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Whistle-Blower Says Managers Kept Enron CEO Lay in Dark

By Elaine S. Povich
NEWSDAY -- washington

Enron whistle-blower Sherron Watkins Thursday painted a picture of duplicity and deceit at the once high-flying company, telling congressional investigators that two top company officers kept then-chief executive Kenneth Lay in the dark about improper partnerships that hid more than $1 billion in debt.

Watkins, who wrote an August 2001 memo to Lay that said the company was about to “implode” in a wave of accounting discrepancies, told a House Energy and Commerce Committee panel that when she met with Lay on Aug. 22 to discuss her concerns, she found him far too trusting of his top managers, Jeffrey Skilling and Andrew Fastow.

“I do believe that Mr. Skilling and Mr. Fastow ... did dupe Ken Lay and the board,” Watkins testified. “It is my humble opinion that he did not understand the gravity of the situation.”

Soft-spoken and unflappable, Watkins charged that former chief operating officer Skilling, in particular, knew all the details of the off-the-books, possibly illegal partnerships that were structured to conceal Enron’s mounting debt. She directly contradicted Skilling’s sworn testimony before the subcommittee last week.

Skilling testified that he didn’t know anything about the partnerships and that they were undertaken without his approval. But Watkins, 42, testified that it was company policy that Skilling sign off on any transactions involving the partnerships. Skilling testified that he didn’t know about the transaction sheets and didn’t have to sign them in any event.

Bruce Hiler, an attorney for Skilling, said in a statement that Watkins’ testimony “about my client is based either on hearsay, rumor or opinion. She did not talk to my client; she has no basis in fact for her views. Ms. Watkins is certainly entitled to her own opinion. But she is not entitled to her own facts.”

Watkins, an Enron vice president, said going public with her concerns cost her in terms of her position at the company. She said that when Fastow, then chief financial officer, learned she had written the once-anonymous memo, he “wanted to have me fired. He wanted to seize my computer.” Watkins said she was transferred to another department and removed as much data from her computer as she could.

Committee members, including Energy and Commerce Committee Chairman Billy Tauzin, R-La., advised Watkins that if she was threatened in any way in the future by Enron executives, she should let them know. The panel is one of nearly a dozen congressional committees looking into the Enron bankruptcy, which cost employees and investors millions of dollars.

Lay invoked his Fifth Amendment right against self-incrimination in refusing to testify to a Senate committee Tuesday. Skilling is the only one of Enron’s top-echelon managers to testify so far.