by John M. Curtis
(310) 204-8700

Copyright February 15, 2002
All Rights Reserved.

outed as a courageous whistle blower, Enron Vice President Sherron S. Watkins looked a lot like Linda Tripp, denouncing former bosses and selling herself as a true patriot. Recall Tripp's self-conscious publicity stunts on the steps of the Capitol telling the press she betrayed her "good friend" Monica Lewinsky out of a "patriotic duty." With most of Enron's key execs—including former Chairman and CEO Kenneth L. Lay—taking the 5th, Congress salivated at Watkins' testimony, believing the hype that she was true whistle blower. In point of fact, Watkins served as a public relations hack for Lay, diverting blame onto his underlings. In fact, Watkins drafted a damage control plan specifically designed to get Lay off the hook. While she's best known for her elaborate Aug. 2001 memos warning Lay about accounting improprieties, Watkins appeared a bit too slick in her congressional debut. Tipping her hand, "It's my humble opinion that he did not understand the gravity of the situation the company was in," said Watkins. "I believed—and I still believe—that Mr. Lay is a man of integrity."

      Watkins failed to mention to the House Energy and Commerce Committee that Ken Lay instructed her to join a covert PR team designed to camouflage his culpability in Enron's failure. "Ken thinks it would be a good idea for me to work for you in our [public relations] and [investor relations] effort [regarding] our current crisis," wrote Watkins on Oct. 30 to an executive in the investor and public relations department. In her Oct. 30 e-mail, Watkins suggested blaming Enron CEO Jeffrey K. Skilling, Chief Financial Officer Andrew S. Fastow and Chief Accounting Officer Richard A. Causey. Watkins urged Enron to tell shareholders that "Lay relied on his CEO Skilling, as well as CFO Fastow and CAO Causey to manage details," proving her involvement in a calculated scheme to distance Lay from the scandal. "Nobody wants Ken Lay's head," wrote Watkins. "He's very well-respected in business and the community. The real culprits are Skilling and Fastow." While Watkins encouraged Enron to "come clean and restate [earnings]," it's clear that her real mission was to hide Lay's guilt. Watkins' planned attempt to extricate Lay impeaches her credibility.

      Seduced by her testimony, Watkins received undeserved praise for her apparent willingness to blow the whistle. "All America thanks you for what you did," said Rep. Cliff Stearns (R-Fla.), either swallowing Watkins' testimony or pushing the notion that Lay was clueless. Behind the scenes, Ken Lay's attorney Bob Bennett only prays that Watkins doesn't blow her cover—she currently stands as a firewall between Lay and a grand jury. Though Watkins looked credible under direct examination, she won't look so good under cross. No one from the panel admitted her plan to extricate her boss—including direct involvement in a carefully staged PR effort to protect Ken Lay. "What you have done is really courageous. You're a hero. But . . . I have a feeling that this is just the beginning of a process for you in terms of the stress you're going to be under," said Rep. Edward J. Markey (D-Mass.), prophetically implying that Watkins' cakewalk won't last forever.

      Clearing the smoke, Watkins didn't shed light on the real factors that led to Enron's bankruptcy. She painted a self-serving picture, portraying herself as a good Samaritan and Ken Lay as a innocent bystander. What made her testimony transparent were skillful disclosures designed to lead to only one conclusion: Ken Lay had no role in the largest financial scandal in corporate history. "The saying around Enron was: Heads, Mr. Fastow wins; tails Enron loses," said Watkins, cleverly following her original Oct. 30 strategy of demonizing Skilling and other Enron execs. There's nothing wrong with indicting Skilling, but Watkins forgets that at least Skilling testified. Her boss Ken Lay took the 5th, not only because he dutifully followed his lawyer's advice but precisely because he's in serious hot water. Watkins accused Skilling of not telling "the whole truth," yet failed to reveal her own effort to get Lay off the hook. If Lay really knew nothing about Enron's shady dealings—as Watkins suggests—why would he refuse to testify? Skilling may have slanted his testimony, but at least he testified.

      Watkins claimed under oath that she was harassed by Skilling's office. "He wanted to get me fired," implying that Skilling tried to silence her public disclosures about Enron's off-the-books partnerships, including Fastow's cash cow known as LJM and Raptor partnerships. "He wanted to seize my computer," Watkins told the committee to prove her point. Savvy CEOs like Shilling know that confiscating computers won't clear the slate, erase records or discourage real whistle blowers from going public. At that time, Watkins was already transferred to Enron's PR department to help clear Ken Lay's good name. "Everything Ms. Watkins said about my client is based on hearsay, rumor or opinion," said Bruce Hiler, Skilling's defense attorney, missing Watkins' central role in defending Ken Lay. Watkins' remarks weren't based only on hearsay, rumor or opinion, they were part of a carefully planned strategy to discredit Skilling and exonerate Lay. Far from heroic, Watkins remarks misled congressional investigators by deliberately omitting her role on Lay's PR team.

      Playing for an Oscar, Sherron Watkins has no credibility when it comes to helping Congress get to the bottom of the Enron disaster. When she signed on as a loyal lieutenant in Lay's PR brigade, she's about as believable as Al Qaeda detainees at Guantanamo Bay. Watkins proved she's still loyal to Ken Lay, but not to the cause of getting out the truth. Despite the paucity of witnesses, Congress shouldn't leap hastily to immunity deals or zealously embrace witnesses that could bite them in the rear ends. "She [Watkins] may come to the conclusion that Ken Lay was blameless, but we have not to this point," said House Energy and Commerce Committee spokesman Ken Johnson, on the eve of her much-awaited testimony. Though investigators found Watkins "entirely credible," it's time for the panel to look at the record before swallowing her sworn remarks. Watkins' neatly scripted talking points suggest that she's well rehearsed. Her omission that she's part of Ken Lay's covert PR squad tells the real story.

About the Author

John M. Curtis is editor of OnlineColumnist.com and columnist for the Los Angeles Daily Journal. He's director of a Los Angeles think tank specializing in political consulting and strategic communication. He's author of Dodging the Bullet and Operation Charisma.

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