Lou Pai, Enron's Elusive Mystery Man

Lou Pai is the real mystery man in the Enron scandal. A former executive of the energy trading firm, he cashed in an estimated $270 million in stock and left the company before it collapsed, divorced his wife, married an exotic dancer, bought an enormous piece of Colorado, sold it and then disappeared into obscurity.

MADELEINE BRAND, host:

The Enron executive who walked away from the company with the most money has hardly been mentioned during the trial. His name is Lou Pai. He made more money than Lay or Skilling. And Pai has escaped federal prosecution. He wasn't even called as a witness at the trial.

So what about Lou Pai?

Mr. BRIAN CRUVER (Author, Anatomy of Greed): Everyone says, well, what about Lou Pai?

Unidentified Man #1: I don't think too many people at Enron knew Lou Pai personally. He was referred to as the invisible CEO.

Unidentified Man #2: Pai wouldn't look him in the eye. He'd be on the elevator, wouldn't say hello. He was clearly not a people person.

Mr. CRUVER: At one point I questioned whether he really existed or not.

BRAND: Not only did Lou Pai exist, he was one of the company's top executives and one of the idea-men behind Enron's spectacular rise and collapse. Before he left the company, Pai cashed in about $270 million worth of Enron stock, or maybe it was $250 million or even $300 million.

Like a lot of things about Lou Pai, no one knows exactly how much. Brian Cruver is the author of a book on Enron called, Anatomy of Greed.

Mr. CRUVER: He's either very lucky or he's a genius. I mean, he's sitting on the biggest pile of money and he's in the least amount of trouble.

BRAND: By most accounts, he was both, very lucky and really smart. Lou Pai is the son of Chinese immigrants. He's a mathematics wiz. He joined Enron in 1987 when it was a boring regional energy company, before Jeff Skilling figured out how to turn it into the world's largest energy trading company.

That idea began with natural gas. Jeff Skilling came up with a plan to trade natural gas to turn Enron into a middleman. Lou Pai figured out how to make it fly.

Max Eberts did public relations for Pai's division of Enron.

Mr. MAX EBERTS (Public Relations, Former Enron): He is the man who developed the market model for deregulation of natural gas. Look at what an enormous success that was. Look at what it did for Enron. It built Enron.

BRAND: It's what turned Enron into, at one point, the fifth richest company in the United States, bigger than GE, bigger than Citigroup. A lot of those riches, it turned out, only existed on paper.

Brian Cruver was an energy trader at Enron.

Mr. CRUVER: One of the things that Lou Pai and his group did was forecast future energy prices saying, even though this deal is based on prices 10, 15 years out, we're going to value this deal with one big number right now. And we're going to pay our bonuses right now. And we're going to post Enron's earnings right now. We're going to manipulate the markets right now.

BRAND: And it was all perfectly legal, says Tom White. He ran Pai's division after he left.

Mr. TOM WHITE (Former Enron Employee): It wasn't optional that you accounted for these deals that way. It was required. And it was the industry standard that was dictated by the Finance and Accounting Standards Board. And everybody in the industry used it.

BRAND: But this was the late 1990s, remember, a time when a lot of people were overly optimistic about their future profits. And Cruver says that proved true at Enron.

Mr. CRUVER: That's where the scandal comes in. The people on trial now really were covering up for the losses that Lou Pai's group created.

BRAND: Enron was infamous for its outsized deals. And the corporate culture, both in and out of the office, reflected that. Lou Pai embraced Enron's legendary lavishness.

For example, he used the corporate jet like a taxi, according to Robert Bryce, who wrote a book about Enron called Pipe Dreams. Instead of driving 40 miles to Houston's airport, Pai would get the jet to pick him up at his home in Sugarland, Texas.

Mr. ROBERT BRYCE (Author, Pipe Dreams): Then when the jet would pick him up in Sugarland, they'd have him fly him to his own private airstrip on his ranch in Colorado.

BRAND: A ranch, by the way, that was so big it had it's own 14,000-foot mountain on it.

Mr. BRYCE: So every time Pai visited his ranch, it cost Enron about $45,000.

BRAND: Lou Pai, though, was an unlikely symbol of Enron's excesses. He was shy. He was not a corporate glad-hander. And he never seemed to be around. Maybe that's because he was out at strip clubs.

By all accounts, Lou Pai spent a lot of time and money at those clubs, says Bryce.

Mr. BRYCE: In one case, Pai and some other Enron employees had gone to Rick's, which is a famous Houston strip club, and they blew $800 of the company's money for lunch. Pai's predilection for strip clubs and the high life got so extreme, and he was submitting so many expense reports at Enron, that Ken Lay actually put out a company-wide memo saying that Enron would no longer reimburse big expenditures from strip clubs.

BRAND: Pai's taste for strippers may have been his salvation. When his wife got wind, she filed for divorce and demanded a lot of money. Pai had to exercise his stock options to pay her off. And he did so well before Enron collapsed.

Pai eventually left the company and cashed out the rest of his stock. There was no going away party, no company-wide email saying, Thanks for everything.

Why he left is a bit of a mystery. Some say he had a falling out with Jeff Skilling. Others say he wanted to form his own company. Still, months before Enron went under, Pai left, becoming the company's richest executive.

After all, he had a brand new wife to support. He married the stripper he was seeing on the side. She quit the exotic dancing life. They had a child. And now Lou Pai and his wife are raising thoroughbreds, respectable members of Houston's horsy set.

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