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From inside the walls of Enron, a lone whistleblower attempted to avert the course of events leading to the largest bankruptcy in American history. On August 16, 2001, Sherron Watkins wrote an anonymous letter to Enron's Chairman, Ken Lay, laying out problems with Enron's use of partnerships to hide debt. She warned of a possible scandal that could topple the company if investors and the news media learned of the operations. Then, she revealed her identity and confronted Lay directly. Lay did nothing, and the ...
From inside the walls of Enron, a lone whistleblower attempted to avert the course of events leading to the largest bankruptcy in American history. On August 16, 2001, Sherron Watkins wrote an anonymous letter to Enron's Chairman, Ken Lay, laying out problems with Enron's use of partnerships to hide debt. She warned of a possible scandal that could topple the company if investors and the news media learned of the operations. Then, she revealed her identity and confronted Lay directly. Lay did nothing, and the scandal broke, sending Enron's stock price into the basement and wiping out the life savings of many thousands of people. Hear how Enron's culture of greed and the relentless cutting of moral corners led to the ultimate disaster, as told by an insider.
Winners and Losers
SHERRON Watkins went to the Enron Corporation's November management conference for the year 2000 determined she wouldn't be taken for a loser. The year before, at her first such meeting after being promoted to vice president, she had blown it. Booked into the Hill Country Hyatt and Resort for three days of corporate team building, she had opted, in the recreational hours, for the company-sponsored salsa-making class. At affairs such as these, where Enron took over the entire hotel and offered an array of afternoon networking and socializing activities, it was important to pick one that advanced your career. A smart, ambitious employee would never sign up for the afternoon of fly-fishing, for instance, because you couldn't lose the smell of fish in time for the evening cocktail party, and because you could wind up wasting your afternoon with guys who worked in the once crucial but now irrelevant pipeline division. That left, as career-building activities, skeet shooting, the Road Rally, tennis, golf, facials, pedicures, outlet shopping, and antiquing in a nearby Hill Country town.
To understand the loaded nature of the choices, you had to understand the loaded nature of life at Enron. Salsa making, for instance, had turned out to be a disaster. One of the small hotel conference rooms had been converted into a kitchen for the occasion; Sherron had entered straight from her facial, without makeup, without combing her hair, and she was chopping jalapenos with three pipeline guys--middle-aged men shaped like bumpy Bosc pears--when the then COO, soon to be CEO, Jeff Skilling, had walked in. Or, rather, he'd poked his head into the room, narrowed his eyes, and raised his peaked nose, as if to test the air. It had not pleased him. At just that moment, he'd caught sight of her. "Uh, hi, Sherron," Skilling had said, and then, whoosh, he was gone. In his wake, Sherron found herself enveloped in that uniquely Enronian sense of dread: She knew she'd been caught with a bunch of losers, far, far away from Skilling's winning team.
Once, the pipeline guys had mattered, but that was long ago. In the 1980s, Enron was one of the largest pipeline companies in North America, moving natural gas from the Gulf Coast to the East Coast, the West Coast, the Midwest, and beyond. But as Jeff Skilling's influence over CEO Ken Lay grew, Enron changed identities several times. It always positioned itself as the company of Vision, but it supplemented its base. In the late eighties and early nineties, Enron revolutionized the way natural gas was bought and sold by operating more like a finance company than a gas company. In the mid-nineties, Enron started selling and trading power, battling across the country to deregulate entrenched electric utilities.
Lately, with the boom in dot-com and high-tech companies, Enron was vigorously morphing into an Internet/telecommunications conglomerate. Enron Online, the company's online trading platform, was already the largest e-commerce site in the world, and now "Broadband" was the new buzzword inside the company. Enron was gearing up to trade space available on high-speed telephone lines in order to deliver movies and more into private homes over its Enron Intelligent Network, a new and improved Internet. It was poised to dominate AT&T and all the other behemoths. This corporate shape shifting made Enron seem, to Wall Street, less like an IBM or an Exxon and more like the poster child for the New Economy, a business so fast-paced, so protean, and so forward-looking that it could change its stripes, virtually overnight, to suit the...