You can smell the fish sticks from lunch in Sherron Watkins' 60-year-old house near downtown Houston, see the framed pictures of the family vacation and the baby in bunny ears and even one of her country-crooning second cousin, Lyle Lovett. Things have been so hectic, Watkins apologizes, that the Christmas ornaments haven't been put away yet. The daughter of two educators, Watkins grew up in nearby Tomball, where she worked the cash register at the family grocery store and began saving her money. By 1982, she'd picked up two accounting degrees in Austin and quickly found a job with Arthur Andersen. She eventually landed a job with Enron, Houston's red-hot energy trading firm, rising in eight years to vice president for corporate development. Her quick ascent surprised no one, says her husband Rick: "She always had a flair for numbers."
That flair led Watkins last summer to conclude there was something rotten at Enron. The numbers didn't add up. A pair of letters that she wrote to Chairman Kenneth Lay exposed top officials--perhaps including Lay himself--who for months had been trying to hide a mountain of debt, and started a chain reaction of events that brought down the company. Watkins' letters, along with thousands of other documents, are now in the hands of congressional and criminal investigators who are probing how Enron, its pet-rock auditors at Andersen and a host of other supporting actors allowed the country's seventh largest company to suddenly go bankrupt in December. "I am incredibly nervous that we will implode in a wave of accounting scandals," Watkins wrote of Enron's financial health. "I have heard one manager-level employee from the principal investments group say, 'I know it would be devastating to all of us, but I wish we would get caught. We're such a crooked company.'"
Maybe you can only glimpse the soul of a company when it breaks open right before your eyes. But we know now, thanks to Watkins, that Enron hid billions of dollars in debts and operating losses inside private partnerships and dizzyingly complex accounting schemes that were intended to pump up the buzz about the company and support its inflated stock price. We also learned last week that executives at Andersen, the accounting giant that enabled Enron's every move, fretted about the arrangement but saw the chance to double their fees if they just kept their heads down. And now that the party's over and the damage control is in full swing from Houston to Chicago to Washington, just about everyone who helped create this mess is busy pointing fingers, scapegoating the other guys, firing the lower-downs and diming out the higher-ups. Last week what was once envisioned as a new kind of company resembled little more than a circular firing squad of executives, accountants, consultants and lawyers, all fighting to stay in business or, at least, out of jail.