And then in early 2001, seemingly out of nowhere, Enron officials began suggesting that they wanted to be bought out. By August, their overtures became more and more insistent and they called for a dinner. Ultimately, Marquez and Venoco CFO Bill Wineland sat down in Santa Barbara with the two Enron officials who oversaw the company's investment, Jesse Neyman and Richard Lydecker. What Venoco didn't know at the time was that Enron needed cash to conceal its mounting losses. Only three months from that night, the company would file the then-largest bankruptcy in United States history. At the dinner, Neyman and Lydecker offered Enron's shares back to Venoco for $65 million that would be financed through the issuance of high-yield corporate bonds--junk bonds. The deal would include a $10 million payout to Marquez, Wineland, and Eson.
Marquez read the proposal over drinks. Shaking his head, he stared into the men's eyes. "This is a nonstarter," he said.
The Enron guys were livid. While Marquez believed the deal would burden Venoco with interest payments it couldn't afford, Enron, still riding high, couldn't believe such a small company would challenge its judgment. (Enron declined comment for this article.)
"If Venoco wants to f--- with Enron," Marquez remembers one of the Enron guys shouting, "Enron will f--- Venoco." The dinner ended just short of a fistfight.
Months passed. For all the turmoil, Venoco was actually doing okay financially. The company was pulling in close to $10 million in revenue a month, and for 2001 it netted a profit of $31 million. But the strain between Venoco's founding partners was growing. At Marquez's request, the company's outside directors--Eson calls them "Marquez's friends"--had conducted a survey of executive salaries in the oil industry and concluded that Marquez deserved a significantly higher raise than Eson. The companies surveyed had all been public, Eson argued, and thus had no bearing on the salaries given to the partners of a private company, but the issue went unresolved.
And other issues surfaced. The company had always partied hard. "I swear every time we had a party we'd get at least one employee complaint about harassment," says Wineland. But now the company was less a family than a full-fledged corporate entity, with an HR department. When Marquez, who often railed against corporate orthodoxy, suggested that he might wear a dress to the 2001 Christmas party, HR got nervous. "They said, 'We got to stop this s---," Wineland remembers. "So, of course, Tim goes bonkers." (Marquez says he never suggested any such thing and that he wore a suit to the party.)
Marquez rushed back to his office and demanded to see Eson's e-mails. What he found exceeded even his most paranoid fears.
Wineland and Eson say the party debate forced them to ask themselves a number of important questions: Had the company outgrown its leadership? Why did Marquez seem to have final say on everything? Why was Eson's role diminishing? Eson and Wineland decided that the company needed training, a consultant--someone objective to steer a ship that seemed headed in the wrong direction.
When Wineland and Eson suggested as much to Marquez, the CEO was surprisingly receptive. He had recently been named a Henry Crown Fellow, a prestigious award given by the Aspen Institute to young executives it considers America's leaders of the future. One of the institute's fellows, a dot-com CEO, had told Marquez about sending a group of her brightest employees into the woods to talk about how they could improve their company. Marquez suggested Venoco do the same.
In January, the co-founders chose five independent and insightful midlevel managers to do an internal evaluation. They hired a professional facilitator and sent what became known at Venoco as the Gang of Five to a local resort for two days. Leading up to the getaway, employees from every level of the organization were encouraged to send the group suggestions, pet peeves, and anything else they thought might help. "I was looking for inefficiencies, better ways to incentivize our work force, ideas to help us grow," Marquez says. Eson and Wineland were hoping for something more dramatic.
A few weeks later, the Gang of Five filed a 30-page report. It found that Marquez's micromanaging had gotten out of hand. In particular, the acting president Marquez had brought in to rein in costs, Ed O'Donnell, was widely disliked by employees. The Gang of Five made three specific suggestions: Marquez should back off and let people do their jobs, O'Donnell should be fired, and Eson should involve himself more in day-to-day operations. Not surprisingly, Marquez was incensed--a reaction compounded by the feeling that forces were beginning to align against him. "I expected helpful suggestions, not a radical reorganization," he says. The CEO rejected the report in its entirety. But now he felt pressure from all sides: from Enron, from the company's employees, and especially from his old friend Eson.
For the first time, Eson began to contest his partner's decisions: We're moving too fast. We're spending too much money on offshore exploration. We're losing focus. Why, Marquez wondered, was Eson doing this--especially after so many years of seeming content. Marquez's suspicions grew, as did his isolation. All Marquez needed to do, Eson insisted, was "to listen." But Marquez wasn't the talk-it-out type. "We wanted him to concentrate on what he does best, which is driving the company forward with big-picture stuff. His management of the day-to-day was a liability, and he had to give it up," says Eson. "But there's no disagreeing with Tim: You're either with him or against him."
Despite it all, Marquez, Eson, Wineland, and their wives were scheduled to take their annual vacation together, a trip to Jamaica, in March 2002. But they hadn't spoken, really spoken as partners, for months--and Wineland and Eson pulled out a few days before they were to leave. Marquez and his wife went anyway. During this time Eson asked O'Donnell to lunch. "He told me he was the new CEO," says O'Donnell. "He told me Tim went to Jamaica to figure out whether he wanted to stay on in a diminished role or leave outright." O'Donnell, who had interviewed a fresh-out-of-college Marquez and worked with him at Unical for more than a decade, was amazed that Marquez had said nothing to him. When Marquez returned, O'Donnell sat down with the man who had entrusted him with the thankless task of cleaning house. Over lunch, O'Donnell talked about his conversation with Eson--and Eson's assertion that he would be the new CEO. "What!" Marquez shouted. "Are you kidding me?"
