Enron Corporation Bankruptcy Timeline: I In 1985, Kenneth Lay merges two companies forming Enron I In mid-1980s, companies incl. Enron successfully lobbied for deregulation of electricity markets allowing for trading futures I In 1990, Je↵rey Skilling joined Enron; President/COO in 1997 I In late 1990s, Enron invested heavily in new entities ostensibly run by CFO Andy Fastow whose debts were kept o↵Enron’s books; I In 2000, California experienced periods of extremely high electricity pricing; energy companies including Enron were accused of driving up prices through market manipulation I The Federal Energy Regulatory Commission’s decision not to refund this money was controversial; Enron was accused of overt influence I Enron filed for bankruptcy in Dec 2001; Arthur Andersen later was found to have knowingly destroyed related audit documents I Largest bankruptcy in U.S. history; criminal charges for several C-level executives; thousands of jobs and billions in investments lost

2/21 Enron Emails

During the bankruptcy and accompanying SEC investigations, Senators Feinstein and Cantwell filed a Freedom of Information Act (FOIA) request to make public evidence related the investigation, including about 1.5 million emails from Enron employees. The emails were used to determine if there was forethought related to the accounting fraud or the alleged energy market manipulation. However, they also provided analytical insights into the inner workings of a corporation at all levels. What do people talk about? To better characterize the company’s communication as well as individual email tendencies, we might ask the following:

I What are common email topics?

I How frequently are they discussed?

I How do these topics change over time?

I How do these topics change across people?

3/21 Enron Emails

Example email text from the inbox of Kenneth Lay, former CEO:

Ken, I have been working to put together the business agenda for the Management Conference in November. The theme I am proposing is ”Reinventing Enron ... Again!” I believe the theme is timely as we celebrate our 15 year history and address significant changes for the future.

Dear Friends, Family and Wedding Party, I am attaching a tentative itinerary for the wedding weekend. Some of the times for transportation and hair appointments may change as we finalize the schedules, but for the most part, this should help you plan your weekend. We do not have a golf outing planned but I am assured the Four Seasons and Hilton can help arrange golf groups for wedding guests.

Di↵erent topics tend to use di↵erent words/phrases; we might also see di↵erences in length, use of punctuation, typographical errors.

4/21 Characterizing Clustering Algorithms

Most clustering approaches use a similar framework

I Choose a set of variables or features to describe our observations: x = x , x , x ,... for i =1, 2,...,n i { i1 i2 i3 } I Define a distance or dissimilarity between observations; e.g. Euclidean (as the crow flies), Manhattan (city-blocks)

I Search for di↵erent ways to separate observations that lead to “good” clusters (clear partitions or boundaries between the groups; no uncertainty about where an observation belongs)

I Describe the clusters by their center, spread, and shape

A common algorithm that can be adapted for documents: K-means

6/21 Describing our Email Documents

What variables can we use to describe our Enron emails?

We have a collection (or a corpus) of D documents. Can describe by frequency of the terms they use (words/phrases) Term Frequency - Inverse Document Frequency (TF-IDF):

ntd D TFIDFtd = log nd · Dt

ntd =#oftimestermt is in document d; nd =#oftermsindocumentd D =total#ofdocuments;Dt =#ofdocumentswithtermt

“the” frequently appears in all docs: ntd log 1 = 0 ⇡ nd · rare words used frequently in few docs: high values of ntd , log D nd Dt Each document d has a TF-IDF value for each term t in corpus; if a term is not present in the document, TF-IDFtd = 0.

12 / 21 Document-Term Matrix

For clustering, our observations are the emails; our set of TF-IDF variables corresponds to all unique terms in our corpus. In practice, the total number of terms used in a collection of documents grows very rapidly; problem can become too large

We can reduce the number of variables or terms through some standard text pre-processing algorithms:

I Punctuation: you’re, it’s, Stop!, Why?, There vs. there

I Stemming/Stripping:jump,jumps,jumped,jumping

I Stop Words:the,an,a,for,to

I Numbers: 27, twenty-seven

I Abbrevations: IBM vs International Business Machines

I Typographical Errors: house and huose

13 / 21 Sample of Emails from CALO Project/SRI International

5000 Emails (25,409 Terms)

management january service street resource wanted change approval ticket ena program vacation home conferenceroom global texas detailed regarding place dear tuesday mtgmeet process companypayment position thursday point cashworking rick customer direct person cattachedreceived cell pricesholiday bookservices dinner love standard clickreview schedule receive steveferc group find issues site scott comment file hour amount scheduled smith think gas description pge copy send price offer code jim form going note month cable office team talk web thing california friday version contractdatereport lynn guy check desk feel deal mike update mark risk jeffpower sure david centraldue meeting plan ive daily thought monday data game

corp night attached set list letter market july help final fyi nyiso rate infobill number ill fax status decembersallyenergy phone request order trading issue documentfreetry forward houston time credit option item business tomorrow message discuss case online give startweekend november look sorry room draft october mail updated total costlink morning error hope employees projectlooking committee presentation hourahead detail changed interested conference michelle support product end northamerica wednesday soon caddress agreement put jeffdasovich caccess employee problem yesterday provide transaction expenseseptember 14 / 21 Sample of Executive Emails

