Another key whistleblower in the Enron case has told a US Court that the company's top executives launched a "bogus" internal investigation just before the energy giant's spectacular collapse in 2001.
By
AFP

Source:
AFP
16 Mar 2006 - 12:00 AM  UPDATED 22 Aug 2013 - 12:18 PM

Sherron Watkins appeared as a prosecution witness in the fraud and conspiracy trial of her former bosses, Jeffrey Skilling and Kenneth Lay.

Skilling is charged with 31 counts of conspiracy, securities fraud and insider trading, while Lay faces seven counts of conspiracy and securities fraud.

Both are former CEOs at Enron and face lengthy prison terms if found guilty.

Ms Watkins is the author of the now famous memo that warned Enron would "implode in a wave of accounting scandals."

“Outright fraudulent”: whistleblower

Ms Watkins testified in detail how she investigate accounting irregularities at Enron then passed on her findings to Lay four months prior to the company’s downfall.

She told jurors that Enron's accounting was not just aggressive but outright fraudulent.

Her testimony could be damaging to the defence because it corroborates much of what Enron's disgraced chief financial officer, Andrew Fastow, said on the stand last week.

While on the witness stand, Ms Watkins consulted copies of memos and spreadsheets that she carried into a private meeting she had with Lay in August 2001.

She recounted how she expressed her alarm that Enron's off-the-books partnerships had lost close to US$500 million, which were half Enron's profits that year.

Ms Watkins said she thought Lay "took my concerns seriously" and would launch an investigation.

He later hired the law firm Vinson and Elkins to look into her allegations.

But Ms Watkins told the jury "the investigation was bogus" because the attorneys had helped create the shady partnerships and did not interview Enron employees who were knowledgeable about them.

She added it was not until she testified before Congress two years later that she learned Lay had also sought the advice of Enron's in-house counsel about firing her.

Cross examination

During the cross-examination, Lay's lawyer Chip Lewis had Ms Watkins admit that she had not used the word "illegal" when she raised concerns with her boss, in a bid to mitigate the damage of her testimony.

Mr Lewis also pressed her to acknowledge that his client never fired her.

Under questioning from Skilling's lawyer, Ms Watkins conceded that she had little direct contact with his client at Enron.

She also acknowledged that some of her Enron colleagues referred to her as the "Buzzsaw" because she was abrasively forthright.