Bad Analysis: How Corporate Banking Culture Prevented Earlier Detection of The Fraud
There were also some analysts who refused to put out bad advice by praising Enron to their clients. One of the most famous is John Olson, an energy analyst at Merrill Lynch who followed Enron when it was one of the hottest stocks on Wall Street. Enron at that time was paying out anywhere between 100 million and 200 million a year in investment banking fees, and it was known that Enron management would simply go to investment bankers or C-level executives of the company and say, `Your analyst is a real problem. We’re paying out X millions of dollars per year of investment banking, and you’re never going to see it, because your analyst doesn’t have a strong buy recommendation’. Olson, who had been an energy analyst for 35 years, knew he was in trouble, but he couldn’t quite bring himself to recommend Enron to investors. In 1998, Olson’s recommendation stood at neutral and for that simple purpose he was fired by Merrill Lynch.
Had it not been for McLean’s perplexity about Enron and Watkins’ moral compass we may not have known how far Enron would have gone manipulating investors and their employees into losing billions while cashing in on billions of unearned money.