If you continue to use this site we will assume that you are happy with it. Sherron Watkins exposed corporate misconduct in the infamous Enron scandal paving the way for the enactment of the SOX corporate reform law. Our Morning Risk Report features insights and news on governance, risk and compliance. Sherron Watkins - Honesty Anna Strange How did she do it? But he died before his sentencing for a fraud conviction at age 64. Sherron recognized that students were being shortchanged by this situation, and she told her uncles about it. Watch Now! document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); This site uses Akismet to reduce spam. Watkins demanded honesty from her employer. Instead of reporting these staggering losses, Enron reported $425 million in earnings for the first three months of 2001. Leaders need to have pristine ethics and keep an ear to the ground. In a way, its been interesting. At the small Lutheran school she attended, the principal was also a classroom teacher. Earlier in the day, the company's former head of risk and research, Vince Kaminski, testified he tried to do his job in telling top executives when he believed Enron conducted risky business. Back in the 1990s Olson, a veteran energy industry analyst, was a lonely voice in the wilderness; he was skeptical about Enron for a decade before its collapse. In her eyes, it was okay to challenge authority if it meant uncovering the truth. Ive just sat here and told [him] how the Chief Accounting Officer and Chief Financial Officer have cooked the books; you cant then conclude theyre doing a good job, Watkins said. You cant change the value system unless youre the leader. Prior success can make people ignore warning signs in times of trouble. In 2002, she was named Person of the Year by Time magazine for her honesty and convictions. RELATED: 20 years ago today, Enron filed for bankruptcy, December 2, were three weeks away from Christmas, everyones usually in a great mood, youre about to get maybe a Christmas bonus, spend time with family, holiday music is playing," said Watkins. Here's what we know, Houston Forecast: Warm and muggy today, severe storm threat looms for Thursday night, Hazy Houston skies: West Texas dust filling the air today | Here's how long it'll last, 20 years ago today, Enron filed for bankruptcy. When Sherron was in eighth grade, she had a significant experience that would prepare her for her role at Enron many years later. After taking her first job, Watkins requested a transfer to New York City. Enrons collapse, 20 years later: KPRC 2 journalists reflect on covering the scandal. The cookie is used to store the user consent for the cookies in the category "Analytics". About Sherron She first went to senior management, but they were in on the fraud, so they did nothing. As Enrons Chairman and CEO, Lay had oversight of Enrons business units and supervised the senior executives and managers of these units, reviewed drafts of public filings and draft press releases, and participated in conference calls with investment analysts. Campbells Soup Sales Were Declining. Consider the three Ms: Mentor, media, mother. She joined Enron in 1993, and departed in November 2002. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. She discovered Enrons accounting manipulations were hiding massive debt while overinflating how much money the company was actually making. She joined New York-based MG Trade Finance in 1990 to manage their portfolio of commodity-backed finance assets until October 1993. Accounting just doesnt get that creative, she testified. My biggest disappointment is that I was really not believed, Watkins said. Ms. Watkins, now living near Austin, Texas, still gives speeches about Enron and on the warning signs of bad organizational culture. In 2004, she released a book about her experiences at Enron and the problems of US corporate culture, Power Failure: The Inside Story of the Collapse of Enron. A CEO should also love the products and services their organization provides, says Watkins. How did Sherron Watkins show honesty? Enron whistleblower shares lessons on corporate integrity. Last chance for up to $40 off TurboTax, Wayfair promo code: 10% off any single purchase, Sign up to Stock Advisor for $79 for 1 year, All Jeans + Pants 25% off! Sherron Watkins She initially wrote a letter to CEO Ken Lay. Much has changed for Ms. Watkins since she first raised her concerns at Enron. The trial recessed until Monday after Watkins was released because prosecutors had scheduling conflicts with upcoming witnesses. 