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Sherron Watkins: Suspicions Arise Within Enron’s Own Ranks

Even though McLean was the first to publicly analyze Enron’s lack of transparency, it wasn’t until Sherron Watkins (VP of Corporate Development) began to inquire about Enron’s creative accounting methods that the true demise of the company began.  On August 15th, 2001, Watkins sent a one-page letter to CEO Kenneth Lay questioning Enron’s accounting practices and pointed out that there were misstatements in the financial reports.  

Watkins’ tried to caution Lay and even offered up some alternatives to remedy the situation.  But Lay, knowing full well that the issues ran deeper than those which Watkins had presented, flatly refused to address any of the unlawful activity.  Ultimately, it is Watkins who is considered by many to be the whistleblower that helped to uncover the Enron scandal in 2001.  Shortly thereafter, on October 31, the SEC began a formal investigation and by December 2nd, Enron had filed for bankruptcy with a share price of $0.41 cents.

History has maintained that Watkins was the official whistleblower but let us not forget those who had suspicions all along.  Among the many that were close to Enron’s top echelon, there were a few who stood out in questioning the practices of Enron and its executives. One veteran trader, Mike McElroy, was apprehensive about Enron’s steady high profits but did not make his uneasy feelings public. Several auditors assigned to Enron warned Lay that his traders were manipulating earnings, destroying daily records, and gambling beyond their capacity but Lay decided to do nothing with those findings.

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