Kenneth Lay (L): 1015 Emails (22167 Terms) Je↵rey Skilling (R): 488 Emails (18832 Terms)

policy generator participationcorporate maureen venturewirereference version cooper government product version leader morning spreadsheet sandra discussed hesitate employeescadditional

committee caccount proposal backgrounder michael business online fastow office project causey jester gossetticacadded info material send billion cattend comment sally soo suggestion getting monday talk services hesitate services var customer cattached kean corp investor password file fyi sally buy glynntomorrow kean electricity sue send

harry deal texas tuesday midpoint listbusiness happy request form skilling zanepower stock technology asked plan cost cpuc course mara enacent pucmilk ceos wantedgov error

process market report phone companies davis california going order venturewire process think print billion scott financial messagelettercompany group mayor enw companycattached chief event help ceobill folk direct request jeff monday review solution states monthgive steve ive phone yeslogin marketteam mail group mike layforward attached jefffirm asset fund feedback number look utilities place mail support fax point schedule meeting jun houston conversation october discount gas rick power tour susan ken cob deal mentioned ccandidates izio energy india mara jim plant list fri dear receive dialin friday jeffdasovich review eim pep date kenneth item filed friday

briefing peevey eel payment ill infopier zaun london reply putfyi energypge isoferc ena trading meeting regard eestomorrow david

number donald iso issues svmg daterac skilling vestingwithdrawn presentation credit write active dasovichattached lay hes final discussion copy dwr person board status ferc morning credit

update contract schwab regarding file palmmemo tax service corp percent draft rosalee team stock fastow order trading management origination director financial ees dynegy document cowcalifornias chairman watkiss houston thing mark gas messagefirm plan california dinner round doggett price governor contract discussedison investor wednesday management data prices jeffdasovichelectricity respond employee proposed conference summary whalleyseason seller price austin received scott thursday counterparty governor corenoncore product description investment background mcnealy public companies comment haasschool sacramento fund utility follow claw coulter customer ventures planning excel hilling

hope shares

15 / 21 Sample of Executive Emails

Andrew Fastow (L): 1049 Emails (21568 Terms) Benjamin Glisan (R): 363 Emails (17908 Terms)

person presentation mba abstract employees allowed mark wednesday monday tomorrow help thought partner interested discussion cheryl technology issues smutnyjones forward showtimes mail longhorn electricity johnson plant cafternoon management larry check trader london companies miso project message capital project jillhaasschool phone govenar public sure item london sound defense date discuss associate mitch including coords edison david analyst veronica origination asked california trading eel interest george mara tomorrow plan kent gas assistant woody dear pge stock orderguy mom ish dean report mara

bob rick desk bill brown thursday team gas shitsteve corp team scott group dave van michelle matt dave mike zipper point west shaw thing review deal webbshume glisan jeff group analyst michaelthink services texas davislegal ferc meeting marty commitmentdare yardgame cathy give

paula ideascampbell talk date season

place market gift showtimes candrew business bull lsu ena ofo janet fax later customer var energy list kaplan energy marketing fwd scott mark power going corp attached lynn candy julee bush oii pri month

billion houston contract sherirob ken review discussion firm copy haas illmarkey office ena company ferc site pelt school number katie bill electricity list california friday turbine think firm greg jan joe cbenjamingotta cook jeff draft ben reportiep espeak

nice lng parties jim fyi committee fund andy error meeting tim process ankle company fantasy cbath discuss draft houstonfastow friday stock investorplan buy check rick americacorp settlement attached maybe enjoy

games fund venturewire business andrew eventkaren neely power gail hoyle texas enw game research intern welch market greg deal iso product ees hope free governor related benjamin hogan

regarding communication steve investor wednesday point study

gary cagreement jeffdasovichmail presentation round updated decision northamericatrading matson forum provide financial conferencemissedcustomer contract ventures couple fastow forward comment sally cost received alternate student letter august management commission calot investment september monday document program proposal agreement shaperect

16 / 21 Spherical K-Means

Some common issues with clustering documents: I Sparseness: many emails will largely be assigned TF-IDF values of zero; words/phrases don’t appear I Di↵erences in Length: some emails are much longer than others; not a fair comparison? Spherical K-means uses the same algorithm with minor changes: I all vector values are normalized for length I we use cosine dissimilarity < x, x¯ > d(x, x¯ )=1 cos(x, x¯ )=1 k k k x x¯ k ||k k k Cosine dissimilarity is measuring angles between observations and is less a↵ected by the presence of TF-IDF values of zero.

