Sherron Watkins was raised in a town of 6,000 people, Tomball, Texas. A town where she was surrounded by adults who believed their actions mattered. It was interesting, Watkins noted, that the three female whistleblowers on the Time cover of December 2002, all came from small towns. In Tomball, when something needed to be done, the townspeople took action and did it. Your actions mattered, and the feeling was that “we are all in this together.” Watkins has always carried that philosophy from her small town with her.
Math was a strong suit for Watkins as a youngster. When she was older, Watkins’ mother (who had a business degree), pushed her toward the same. She graduated from the University of Texas in Business Administration and later earned a Master’s in Professional Accounting. Watkins then became a Certified Public Accountant.
She started at Arthur Anderson in Houston as an intern in 1981 and was hired as an auditor in 1982. As was typical during that time, there was a fair amount of prejudice against women, but back then, it was just accepted as typical of the workplace. Watkins stated that Anita Hill talked about this phenomenon in the early ‘90s.
After eight years, Watkins was offered a wonderful post, Vice President at MG Trade Finance in New York, and found it fulfilling and fun. But after three years, Watkins wanted to return to Houston and was offered a job by Andrew Fastow from Enron, as a Director, in 1993, which she accepted.
In late 1996, Watkins saw seeds of fraud at Enron and was concerned about looking for employment outside of Enron in Houston. She felt it “might appear Enron was firing her.” She became a Vice President after she left one area of Enron to work in another, Enron International. Enron had a change of focus, and Watkins felt that instead of promoting technical proficiency, Enron promoted “salesmanship,” cross-selling, and targeted more business.
In the early 2000s, Fastow appeared before the Board of Directors and received an exemption from Enron’s code of ethics to manage and formulate two limited partnerships. The purpose was to buy Enron’s poorly performing stocks and stakes and to improve Enron’s financial statements. There was also a transfer to special purpose entities totaling more than1.2 billion. During this time, Enron’s auditor firm, Arthur Anderson, had been given over 50 million dollars by Enron, 25 million in audit fees, and 27 million in consulting fees. Arthur Anderson failed spectacularly in its duties, preventing a conflict of interest with Enron.
Fastow told Watkins that they needed to sell assets that were not strategic for Enron and gave Watkins a spreadsheet of over 200. Watkins had meetings with asset holders and found a dozen assets that did not add up. Watkins realized that she had a “fraudulent mess,” that some assets were not financially viable, and were just “plain fraud.” There was a 700 million dollar problem because assets were missing. As Watkins unraveled it, she realized she was in a unique position, as Arthur Anderson was also involved, and she had career experience in both companies.
She decided to write an anonymous memo, and stayed up a few nights, trying to decide what to put on paper in summing up the problems facing Enron. Watkins dropped the memo into an Enron communications box. A few days later, Watkins went to Human Resources (HR) and identified herself as the memo’s author. HR facilitated a meeting with Kenneth Lay, founder, CEO and Chairman of Enron, and Watkins presented the fraud directly to Lay.
Watkins noted that some critics keep referring to her as an “anonymous whistleblower.” Watkins was not anonymous long, having met with HR quickly, and Chairman Lay a few days later. She provided Lay with additional memos and voiced her concerns about the fraudulent accounting happening at Enron. Lay said he would look into it, and Watkins went on vacation, thinking that Lay would take care of the problems.
When Watkins returned from her vacation in August of 2001, she found her phone had “blown up.” Retaliation came quickly, corporate officers wanted her computer, and she was moved from the 49th floor of Enron to the sixteenth floor, which housed HR. She was given no real responsibilities at her job and found that Enron hired a company to investigate the fraud that had a conflict of interest. Then 9/11 happened, and things ground to a halt.
On Oct. 16th, 2001, Enron reported their earnings and announced losses. The Wall Street Journal began investigative articles on Enron, and the SEC started a preliminary investigation. Watkins advised she was not the only individual who knew about the fraud, but in a company of 8,000 in the Houston area, she was the only one to write a memo alerting management. When asked if being a woman might be why she was the only one to alert management at Enron, Watkins answered that women are not part of the “old boys’ club, so a woman is not concerned about being kicked out of the club, because you didn’t belong to one in the first place.”
Surveys have shown that women take more risks in the ‘societal or moral risk area’ (the motherhood gene), and men take more risk in “arena risk-taking,” the physical and financial arena, where there are adoring crowds.
Watkins feels the term of whistleblower is a “loaded’ term. Her friends warned her against being a whistleblower because she was just a loyal employee who tried to fix a problem. The term whistleblower brought up descriptions like “rat, snitch, and fink.“ Not descriptors one would want to be attached to their name. On the other hand, other people said, “How dare you call yourself a whistleblower when you did not go outside your company.” The whistleblower label was very toxic because when you try to stop something wrong, it turns out your “damned if you do, and damned if you don’t.” When you are in the news for being courageous, people say you are such a media hog, and you did it because you wanted attention.
Watkins stated that the term whistleblower has changed in the last twenty years, moving towards the positive scale. “Whistleblowers are now presented as positive and courageous, and blowing the whistle is getting a better reputation.”