5 Speaking today, Sherron Watkins says that "Enron was able to push Andersen around". The reality is frauds start small, so to stop them at their very inception is wonderful, Watkins said. In other words, Enron was doing business with itself. Kenneth Lay, She kept asking questions and never got any legitimate answers. Sherrons uncle owned the local supermarket, and her cousin managed the funeral home. Nobody, that is, except Sherron Watkins. Watkins doesnt regret blowing the whistle, but there are other whistleblowers that do. Watkins still considers herself lucky. Despite this obvious conflict of interest and strong protests from some employees, the companys board of directors approved the transaction. Many Enron executives were indicted including Skilling, Lay, and Fastow. . She sounded the alarm, advising the captain that the ship is sinking. But his criticism in 1999 of a partnership backed by Enron stock got him pushed out of the companys risk squad by Chief Executive Jeffrey Skilling. The best organizations just value their culture, their value system, says Watkins. After she uncovered the truth the company of Enron got better. There was immense pressure on employees to close profitable deals at any cost. Watkins met with Lay four months before the company went bankrupt . CEO Lay even wrote a chapter for a best-selling book in which he emphasized that rule breakers get to the future first. Enron employees got the message that it was okay to put ethics aside in pursuit of profit. When the meeting ended, Watkins felt relieved and proud at the same time. ", TEA could take over Houston ISD next week, Mayor Sylvester Turner says, What happened to the Luby's sign on Westheimer? Nearly 20 years after the energy companys collapse, Ms. Watkins, 61 years old, said being labeled a whistleblower has been a challenge to her career ever since. I cant believe it, she said. Learn vocabulary, terms, and more with flashcards, games, and other study tools. Plus, 60% off clearance with American Eagle promo code, Kohl's promo code: 30% off for Kohl's Rewards Members, Why Lori Lightfoot Is the First Chicago Mayor to Lose in 40 Years, The Airline Experiment to Make Boarding Less Awful, The 20-Somethings Fueling a Stick-Shift Renaissance, More Younger People Are Getting Colorectal Cancers, and Doctors Dont Know Why, Long-Robust U.S. Labor Market Shows Signs of Cooling, Opinion: Ron DeSantis: Why I Stood Up to Disney, Opinion: The Chips Act Becomes Industrial Social Policy, Opinion: Major Questions in the Student-Loan Forgiveness Case, Opinion: Why Elite Law and Medical Schools Cant Stand U.S. News, Chicago Mayor Lori Lightfoot Loses Re-Election Bid. Celebrated among Time magazine's Persons of the Year in 2002, Watkins now speaks throughout the country . HOUSTON, Texas Enrons energy empire crumbled exactly 20 years ago in gleaming downtown towers that now house Chevron. Sherron Watkins is the former Vice President of Enron Corporation and whistleblower who alerted then-CEO Ken Lay in August 2001 to accounting irregularities within the company, warning him that Enron might implode in a wave of accounting scandals. Enrons chief executive at the time. Watkins said she lost friendships and the trajectory of her career was forever altered. Start studying Sherron Watkins. Since then, Watkins has been giving speeches at colleges and management congresses. Except for the drilling rigs that drilled for oil within the city limits, Tomball was an unremarkable small town. After blowing the whistle, Watkins thentestifiedagainst Enron before House and Senate subcommittees and was selected as one of three TIME MagazinesPersons of the Yearin 2002, along with two other whistleblowers. She felt like she was telling the captain to head down to the hull and check the damage and have everyone man the lifeboats. So its a wonderful check and balance.. Classroom Curriculum Webinar! Thousands more lost their jobs when an accounting firm collapsed as a result of the scandal. If this jury were to acquit, your source of income would dry up, wouldnt it? Skilling lawyer Ron Woods asked. The SEC said in its 2020 annual report to Congress that about 68% of its award recipients to date were current or former insiders of the company involved. On Thursday, February 19, famed Enron whistleblower Sherron S. Watkins outlined for Samford University students the ethical failures underlying her former employer's spectacular collapse. Thats because they are comparing their post-whistleblowing life with their life pre-ethical dilemma, she says. Award winning investigative journalist who joined KPRC 2 in July 2000. Can the Constitution be changed by the president? Initially Kenneth Lay, Enrons chief executive officer, had a superb business plan. For that and for the courage of her convictions, Time honored her as Person of the Year for 2002. These cookies track visitors across websites and collect information to provide customized ads. They just acted as if this was a minor hiccup in the road and could be handled with some good PR.. How did such a large and respected company self-destruct so quickly? Before Sherron Watkins found herself on the cover of Time, she was just an average citizen like anyone else. So It Redesigned Its Iconic Can. At Fastows bidding, she examined a list of weak assets Enron wanted to sell that had been tucked into off-balance-sheet financial structures intended to lock in their value. She joined Enron in 1993, and departed in November 2002. REUTERS/Richard Carson. I did come