Enron exec 'feared for her safety'

When Enron executive Sherron Watkins warned her chairman Kenneth Lay last summer that the company’s financial house of cards was set to collapse, she was nervous about her job security.

Later, she feared for her personal safety and locked up her files.

Hailed as a hero by politicians during more than four hours of testimony before Congress in Washington yesterday, Watkins drew a portrait of a company where rank-and-file employees were pumped up and loyal while Lay was duped by subordinates into acceptance of dodgy accounting.

Other top executives were intimidated into silence, she said.

Watkins said it was common knowledge in the financial division where she worked that a complex web of partnerships was used improperly to hide more than one billion dollars (€1.02bn) in debt, inflate profits and buoy Enron’s stock price.

Still, few challenged top executives, especially former chief financial officer Andrew Fastow, the architect of some of the off-the-books partnership transactions, she told the House Energy and Commerce investigative subcommittee.

A clique of executives profited hugely from the partnerships, including Fastow, who reaped at least £19m (€31.1m).

After the Houston-based energy-trading company’s true financial condition became known last autumn, it crumbled into the largest bankruptcy in history, burning investors and stripping thousands of employees of their retirement savings in accounts loaded with Enron shares.

Watkins, an accountant and vice president, said she believed Fastow and then-chief executive officer Jeffrey Skilling along with Enron’s accounting firm, Arthur Andersen, and its outside legal advisers ‘‘did dupe Ken Lay and the board.’’

Watkins sent Lay a scathing memo in August warning that Enron could collapse ‘‘in a wave of accounting scandals.’’

In two meetings in October, she urged Lay to ‘‘come clean’’ to save the company.

When Fastow learned that she had brought her concerns to Lay, ‘‘he wanted to have me fired; he wanted to seize my computer,’’ Watkins said she was told by Cindy Olson, vice president for human resources.

‘‘I think Mr Skilling and Mr Fastow are highly intimidating, very smart individuals and I think they intimidated a number of people into accepting’’ questionable structures for the partnerships, Watkins testified.

More recently, she said, fear for her personal safety and concern ‘‘that Mr. Fastow might be vindictive’’ led her to seek advice from Enron security personnel and secure her files.