Mr. Skilling knew about Mr. Fastow’s crimes Cooper encountered “the most catastrophic, most I call “the document wrangler” seem absurdly detailed. What type Then I cut hundreds of pages to remains unclear, but both had sold massive amounts investigated, most chaotic scene you could imagine. of sandwich did you eat? In which places all of the records in produce a final product that is rich pocket did you carry your wallet? chronological order, then sorts in detail, such as the color of alarm of Enron stock ahead of the company’s downfall, Enron was being investigated by virtually every

My goal is to write nonfiction them into hundreds of binders. clock digits. EINSEL/GETTY IMAGES DAVE PHOTOGRAPH: leading to zero objectivity among potential jurors arm of the US government – the DOJ, SEC, FTC,

brunswick review · 2020 brunswick review · 2020 MARK PALMER

Department of Energy – and sued by dozens of describe the ways he and his fellow prisoners had Brunswick Partner, Mark Palmer leads the firm's states’ attorneys general. It had all the elements that stayed positive – by seeing how long they could stay Dallas office. He has 30 attracted massive scrutiny by the press.” conscious during torture, by communicating with years of global experience Fielding all that was Mr. Palmer. “He brought each other via a kind of Morse Code, by memorizing in corporate, crisis and litigation, and financial order and thoughtfulness and transparency to what the name and capture date of every other prisoner, transactions. Previously, was a massive shitstorm,” says Mr. Cooper. and honoring a system wherein the longest held he was VP of corporate The psychological toll on Mr. Palmer and his staff would be the first released. communications and organizational was tremendous. In a matter of weeks, the company In that way, Mr. Palmer turned the months-long effectiveness at Sysco they represented had gone from admired to reviled. slog into a kind of contest. He began to pride himself Corporation. From 1996 to 2004, he served as A typical experience for them was when Mr. Palmer on making sound decisions despite fatigue and Enron’s managing director learned that his daughter’s high-school journalism anxiety. Long accustomed to feeling pressure from and senior vice president teacher stood at the front of class and referred both his superiors and the media, he saw clearly now of global communications. to all Enron executives as “criminals.” For years what he had known all along, that his only duty was accustomed to fielding requests from journalists to the truth, even if the truth was, “I don’t know.” competing to write front-page features, the team Tackling one phone call at a time, one day at a time, now faced a prosecutorial press that felt betrayed. he began to feel more than equal to the task. “In a As requests for information intensified, Mr. crisis like that, what matters is mindset – somehow Palmer and his team had little of it to give. Their maintaining a productive, positive mindset,” he says. first priority was to avoid giving bad information, Recalling his insistence that the company hire an which increasingly meant they had no information outside investigator, Mr. Palmer wishes he’d also to give at all. At one point, Securities and Exchange demanded that it hire a psychological consultant Commission Chairman Harvey Pitt became irate – ideally one with crisis expertise – to help his when he read in a news story that Mr. Palmer declined staff and others at Enron headquarters through to answer reporters’ questions on grounds that Enron the tumultuous weeks before and after Enron’s was being investigated by the SEC. bankruptcy. “Companies in a crisis hire workout “Harvey Pitt was furious, saying an SEC specialists, and they hire financial advisers, and investigation should never be used as an excuse for all of that’s vital, but the mindset of those advisers not telling the truth,” Mr. Palmer recalls. “But I wasn’t is action, action, action. That doesn’t address the hiding the truth. We simply didn’t know the truth.” problem of shame and anxiety and fatigue in a At times, Mr. Palmer wondered how long he and culture that used to feel proud, and wants to feel his staff could go on. Issuing one bad bit of news proud again,” he says. after another, amid a government investigation Mr. Palmer believes that a serious crisis can’t be that would put all of their previous work under a managed according to any pre-conceived playbook. spotlight, the communications staff was plagued But he believes it offers an enormous opportunity by fatigue, depression and anxiety. It didn’t help for leaders to negotiate the unforeseen in a way that that their retirement funds were stuffed with now- inspires and encourages employees, investors and worthless Enron stock. the media. Never is a leader more closely watched or Once, Mr. Palmer called his father to ask if he more widely heard than during a crisis, Mr. Palmer should quit. His father, the stalwart Naval aviator notes, adding that what all stakeholders seek from and former TWA captain, noted that no one was a leader at such moments is competence, diligence shooting at him. “My father said, ‘I think you’re and honesty, especially honesty. really good at what you do. If you stick it out, you’ll Mr. Palmer believes that his experience leading probably learn a lot. You’ll probably be even better.’” during crisis gave him extraordinary insight into For Mr. Palmer, a turning point came one day how to avoid or limit such debacles, and the key when his boss, Steve Kean, said, “You know what? At factor is honesty. Given the very human desire to the end of the day, what we have to do is be proud of please one’s boss, and given the boss’s very human the way we conducted ourselves. We’ve got to be able desire for positive reports, how can leaders create a to tell our grandchildren that we did the right things.” culture where their workforce isn’t afraid to tell even Inherent in that thought was the promise that this the most unpleasant truths? “I got my Ph.D. in that crisis would end. It wouldn’t last forever. Nothing at Enron,” says Mr. Palmer. u does. Mr. Palmer remembered listening to a former kevin helliker is Editor-in-Chief of the Brunswick squadron-mate of his father’s, a man who had Review. He is a Pulitzer Prize-winning journalist, who spent seven years as a prisoner of war in Vietnam, spent nearly three decades at The Wall Street Journal.

brunswick review · 2020