Wednesday, March 15, 2006

St. Sherron on the Witness Stand

After the seemingly endless parade of government witnesses who entered guilty pleas and have testified at the Enron conspiracy trial of Ken Lay and Jeffrey Skilling, prosecutors called Sherron Watkins, one of the few people who emerged with a better reputation after the Enron debacle -- a neutral term for those who agree with the defense assertion about Enron being a fundamentally sound company.  For those whose memories have faded over the lasts 4+ years, Watkins was the "whistleblower" who accepted Lay's admonition to address him directly if they believed there were problems at the company.  Watkins raised concerns about the accounting for the special purpose entities (SPE) created by former CFO Andrew Fastow that were used to help engineer earnings at the company and move assets off its books.  She accused the company of engaging in fraudulent accounting, and urged Lay to conduct an investigation of the SPEs and other financial issues with a law firm other than long-time outside counsel Vinson & Elkins.  As it turned out, Vinson & Elkins did the investigation, but under severe limits on what areas could be inquired into and with a restricted time frame, resulting in an exoneration of the company.  A few months later, Enron collapsed and Watkins was celebrated for trying to bring the fraud to light, including an appearance on the cover of Time.  She is now a well-received public speaker, being paid upwards of $30,000 per speech, and has written a book about her experiences.  Her cross-examination focused on the benefits she has reaped since her attempts to warn of fraud came to light, with defense counsel questioning whether a conviction motivated her testimony to pump up book sales and to maintain her many speaking engagements.  Also, Watkins sold Enron shares before the accounting problems emerged, leading one of Lay's attorney's, Chip Lewis, to accuse Watkins of insider trading and questioning why the Enron Task Force had not charged her with a crime.  Even St. Sherron is not immune to accusations of greed and misconduct, although if everyone at Enron was dirty, does that help the defense claim that it was a fundamentally sound company?  The Houston Chronicle's trial blog (here) has up-to-the-minute coverage of the trial, which will take a four day break and resume on Monday, March 20.  (ph)

http://lawprofessors.typepad.com/whitecollarcrime_blog/2006/03/saint_sharon_on.html

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