When Watkins blew the whistle, she felt naive and optimistic, expecting the evidence would be enough, and Enron would do the right thing. Watkins used the Titanic analogy, where she was a crew member warning the captain of the ship (Lay), that they have hit an iceberg and water is pouring in. She felt like she was telling the captain to head down to the hull and check the damage and have everyone man the lifeboats. She sounded the alarm, advising the captain that the ship is sinking. It was shocking to Watkins that Lay, the so-called “captain of the ship,” never sent anyone down to check if water was pouring into the ship. He just wanted to be assured that the ship was unsinkable. Lay wanted Arthur Anderson to signal everything was alright, and they were not sinking.
Watkins had no sense that Lay realized the significance of Enron masking massive losses. Instead of facing the hard truth, executives elbowed each other to be the next CEO, and Watkins felt the irony that they were fighting to be the captain of a sinking ship. She was shocked that hard evidence did not matter that people were just ignoring it.
Watkins was nervous about presenting the evidence to Lay in a respectful, professional way, but never thought he would ignore the news, ignore the evidence. Looking back, Watkins stated she wished she had taken more people in with her to meet with Lay. Enron might have survived if Lay had not dismissed Watkins as one lone voice. People had encouraged her to go in, but they would not go in with her. She felt that the executives wanted her to go in and see what Lay would do. Lay felt that he was paying Arthur Anderson millions to protect the company and not hear the alarm. The executives who wanted Watkins to blow the whistle turned around later and washed their hands of culpability.
Watkins stated that she went to the Lay meeting because that is how she was raised, believing in the fact that “actions do matter.” You bring up problems to those in charge, and the problems get fixed. Watkins did not grasp how hard it is for people to take responsibility for a problem. She has learned that it is almost impossible for people to admit that they have done wrong.
Watkins stated that the burdens of telling the truth for the normal whistleblower are being blackballed. Watkins realized that she would never have the opportunity to work in corporate America again. A whistleblower will be labeled as someone who has a loyalty to truth above all else, and a whistleblower will take risks to let the truth be known, and that concerns people. Whistleblowers make others feel uncomfortable, because they may realize they would not make that same risky move for the sake of truth. Or, Watkins said, as our famous former President George W. Bush remarked, “ you are just the turd in the punchbowl, spoiling the party.”
Congress found Watkins’ memos in February 2002, with congressional investigations occurring and then Department of Justice investigations happening. The criminal trials where Watkins was a critical witness took place in 2006. Looking back, Watkins sees that Enron did not survive, and it was a horrible wreck, but now there are better laws that exist that take whistleblower complaints. Thanks to Watkins, we have the Sarbanes-Oxley Act of 2002, a federal law that sets new or expanded requirements for all U.S. public company boards, management ,and public accounting firms.
Mystical things and miraculous things have happened to Watkins, and she can see Gods’ hand in her life. She walks with contentment, less anxiety, and worry. Watkins knows she is on the right path for a happy life. She has traveled to speaking engagements and has made a good living.
Watkins feels that everyone should apply the 3M test to their life:
- If you got called in by your mentor or supervisor, and you would be embarrassed by something you did, don’t do it.
- If you don’t want it on the front page of the media, don’t do it
- If you wouldn’t want your mother to find out, don’t do it.
Watkins feels democracy is like a three-legged stool, composed of economic freedoms, political freedom, and moral responsibility. Right now, there are problems in the moral responsibility field. Watkins feels we are losing our ability to address out-of-line profits at the cost of everything else. The media has been degraded, and this comes with its problems.
Even to this day, Watkins has enemies who try to marginalize and diminish her whistleblowing. But Watkins does not want to be remembered solely for her whistleblowing activities, being the ”Enron whistleblower.’ Her 2nd act was as a corporate whistleblower on the speaking tour, and Watkins hopes for a 3rd act in life that will put some spiritual truth into the world.
It is interesting to note that Fastow and other executives created off balance entities, complex and bewildering financing structures that very few people could understand. Watkins was one of those very few. A special woman in the long arc of justice, who brought justice into an unjust world, who brought truth into a world of lies.
Watkins’ daughter is 21 now and was very young when Watkins whistleblowing happened. She has not suffered from her mother’s whistleblowing, and when she did become aware, she heard it from her friends. Watkins advised that she was a “unique” whistleblower because the corporate scandals of 2002 were all over the media. Watkins was a whistleblower put on a pedestal, as 2002 was labeled as the year of the whistleblower, and her picture was on the cover of Time magazine.
Watkins is in textbooks, and her daughter’s high school or college friends see Watkins in their business books. There was not a negative impact on her daughter, and when Watkins ended her corporate career, she started on the lecture circuit. She got time to stay home with her daughter, and she knows she is one of those very few whistleblowers with a good story.
The only thing that bothers Watkins is that twenty years later, she still has enemies.
But from a spiritual perspective, it has been a life changing event. It has been “amazingly and awesomely spiritual.” Watkins took a risk with her faith and felt that “God had her back.” Watkins mentioned the parable of the wealthy master from the Bible, who went on a trip and gave his servants talents. Some servants took a risk with their talents, and doubled them, some buried their talents. From that parable, Watkins knows she has only one life to live, and energies and talents to use. You are supposed to use those talents and take a risk for the good and betterment of mankind.
Sherron Watkins believes that God put her whistleblowing days on her path, and she
has seen many mystical things happen. She expects many more.
Watkins’ book, Power Failure, the Inside Story of the Collapse of Enron, is available on Amazon.
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