The woman who blew the whistle on the accounting scandal that brought down Enron spoke on Wednesday about how she tried to get out of the firm when she discovered the extent of its dodgy accounting.
Sherron Watkins, who has since written a book and gives lectures, also told the trial of the former Enron executives Kenneth Lay and Jeffrey Skilling that she was shocked when she discovered two years after the collapse that managers had considered sacking her when she spoke up.
Watkins is famous for writing an anonymous memo to Lay, which was read out in court on Wednesday, warning: ”I am incredibly nervous that we will implode in a wave of accounting scandals.”
From June 2001, Watkins, who joined Enron in 1993, worked for Andrew Fastow, the disgraced former chief financial officer. She soon discovered a series of off-balance sheet transactions so ”the math on the spreadsheet just did not add up”.
She said she found not just ”aggressive accounting but possibly fraudulent accounting … I wanted to get out.”
She was spurred into action by the departure of Skilling from Enron in August 2001.
”He’s a smart man,” she said on Wednesday. ”He knows it’s bad.” His departure ”confirmed to me that what I was looking at … was the tip of the iceberg”.
”When the captain of the ship has abandoned the ship then it was even more problematic than I had thought,” she said.
And did she believe that Lay knew of these problems, asked the prosecutor, John Hueston. ”I don’t think he knew that we’d got a hole in the ship and we were going to sink,” she replied.
In contrast with the prosecution’s other star witness, Fastow, Watkins held her head high, frequently addressing the predominantly female jury directly.
In August 2001 she sent an anonymous memo but admitted writing it after Lay told staff that they could talk to him about any problems. She said she wanted to warn him of Enron’s ”impending doom”.
Lay went through the memos with her. She said: ”He winced when he ran across one line.” This was in a memo in which she quoted a manager in Enron’s main investment group saying: ”I know it would be devastating … but I wish we’d get caught. We’re such a crooked company.” On the threat of being sacked, Watkins said: ”I went to Ken Lay specifically because I did not think he would try to fire or dump me on the street. And that memo is basically saying, ‘what is the risk of us dumping her on the street?’.”
The case continues. – Guardian Unlimited Â