Return to Transcripts main page

American Morning

Report in 'Vanity Fair' Casts Huge Shadow of Doubt Over Watkins' View of Lay

Aired February 22, 2002 - 09:17   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.
PAULA ZAHN, CNN ANCHOR: In the court of the public opinion, former Enron chief Kenneth Lay is no innocent. But, in her testimony before Congress last week, Enron executive Sherron Watkins seemed to suggest he was.

(BEGIN VIDEO CLIP)

SHERRON WATKINS, FMR. ENRON EXECUTIVE: I do believe that Mr. Skilling and Mr. Fastow, along with two very well-respected firms, did dupe Ken Lay and the board.

(END VIDEO CLIP)

ZAHN: But a new report in "Vanity Fair" magazine casts a huge shadow of doubt over Watkins' view. The report claims that Lay has been hiding Enron company losses as far back as 1987. An established pattern of fraud, the article says, that shows the Enron leader put earnings before scruples. The article will appear in next month's issue of "Vanity Fair," and its author, Marie Brenner, joins me now.

Good morning.

MARIE BRENNER, "VANITY FAIR": Good morning.

ZAHN: What did you learn about Ken Lay?

BRENNER: The burning question we all had is, who exactly is Ken Lay? What did he know and when did he know it? Prosecutors often say that the past is prologue. And several auditors stepped forward with an astonishing piece of information. In 1987, in the earliest days of the company, there was a rogue-trading scandal that Ken Lay inherited. He learned that several of his traders up in the trading operation in Balholland (ph), New York were running fake trades through a bank, essentially writing checks to themselves. He sent up a team of auditors to check it out. They came back and said to him, in no uncertain terms, Mr. Lay these people are stealing from you. You must get rid of them. And what become an overture to what we have had now 15 years later, in terms of Enron's hiding the losses, lay kept them in place in an -- and all of this details in minutes that one of the auditors kept, and he spirited away and hid.

ZAHN: And you come to the conclusion this article -- and let's put this on the screen right now. "My conclusion was that this is guy who puts earnings before scruples, rather than reacting to the dishonest right in front of them."

BRENNER: This is, one of, again, one of the auditors said that to me. And what is so fascinating about the episode, and amazing, Paula, is that it is completely a foreshadowing of this hiding the ball, of when you put your image first before anything else rather than doing the right thing. Just imagine, he's in an audit committee meeting with several of the people that we have known well from television, Robert Jadikee (ph), the head of the audit committee. Steve Goddard from Arthur Andersen, who was recently -- his management responsibilities were taken away from him. One very brave Arthur Andersen auditor and several other auditors said to him, in no uncertain terms in this meetings, seven months before this crime was detected, Mr. Lay, you have people in this company who are keeping double books, but they were making so much money as traders for Enron at that period that they decided just to keep them on, send up a control officer, deal with it.

And then what happened was the crime just blew up, and ultimately, they were indicted or pled guilty.

ZAHN: By all accounts, Enron was not a women-friendly place. You write that the vice president actually had a board called a "hottie board," where he ranked the sex appeal of Enron women. But you write, "It was the women of Enron, I soon discovered, who had protected the web of intrigue, predicted the fall, written futile letters to the board members, tipped financial analysts, and tried to avert the final collapse."

BRENNER: Enron is a culture that is filled with astonishingly brave women who were doing the detail work, and I really think when the tale of Enron is finally told, it is going to be the accountants and the auditors who for years have watched all of these episodes and the hiding of the losses on the books, who are going to the true heroes and heroines of the tale.

ZAHN: Well, you've certainly got your hands on information none of the rest of us have seen. Good luck with next week's -- next months's "Vanity Fair," where you will you will find this piece that Marie Brenner wrote. Good to have you with us this morning.

BRENNER: Thank you, Paula.

ZAHN: Thanks for dropping by.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com