armed with a lot of memos, evidence, Excel spreadsheets, PowerPoints, she said. In fact, Lay was so astonished by this reaction that he launched a full-blown investigation. I was just dumbfounded, you know? Watkins was one of three whistleblowers named as Time magazines persons of the year in 2002. Kaminski refused to bless the unwinding procedure. For a while, it seemed as if no one at Enron had the courage to protest the widespread corruption at the company. The company was spending millions and millions of dollars, but Broadband was generating very little revenue in return. Sherron Watkins (born August 28, 1959) is an American former Vice President of Corporate Development at the Enron Corporation. A group of former partners bought the name in 2014, creating a firm named Andersen Global. Skilling told me that he decided to transfer my group, he recalled. Watkins never took her concerns outside the company. A representative for Rice declined to comment on personnel matters. Call Us: (231) 938-4140 Contact Us. Its a toxic label, where you wont work in your chosen career ever again, and you lose friendships. WHEN ENRON WAS RIDING HIGH, in the fall of 1995, an accountant named Sherron Watkins competed in a tournament that her boss, Andy Fastow, had devised, a contest he . Almost 5,000 employees were fired without warning. She has since co-written a book and traveled around the world to speak about Enron. Nearly all of his investments were tied up in just one company and that was his former employer, Enron. His death resulted in a vacated judgment. I think the most significant change has been the ability to report anonymously, which is the best protection against blacklisting and retaliation, he added. By clicking Accept All, you consent to the use of ALL the cookies. I really felt a sense of relief when I spoke truth to power. Frequently, he shirked his teaching duties and did not show up to class. Enron employees even developed a name for these unethical deals, calling them Jasons after the main character in the Friday the 13th horror films. Watkins shared her Time Person of the Year award with two other honest citizensColeen Rowley of the FBI and Cynthia Cooper of WorldCom. Some cancelled surgeries or could no longer afford to take their prescription drugs. He adds that what Ms. Watkins experienced wasnt surprising for a whistleblower whose name became public, because potential employers often are frightened by possible skeletons in their own closets and thus are more inclined to go with lower-risk candidates. Sherron Watkins was an Enron VP when she warned boss Ken Lay of an impending implosion.. Arthur Andersen had shredded documents related to Enron and lost its license to engage in public accounting. This amount was enough to make Enron Andersens second largest account in 2000. How did Sherron Watkins show honesty? The simple answer is dishonesty and greed. This cookie is set by GDPR Cookie Consent plugin. Watkins still visits Houston on occasion but now works as, among other things, a Texas State University professor. But then again, my daughter probably felt like I was a stay-at-home mom able to go to all of her school events, sporting events and was always there. After she uncovered the truth the company of Enron got better. Why would a reputable accounting firm go along with this unethical proposal? To prepare, she confirmed her suspicions with trusted colleagues at Enron and Arthur Andersen, the companys accounting firm. Watkins, who has never been charged with insider trading, said Wednesday her knowledge prompted her to sell almost $50,000 in stock after her August 2001 meeting with Lay and before Enron shares became worthless months later. She says she would have taken her concerns outside the company because she was naive to believe that the top executives would do the right thing. July 7, 2021 9:00 am ET. During her talk, Watkins shared insights and advice learned from her experience. In the end, Watkins was not the only person who knew about the fraud at Enron, but she was the only person to come forward and report it. With leadership experience in legal, privacy, diversity, and governance functions, the companys chief legal officer focuses on staying true to her personal purpose and role as strategist. the Enron Corp. executive who warned management about fraud, said not having confidentiality and protection for whistleblowers can have a cost. Despite all that she did Sherron still had regrets . Sherron Watkins, the plainspoken former vice president whom Congress anointed as a whistleblower after the company's collapse, repeated much of what she said then: Enron needed to come. She learned in February 2002 that the company sought legal advice on the consequences of firing her two days after her meeting with Lay. Id add one more uniqueness about Ms. Watkins that was lacking in all the other individuals who have chosen to come before this committee to stop the bleeding at Enrona moral compass, he said. She has been hailed as a whistle-blower so often it's starting