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CNN Live At Daybreak

Watkins Hailed as Lone Enron Hero by Congress Members

Aired February 15, 2002 - 05:02   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL COSTELLO, CNN ANCHOR: Now to the Enron saga.

There's more fallout today but there is also hope in the wake of the Enron collapse. Senate Democrats say they want to pass reforms to protect your 401(k) funds and level new penalties for securities fraud. Enron, in the meantime, has agreed to give laid off employees severance pay it had refused to hand over after it went bankrupt.

Enron workers have gone to court seeking more money and compensation for lost vacation time. Also, two Enron executives linked to the company's scandal have been fired. Richard Causey and Richard Buy refused to testify before Congress last week.

And those new Enron developments come as congressional probes go on.

CNN'S Jonathan Karl reports on an Enron executive who raised concerns about improper deals.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Do you swear that the testimony you are about to give is the truth, the whole truth and nothing but the truth?

SHERRON WATKINS, ENRON VICE PRESIDENT: I do.

JONATHAN KARL, CNN CORRESPONDENT (voice-over): Even before she spoke, Sherron Watkins was hailed as the lone heroine of the Enron story.

UNIDENTIFIED MALE: And I think all of Americans thank you for what you did.

UNIDENTIFIED MALE: Now what you have done is really very courageous. You're a hero.

KARL: If Watkins was the hero, her villains were Andrew Fastow, the accounting whiz who designed Enron's off the books partnerships, and Jeffrey Skilling, the CEO who abruptly resigned last August.

WATKINS: There were swindlers in the emperor's new clothes discussing the fine material that they were weaving. And I think Mr. Skilling and Mr. Fastow are highly intimidating, very smart individuals, and I think they intimidated a number of people into accepting some structures that were not truly acceptable.

KARL: Watkins was especially harsh on Skilling, who testified last week that he didn't know about the company's questionable accounting practices.

UNIDENTIFIED MALE: Do you think it's possible that Mr. Skilling was unaware of the nature of these transactions?

WATKINS: No, I do not.

KARL: Skilling's attorney shot back, accusing Watkins of trying to save Ken Lays' legacy by shifting the blame to Skilling.

BRUCE HILER, SKILLING'S ATTORNEY: It's scapegoating and that's what's going on in there right now and I'm a little appalled that Congress would participate in that.

KARL: In fact, as harsh as Watkins was on Mr. Skilling, she was easy on Mr. Lay.

WATKINS: I believed and I still believe that Mr. Lay is a man of integrity. He didn't shoot the messenger. I'm still at Enron. And I felt like I could bring the concerns to him.

KARL: Although Watkins did fear that her immediate boss, Andrew Fastow, would fire her and destroy her evidence. She conspired with fellow employee Cindy Olson to save her computer files.

WATKINS: He wanted to have me fired. He wanted to seize my computer.

UNIDENTIFIED MALE: And did he obtain your computer?

WATKINS: He did, but Ms. Olson basically said let me send you to your office with an I.T. person, here's a new laptop, transfer whatever files you want to on the new one, delete whatever ones you want to on the old one and we'll just hand him the hardware. She said, you don't mind doing that, do you? And I said no, I don't.

UNIDENTIFIED MALE: So you pulled a fast one on Andy?

KARL: As a further precaution, Watkins said she kept a copy of her now famous August memo in a lock box away from both her office and her home so that nobody would be able to destroy it.

(on camera): While senior Enron executives were dumping their stocks, so was Sherron Watkins. She acknowledged selling $31,000 worth of Enron's stock back in August of last year, after warning Ken Lay that accounting scandals could destroy the company. And she sold another $17,000 in stock options back in October.

Jonathan Karl, CNN, Capitol Hill.

(END VIDEOTAPE)

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