As Enron Trial Begins, Houston Has Moved On

This article was originally published by Newhouse News Service on Thursday, January 26, 2006.

By Katherine Reynolds Lewis
c.2006 Newhouse News Service

HOUSTON -- Nobody ever said Houstonians dream small.

The city of 2 million is the nation's fourth-largest, home to the world's biggest medical center and a theater district with more seats than any in the U.S. outside New York. Its port ranks first in the country in international commerce.

A strategic plan developed by a local booster group names 10 "world cities" led by London, Paris, New York and Tokyo. "Houston must be on this list by 2015," the Greater Houston Partnership proclaims.

These days, it's almost hard to recall or maybe people here just prefer to forget that a company named Enron once crystallized all the giant, go-go dreams of a city on the rise.

Amid the Internet mania of the late 1990s, Enron was touted as a new breed of energy company, one that understood technology and trading and could transcend the physical limitations of natural resources. The buzz was that Enron would reinvent Houston as the world energy capital for the 21st century, immune from rising and falling fortunes tied to the price of crude oil.

Then Enron became a symbol of something bigger: the accounting scandals that would rip through Corporate America, prompting one of the largest bankruptcies ever in 2001, along with a revolution in oversight and the sight of chief executives in handcuffs.

Investors across the country lost billions as the value of Enron stock plummeted to zero. Wherever Enron had operations, customers and workers were affected, from India to Oregon, where the company owned Portland General Electric.

Starting Monday, Kenneth Lay and Jeffrey Skilling, the two executives prosecutors say were ultimately responsible for the fraud at Enron, go on trial in a nondescript federal courthouse just six blocks from their former office tower. The trial, which could last four months, is sure to reopen old wounds, titillate the curious and perhaps provide some closure at long last.

"Ken Lay was one of the genuine heroes of Houston, and Enron was one of the shining beacons of the city," said Stephen Klineberg, a sociology professor at Rice University here. "There is still a residual of deep anger, betrayal, a sense of outrage over Enron, which is stronger in Houston than anywhere in the country."


That's not to say Houstonians have spent the past four years dwelling on Enron's failure. In conversations with everyone from former Mayor Bob Lanier to ex-Enron employees, a theme emerges: Houston has moved on.

Since the debacle, the city has added a net 52,000 jobs, rebuilt the downtown streets and infrastructure, and hosted the 2004 Super Bowl and 2005 World Series. It is preparing for next month's NBA All-Star Game.

Houston took in a quarter-million victims of hurricanes Katrina and Rita this fall without breaking a sweat, more than any other city. The response was immediate, with a receiving hospital established in 16 hours, said Richard Wainerdi, CEO of the Texas Medical Center.

Even many who lost their jobs and savings in Enron's collapse found work relatively quickly, a path eased by the high skill level and youth of the typical Enron worker.

"It's not like losing jobs in a blue-collar industry," said Charles Savino, chief operating officer of the Greater Houston Partnership.

But all the Houston spirit can't change a fact of globalization: Most major companies are multinational, with less loyalty to the city in which they happen to be headquartered. They are as likely to give money to vaccinating children in Africa as to the Houston Grand Opera.

"When a locally owned corporate citizen like Enron goes down and it's replaced by an international presence, there's a loss of the personal touch," Lanier said during an interview at his River Oaks home, just minutes from Lay's condo in the city's ritziest section.

The loss of Lay and his golden corporation marked the end of an era, a time when a single go-to guy and the nation's seventh-largest publicly held company became deeply intertwined with the city's image.

The Astros baseball team played at Enron Field. The corporation supported the ballet, museums and the local United Way. Thousands of Houston's best and brightest flocked to work at Enron or companies dependent on the energy giant.

"When you approached someone about philanthropy, the first question would be, `What are Enron and Ken Lay doing?' They were the pace-setter," said Astros owner Drayton McLane. "No one individual, in my view, has stepped up that has the visibility and is the CEO of a company that has the influence Enron had."