to sound like part of her name. (7 minutes) Sherron Watkins, the Enron Corp. executive who warned management about fraud, said not having confidentiality and protection for . After doing some investigating on her own, Watkins discovered that Enron was part of the worst accounting fraud Ive ever seen. Numbers were being manipulated, losses were being disguised, and people were covering it up. He is serving a five-year prison sentence, and prosecutors said Wednesday he is expected to testify against Lay and Skilling next week. Armed with incriminating information, she made a bold decision to expose the illegal activity at Enron. Like LJM1, they were similarly backed by Enron stock and used to lock in gains while keeping hundreds of millions of dollars in debt off the energy companys books. She acknowledged Wednesday that she had never discussed such issues with Skilling. They took huge professional and personal risks to blow the whistle on what went wrong at WorldCom, Enron and the FBIand in so doing helped remind us what American courage and American values are all about.. People are hesitant to really join in a venture with you or move forward, just because theres too much noise around that label whistleblower, she said. She became a whistleblower. In the late 1800s, this term was used to describe someone who blew a whistle to alert police to a bank robbery. She didnt report what she knew directly to the government in hopes Enron executives would report it themselves, but later she was interviewed by the SEC and the Justice Department for their investigations into Enron and testified at congressional hearings. They say that honesty is the best policy. Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet. Save my name, email, and website in this browser for the next time I comment. HONESTY. For example, if the company met its projected earnings in a given year, executives would transfer some of the earnings to the next year to cover any unexpected losses. As a seasoned professional, Watkins realized she had made a big mistake by joining the department. She even proposed specific steps for Enron to follow if the company hoped to get out of this mess. People found out and demonstrated their support by emailing her, leaving voice mails, and even people around the world would contact her. What role did Sherron Watkins play in the Enron implosion? Were such a crooked company., That message, she said, slapped him in the face more than anything else., She said she did most of the talking. Watkins knew that her conscience would not let her ignore the situation. Its the most bizarre question Ive ever received, and its still hard for me to wrap my head around why that question came out of his mouth.. Looking back, she acknowledged the criticism that she could have done things differently, but added that criticism is far outweighed by the thank-yous that I received from rank and file employees who thought justice would be served, she said. She went to Lay following Skillings resignation in mid-August 2001 and after the company founder encouraged all employees to come forward with concerns. Religion was a large part of Sherrons daily life. Some of these messages came from former employees, some came from famous people, and some came from complete strangers all across the country. Because Watkins had a masters degree in accounting, she was able to figure out who was behind the corrupt practices at Enron and who was covering them up. How to Market Your Business with Webinars. Watkins published a book in 2004 about her role in uncovering the Enron Scandal and actively participated in Government Accountability Projects American Whistleblower Tour. The U.S. Securities and Exchange Commission also launched its own investigation. Even though Broadbands losses began to mount, Enrons annual report did not reflect these losses. Lay died in 2006, shortly after he was found guilty of several counts of securities and wire fraud and making false statements. You werent fired, were you Mr. Kaminski? federal prosecutor Sean Berkowitz asked Tuesday at the fraud and conspiracy trial of Lay and Skilling. Without trust, Enron had zero credibility. Watkins was called to testify before committees of the U.S. House of Representatives and Senate at the beginning of 2002, primarily about her warnings to Enron's then-CEO Kenneth Lay about accounting irregularities in the financial statements.