Can similarly search for stable values of K, good starting centers Note: Spherical K-means is the same as projecting our observations to the unit sphere and then using Euclidean distance in the original K–Means algorithm 17 / 21 Sample of Emails from CALO Project/SRI

5000 Emails (25,409 Terms); 10 clusters

mark transaction management updated yesterday ticket enaamount northamerica issue resource weekend scheduled talk mtg expense regarding point november problem dinner september trading standard october room looking total receive conference conferenceroom committee hourahead linkdraft discuss form direct streetinfo letter data thursday option caccess central cost message offer set prices program california energycattached rick company book click forward free

list hour process fyi think employee

night final case soon office jeff going market monday meet cell ferc jeffdasovich ive powerteamreport send sallynyisoweb due interested thought presentation filelook update global friday meeting december tuesday order mail versionplan gas give check hope attached sorry help lynn credit steve numberfaxdate phone product status mike

request person item tomorrow review issues july feel sure find ill risk michelle houston group deal schedule detailed billcontract pge service month put comment time thing position home note received copy love start gamecable smith sitedaily customer morning guy vacation corp document approval description services texas place cash support deskproject price business detail scott david try agreement wednesday error jim online changed end payment working wanted rate dear employees change

code holiday caddress provide january 18 / 21 Sample of Executive Emails

Kenneth Lay (L): 1015 Emails (22167 Terms); 8 clusters Je↵rey Skilling (R): 488 Emails (18832 Terms); 9 clusters

sally ventures technology monday version venturewire season management wednesday fund trading sacramento hilling spreadsheet customer put corenoncoregovernment percent data kean counterparty corporate gov conferencediscuss whalley edison description svmg companies

causey fastow tuesday puc person peevey prices course ena give schedule deal cadded thing governor mail employees list financial event monday summaryprint productrespondhesitate regard message houston hope onlinecattached seller payment going copy mcnealy coulter dinner haasschool jim document dynegy password corp send investment businessenergy solution states cooper eim donald hes order sally lay look trading

glynn cattend lay thursday venturewire billion leader rac kenneth talk message david team firmpresentationproject board susan tomorrow caccount plant listdeal midpoint fund jun ferc zaun public company service meeting fyi phone mara morning ceos skilling update claw write india reply

ees houston london corp stock issuestour memo feedback services briefing billion plan direct info sandra mail login status ees attached folk cpuc fri credit chairman investor davis ill pge fastow filed scott powerpep group ceo letter gas ica dear market sue services rick ive wanted file committeedwr ken ferc receive zaneenw ena skilling final izio orderbill kean cob policy dasovich friday jeffdasovich contract milk form plan process buy gas point infopier follow asked review credit

price file discussed think meeting rosalee dialin date versionvestingwithdrawn item jester maureen office jeff iso background suggestion soo governor scott tomorrowpower var costfax stock company watkiss harry

texas steve mark discount review market fyi send happy isomichael eel energy employee group request reference utilities excel tax schwab palm number forward california report planning cow help chiefccandidates attached director active californias cattached regarding material round firm phone business originationcalifornia date getting backgrounder electricity customer electricity yes friday mayor product management draft doggett conversation jeff team gossett investor price octoberfinancial mara comment proposal process austin discussion cent jeffdasovich error shares companies hesitate month utility proposed comment morning contract assetreceived mentioned cadditional mike request number participation place generator support

19 / 21 Sample of Executive Emails

Andrew Fastow (L): 1049 Emails (21568 Terms); 6 clusters Benjamin Glisan (R): 363 Emails (17908 Terms); 6 clusters

customer alternatepublic abstract investment decision lynn greg electricity student bush tomorrow research comment showtimes venturewiremonth commission dave contract asked shaperect itemmarketing provide management capital george number plan regarding forward northamerica monday ventures cafternoon cagreement fastowforward monday conference committee deal americacorp mom veronica trading turbine product ken related california katie project copy coords fundinvestor billneely electricity hope deal longhorn mike rob firmlondon received later sound review california team london buy business game cheryl woody scott market mail fantasy meeting tradingtalk davis technology discuss trader zipper sally ferc billion thing gail company texas season gas michelle sure mail desk report meeting bill matsongroupthink ben larry wednesday kent office draft report yard campbellvanpge letter fyi dare school team michael west discussion list company game tim markey edison analyst person jim corp illpelt order haas draft cost enw energy calot glisan jeffdasovich jill houston cook pri origination

matt dean think candy houston welch give fwd cathy project

iso group including powerreview study mitch ofo ena settlement ferc candrew assistant point jeff date place steve interest hogan listwebb karen ena joe miso scott free firm cbenjamin round stock power ees andrew iepandy mba hoylelng gotta parties nice phone eel var shume oii gary wednesday

corp bob gas management contract cbath lsu investor attached friday fund market energy rick ish allowed fax enjoysite legal games sheri jankaplan check business attached deargiftshaw steve companies rick brown message forum jeff janet maybe friday julee espeak going dave plan shit mark communication fastow help mark missed analyst bull davidankle event document errortomorrow stock updated paulamarty septembercouple benjamin ideas check process texas point haasschool services date discussion greg financial presentation thursday associate commitment guy program smutnyjones mara partner proposal customer intern plant issues govenar johnson thought august governor agreement showtimesinterested employees defense mara presentation discuss

20 / 21