Lessons of Madoff and Lay: Never Spurn the Secretary

The secretaries always have the best dirt. That fact comes to mind after reading the piece by Mark Seal and Eleanor Squillari in the new issue of Vanity Fair.

Squillari was Bernie Madoff's secretary and she gleefully dishes the dirt on Bernie, his jealous free-spending wife, Ruth, and the Ponzi schemers who ran Bernard L. Madoff Investment Securities.

When it comes to depantsing the biggest fraudsters of our time, it's been women like Squillari who have helped expose the pornographic excess of the scam artists—the airplanes, multiple homes, the yachts—in the months and years before they were frog-marched away in handcuffs. Squillari's story is remarkably similar to what happened at Enron. While researching my book, Pipe Dreams: Greed, Ego and the Death of Enron (published in 2002), I interviewed more than 100 people. But none of those people were as informative—or as incensed at the company's mismanagement and collapse—as Susan Wadle.

Wadle was one of Ken Lay's secretaries. In February 2002, about two months after Enron collapsed, I met Wadle for coffee at the Hyatt hotel across the street from the Enron building in downtown Houston. She was nervous. She wanted my assurance that I would not use her name in the book. She feared that speaking out would hurt her chances at finding another job. I gave her my word. We talked a bit longer and Wadle gradually relaxed. And at the end of our meeting, she handed me a computer diskette that contained one file: a five-page, single-spaced, Word document that she had written about the internal workings on the executive floors at Enron. It was a gold mine.

During her career at Enron, Wadle interacted with most of the top executives. She had kept her head down and her eyes and ears open. Her five-page memo was my first full look at the internal rot that had corrupted what had once been one of America's most admired companies.

Regarding Lou Pai, the high-living executive who sold more Enron stock than anyone else—some $270 million worth—Wadle wrote: "Lou Pai had a reputation of spending lots of his time away from the office at men's clubs. About 1993 or '94 we received a memo from whoever was in charge of expense reports that Enron's policy regarding this type of entertainment was that it was not eligible for reimbursement and expense reports would be scrutinized closely."

Pai later divorced his wife and married a stripper.

In her memo, Wadle described the shenanigans at Enron Broadband, a make-believe business that turned out to be one of the biggest frauds at Enron. (Which is saying something.) "From the beginning of this unit, there were absolutely no financial controls in place... Certain people within the group were 'golden' and had unlimited budgets... Expense reports were signed off on without any examination given to whether they met standard guidelines."

Wadle detailed the sexual hijinks at Enron, a part of the story that I quickly realized was an essential part of the collapse of the company. Wadle knew the details about Linda Lay's various property holdings in Houston, who kept Ken Lay's calendar, and which Enron staffers were charged with dealing with the Lay's butler.

Wadle was the first to tell me how Enron's top executives—and Ken and Linda Lay in particular—made full use of Enron's fleet of jets. She told me that Pai "would never fly on the corporate plane with Ken Lay. He would always have to cancel at the last minute but would have made arrangements for another [Enron] plane to carry him."

The abuse of the Enron airplane fleet mimics the story that Squillari tells about "Bernie's $24 million Embraer Legacy jet, which had 'BM' on its tail."

The women like Squillari and Wadle had reason to tell what they knew. They were (and are) part of a lower caste. They never got the big paychecks that the top executives and traders did. As Squillari points out, "The FBI laughed when I told them that I only made $100,000." Squillari and Wadle never got rich, but they could help tell the world what really happened in the executive suites. And by telling the truth, they also could get a tiny bit of payback.

That was made clear to me in August 2002. Just a few days before the final draft of Pipe Dreams was going to be sent to the printer, Wadle called me. "Have you finished the book?" she asked. When told that it was just about to go to the printer, she told me she no longer wanted to remain anonymous. "I want my name in the book. I want the Lays to see my name." I happily complied.

Given the many mega-fraud investigations that are now underway—Allen Stanford, Marc Dreier, Madoff, to name just a few—expect more secretaries to come forward. Beware of a woman scorned.

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Robert Bryce's latest book is Gusher of Lies: The Dangerous Delusions of "Energy Independence".