[1]. Justice was served: Enron whistleblower reflects on 20th anniversary of companys collapse. But the structures, known as Raptors, were under water because they owed Enron hundreds of millions of dollars and contained only falling Enron stock to repay the debt. Enron. Published on February 19, 2004 by Sean Flynt. Fortune named it the Most Innovative Company in America six years in a row from 1996 to 2001. Watkins is a Certified Public Accountant. Watkins said Vinson & Elkins lawyers lied when they claimed to have examined the accounting because they did not investigate the accounting at all in her opinion, given their conclusion. She was an excellent student and a member of the National Honor Society. I think white collar crime was pursued and justice was served.". Watkins was surprised to find people ignoring the truth. She said she learned later that he ignored her advice to hire outside accounting and law firms other than those Enron already used Andersen and Vinson & Elkins to investigate her concerns. She set up a meeting with Lay. Kaminski thought the partnership overflowed with conflicts of interest because it was run by Chief Financial Officer Andrew Fastow. That was the case at Enron Corporation, where Watkins served as a vice president. In spite of her small town roots, she wanted to see the world. Watkins discovered the fraud and reported it to executives. She was faced with a number of real-life ethical dilemmas that would prove to have dire consequences for her and thousands of others. Charles Prestwood is a hard-working blue-collar employee who spent 33 years of his adult life working in the gas industry. She noted in her letter that these steps would have severe consequences for the company, but complete honesty was the only plausible way to save the business. However, Watkins has been criticized for not reporting the fraud to government authorities and not speaking up publicly sooner about her concerns, as her memo did not reach the public until five months after it was written. New York was an exciting place for a young professional. Soon it became apparent that virtually no one knew what they were doing. "In the scheme of life, I think Ken Lay passed away a broken man having failed at being a successful businessman," said Watkins. They pay attention to those small things and they jump on it quickly., Enron whistleblower shares lessons on corporate integrity. Although some still harbor negative feelings about whistleblowers, attitudes toward them generally have improved, Ms. Watkins said, as people recognize their importance in keeping businesses honest. Olson ought to know. Andersen had won lucrative, non-audit consulting work from Enron, and would not want to jeopardise the. For extra money, she worked as a cashier at her uncles supermarket. She wrote letters and met personally with Lay, which triggered an investigation into the corruption. Watkins was sure that Lay would take positive steps to help Enron regain the trust of the American people. Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors. To make matters worse, the company promptly cancelled their medical insurance. However, if she did nothing and let the situation continue, she could be considered guilty by association. Watkins became more determined than ever to stop the fraud at Enron. In Houston, Enron whistleblower Sherron Watkins has taken the stand to testify against the company's former chairman, Kenneth Lay. Todays whistleblower reward programs at the SEC and the Commodity Futures Trading Commission provide an option to report potential misdeeds confidentially, offering an easier path for those concerned about fraud at their companies, industry observers said. The cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional". Sherron Watkins was an Enron executive who tried to warn Chief Executive Officer Ken Lay the companys books were being manipulated. Tyrone, Missouri, U.S. HOUSTON (CNN) Former Enron executives Jeffrey Skilling and Rebecca Carter were married over the weekend at his home in Houston, a spokeswoman for Skilling told CNN Wednesday. The company filed for bankruptcy on Dec. 2, 2001. So thats got a benefit that money cant buy., Write to Mengqi Sun at mengqi.sun@wsj.com, Copyright 2022 Dow Jones & Company, Inc. All Rights Reserved. "And I am, for better or worse, known as the Enron whistleblower., In August of 2001, Watkins alerted Enron founder Ken Lay, first in an anonymous letter, of shady accounting practices and the threat of animpending implosion.". Watkins wondered how that could be. She advised the company executives to come clean about Enrons corrupt accounting practices and make assurances that this type of unethical behavior would never occur again. Speak your truth to those in power. On paper anyway, Enron was worth billions of dollars, and the company was ranked seventh on the Fortune 500 list. Telling the truth regardless of the circumstances or consequences . Its up to them to do the right thing.. In 1993, she moved to Houston, which was just a stones throw from her childhood hometown of Tomball. Everything in her life was going well, until she began to uncover the unethical accounting practices at Enron. WATCH:Clips from Sherron Watkins interview. Sherron Watkins is the former Vice President of Enron Corporation and whistleblower who alerted then-CEO Ken Lay in August 2001 to accounting irregularities within the company, warning him that Enron 'might implode in a wave of accounting scandals. To help other companies avoid Enrons mistakes, Watkins has started her own consulting firm to advise businesses on ethics in the workplace. Sherron Watkins was an Enron VP when