Even now, several prominent Houstonians talk about Lay with a respectful, affectionate tone, and think he could again be active in the community if he's acquitted.

"This town is used to somebody that gets knocked down and gets up again. There's some admiration for that," said Lanier, who has known Lay for 20 years.

Not so, says Tammie Huthmacher, 31, who was six months pregnant when she lost her job as a contracts administrator along with nearly 4,000 other local Enron employees.

"It was always said if you have Enron on your resume for six months, you can work anywhere," she said. After the company's collapse, "when they saw Enron they wanted nothing to do with you."

Unable to find work for eight months, she and her husband struggled to pay their bills and were on the brink of bankruptcy when she finally landed a similar job at an oil field chemicals company, taking a $15,000 pay cut.

Visiting the old Enron headquarters on a sunny January day, a wave of emotions rushed over her: pride at having been part of something "really, really big," hurt in remembering the friends who had lost so much, then shame and guilt for not having seen it coming.

She gazed across the park next to 1400 Smith St., home of the mirrored tower that still reflects the city. Nearby is the identical tower Enron was completing when it went under.

Huthmacher is hopeful Lay and Skilling will be punished for their role in Enron's ruin. "I'm ready to get on with this," she said. "It's been four years; it's just been too long of a wait."

Since its founding by real estate speculators in 1836, Houston has represented the chance for both monumental success and monumental failure.

"Houston is an entrepreneurial city. It was born by wildcatters and real estate brokers," Lanier said. "It's always had an optimistic, can-do spirit."

Even in the depths of the 1980s, when a quarter-million jobs disappeared with the collapse of oil prices and the eruption of the savings and loan scandal, Houston never lost population, he said. Instead, it had the highest small business formation rate in the country.

Locals will tell you the city is bigger than one company bigger, in fact, than energy. Before the 1980s oil bust, 82 percent of Houston employment was tied to energy, said Barton Smith, director of the Institute for Regional Forecasting at the University of Houston. Today, the number is just 48 percent.

City leaders are frustrated at stereotypes that fail to recognize the community's cultural offerings; its international leadership in medicine, trade,energy and space exploration; its diversity.

"It is not a cowboy town," said Jodie Jiles, a senior vice president at First Albany Capital and former chairman of the Greater Houston Partnership. "It is a metropolitan city that can compare to any in the world."

Now, as the trial ramps up, Enron will again be in the news and impossible to ignore.

The old headquarters are a stark reminder of the blow dealt to Houston. They remain mostly vacant. The doors are marked "pull" but have no handles on the outside. The receptionist politely told a recent visitor there is no directory of tenants.

"It's a 1 million-square-foot building to have it sitting empty is not good," said Jim Kollaer, a partner at the Staubach Company, a real estate advisory firm.

"It would be nice for that to (be occupied) before the trial is over. It would be part of the healing."

HOUSTON AT A GLANCE

Population: 2 million

Ranking: Fourth-largest U.S. city behind New York, Los Angeles and Chicago

Size: The Houston-Galveston-Brazoria region is 8,778 square miles, larger than New Jersey

Namesake: Gen. Sam Houston, who defeated the Mexican army at nearby San Jacinto battlefield in 1836

All about energy: More than 3,600 energy-related companies are based in Houston, including seven of the nation's 20 largest

Space City: The Lyndon B. Johnson Space Center controlled moon shots and still handles shuttle missions

Unemployment rate: 5.3 percent in December

Sports: The Astrodome was the first domed stadium

Good eating: Houstonians eat out more than residents of any city

Biggest event: The Houston Livestock Show and Rodeo, largest in the world

Raised here: Clint Black, Roger Clemens, Walter Cronkite, Hilary Duff, George Foreman, Howard Hughes, Beyonce Knowles, Phylicia Rashad, Dan Rather, Tommy Tune, Vince Young, ZZ Top

Lives here: Former President George Bush