History In A Hurry
Mark Lacter
As scandals go, the Enron mess has been tough for the general press to sink its teeth into. No doubt this is a huge business story, arguably the biggest corporate meltdown in a generation, but any blockbuster news event (the kind of story that merits its own title on the cable news channels) must be easy to understand and reach some resolution. Just as Hollywood would do it. And up until last week, Enron was anything but script-friendly; reporters were having a hard time just explaining what the Texas-based company did, much less how its honchos might have misled investors.
Which is why Sherron Watkins was just what the script doctor ordered. Courageous Sherron Watkins, as the TV folks will christen her, was the Enron vice president who last August sent a lengthy memo to Chairman and Chief Executive Kenneth Lay warning of improper accounting practices that threatened to bring down the ship. This was, of course, several months before the bankruptcy filing and the 4,000 layoffs and the criminal investigations.
As a snapshot, the Watkins memo reminds oldsters of White House Counsel John Dean’s famous warning to Richard Nixon that Watergate-related misdeeds were creating a “cancer on the presidency” an event that Dean dramatically recounted during Senate testimony and which became the scandal’s most bone-crunching sound bite.
Likewise now, we have Watkins daring to alert the powerful Lay of Enron’s cancerous condition. She specifically noted those off balance sheet private partnerships that kept massive amounts of debt off the books, and the potential conflicts of interest involving then Chief Financial Officer Andrew Fastow, who had stakes in said partnerships. The Watkins memo was delivered at the time Lay and other executives were still touting the company’s prospects.
Suddenly, Watkins became the heroic protagonist that until now the story lacked. That meant instant profiles relying heavily on unnamed sources and vaguely resembling those quick-and-dirty sidebars about arrested serial killers. The New York Times described Watkins as “tough and sharp,” with one former unnamed colleague telling the paper that she was “a bull in the china shop” and others mistaking the Texan for a brusque New Yorker.
In fairness, there’s a great temptation to crank out this kind of story-behind-the-story stuff, if for no other reason than to humanize a scandal that centers on grayer-than-gray accountants. But I’d be willing to bet that Enron’s turning point was not Sherron Watkins.
The Wall Street Journal last week reported that as early as February 2001, six months before the Watkins memo, Arthur Anderson officials discussed Enron’s questionable accounting. Another Journal story spoke of a power struggle within Enron in which senior executive Jeffrey McMahon took his concerns about the partnerships to company president Jeffrey Skilling (the guy who suddenly resigned last summer for personal reasons). McMahon, who has since become chief financial officer, knew Watkins and urged her to identify herself in the memo to Lay. (She initially sent it anonymously.) This has led to speculation, denied by Watkins’ attorney, that McMahon and Watkins were somehow plotting against Fastow.
Got that straight? It’s just the beginning of what will be months of sorting out various claims of who knew what when and then, what they did about it. Before handing out any medals, perhaps it’s best to wait until we get the story straight.
Mark Lacter is editor of the Business Journal.