she warned boss Ken Lay of an impending "implosion. Lay appeared concerned and asked her to let him look into these structures.. They did pretend they were doing a thorough investigation with me.. Once a check-the-box Christian, she is now active in the Transformational Prayer Ministry and the InnerChange Freedom Initiative at the Carol Vance Unit, in Richmond, helping prisoners rebuild their lives. Sherron Watkins is the former Vice President of Enron Corporation and whistleblower who alerted then-CEO Ken Lay in August 2001 to accounting irregularities within the company, warning him that Enron 'might implode in a wave of accounting scandals. In this case, greed won out over common sense. People found out and demonstrated their support by emailing her, leaving voice mails, and even people around the world would contact her. In her letter, she laid out the evidence and warned him, I am incredibly nervous that we will implode in a wave of accounting scandals. She wanted assurances that he would investigate her findings and make appropriate changes. And if her complaints were ignored by higher-ups, then the risk would be for naught. Instead, Watkins has refashioned herself as a speaker on faith as well as ethics in the workplace. Watkins remained employed by Enron until November 2002, almost a year after the company sought bankruptcy protection and after she had begun giving speeches. In a speech in September 2001, Lay said, Our third quarter is looking great. She also read that the business world in retrospect would consider Enrons considerable successes as nothing more than an accounting hoax., She said Lay winced when her memo quoted an unnamed colleague who told her I wish we would get caught. An Inside Look at Ukrainian Troops Training to Use Western Tanks, How Chipotle's Stock Price More Than Quadrupled in Five Years, How Repaying Student Loans Is ChangingDramatically. Next article Why is Shakespeare so important? It never dawned on me that Lay would not go down to the bottom of the ship, says Watkins. She said she also interviewed to be an adjunct professor for executive sessions at Rice Universitys business school, a job she didnt get in the end. A Martin Luther King Jr. quote used to be found at the Enron offices: Our lives begin to end the day we remain silent about things that really matter. Watkins had a fancy office on the 49th floor. In mid-October 2001, two months after her meeting with Lay, Enron announced massive losses, slashed shareholder equity by $1.2 billion and came under intense pressure from investors. However, her integrity held her at a higher standard - the truth. The corporate culture at Enron, however, was unhealthy. She wrote a second, longer letter that chronicled all the irregularities occurring at Enron. "Its amazing how much Enron is still the byword for mega corporate scandal, said Watkins. Watkins also received national awards for her honesty and courage. In my view they were based on the same flawed principles as the first LJM transaction I had looked at in June 1999, he said. Copyright 2021 by KPRC Click2Houston - All rights reserved. She acknowledged to Lewis that she didnt know how the Raptors were created or what approvals they had received. Ms. Watkins first wrote her one-page fraud complaint anonymously and placed it in an employee dropbox in August 2001, but she decided to identify herself the next day and meet with According to her mother, [Sherron] knew she had to say something. By communicating with others youre likely to find others that feel the same way you do. Her mother, grandmother, and great-grandmother had lived in Tomball their entire lives. She also faced criticism from the public and media at the time, including for not taking her concerns early on directly to Enrons board or to regulators, and for selling Enron stock, though she wasnt charged with insider trading. Nobody knows whether Enron would have been able to survive if the company had followed Watkins recommendation to tell the truth. She joined New York-based MG Trade Finance in 1990 to manage their portfolio of commodity-backed finance assets until October 1993. I am incredibly nervous we will implode in a wave of accounting scandals, she said, reading Wednesday from the memo hailed later by Congress as prescient. We use cookies to ensure that we give you the best experience on our website. February 2002 that the company was ranked seventh on the cover of Time, could! They did nothing and let the situation continue, she confirmed her suspicions with trusted colleagues Enron. In your chosen career ever again, and her cousin managed the funeral home have pristine and... Been able to push Andersen around & quot ; Enron was able to Andersen... Result of the worst accounting fraud Ive ever seen Skilling, Lay was so astonished by this situation and. Following Skillings resignation in mid-August 2001 and after the company was ranked on! Risk would be for naught thousands more lost their jobs when an accounting go. 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