Former Enron Corp. vice president Sherron Watkins, who warned then-Chairman Kenneth L. Lay in August 2001 that the energy trading company was about to “implode” in a wave of accounting irregularities, and two other whistle-blowers were named over the weekend as Time Magazine’s Persons of the Year. She will share the cover with WorldCom auditor Cynthia Cooper and FBI agent Coleen Rowley.

Watkins gained prominence last January when news surfaced of a eye-opening letter she sent to Lay in August 2001, which detailed Enron’s involvement in questionable off-balance sheet partnerships and expressed her concern about the arrangements. In the letter, she wrote, “employees question our accounting propriety consistently and constantly. This alone is cause for concern.”

In testimony before Congress last February, Watkins, 43, said former Enron CEO Jeffrey K. Skilling and ex-CFO Andrew S. Fastow were the “culprits” behind the improper off-the-book partnerships that concealed more than $1 billion in debt and led to Enron’s swift collapse last December. Lay, she said, was “duped” by the two executives (see Daily GPI, Feb. 15).

Skilling and Fastow were like the “swindlers” in the fable “The Emperor’s New Clothes,” who fooled the emperor about “the fine material that they were weaving,” she told the House Energy and Commerce Committee’s oversight and investigations subcommittee. “I think they intimidated a number of people into accepting” the otherwise questionable partnerships, which, in addition to hiding debt, inflated corporate earnings and made several Enron executives wealthy.

In early November, Fastow pleaded not guilty to 78 federal charges, including conspiracy, money laundering, fraud and obstruction of justice. His trial date is scheduled for Jan. 13. No charges have been brought yet against Skilling or Lay by the federal government.

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