Sherron Watkins, the former Enron Corp. vice president who was the first to seriously question the company's accounting methods, testified for much of the week in the government's fraud and conspiracy trial against former Enron chairman Kenneth Lay and chief executive Jeffrey Skilling.
Watkins, who has already testified before Congress and written a book about her role in taking her concerns to Lay, again recounted her story before a Houston jury. Watkins is now a consultant to companies on corporate governance issues and gives lectures on her experiences at Enron.
In her now-famous memo from Aug. 15, 2001, Watkins wrote to Lay that she was worried that the company could "implode in a wave of accounting scandals." Her concerns were mostly tied to a series of partnerships and investment hedges created by former chief accounting officer Andrew Fastow. August 15 marked the day that Lay resumed the chief executive's post following the surprise resignation of Skilling.
Watkins, a CPA and former Arthur Andersen accountant, reported to Fastow and said that the internal probe Lay promised to undertake after she voiced her concerns was mostly a whitewash. She said Lay continued to make public statements to employees and investors that all was well with the company, even as the internal investigation continued. Enron collapsed four months later.
Prosecutors hope Watkins' testimony will support allegations that Lay and Skilling used hedging entities to hide billions in Enron's debts and losses. Fastow and former Enron investment analyst Christopher Loehr testified earlier in the week that Enron set up the schemes to hedge investments that investment banks found too risky or too expensive to handle.Watkins is one of the few key witnesses for the prosecution to not have been charged with any crimes.
