Not Past It - The Enron Whistleblower

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Do we have security at the door?

It’s February, 2002 crowd of anxious, on Lookers fills, an official-looking room and Miss Watkins.

If you would pull the microphone as close as you can and speak up.


All righty would very much.

Appreciate it.

At the front of the room is a woman with a neat blond Bob and a printed silk scarf.

Tied around her neck.

She sitting at a long table facing a panel of people with a very lengthy named the oversight and investigation subcommittee of the Energy and Commerce Committee and front of her a name placard reads.


Ms. Watkins.

I was highly alarmed by the information.

I was receiving my understanding as an accountant.

Is that a company could never use its own stock to generate a gain or avoid a loss on its income statement?

I continue to ask, Sharon Watkins had been summoned to deliver testimony about the company where she was currently a vice president, Enron the energy Behemoth, which had collapsed months.


Earlier in spectacular fashion crippled, by its own, massive accounting, fraud leading to the largest corporate bankruptcy and US history at the time.

And Sharon.

She was the Lone voice on the inside, standing up speaking, truth to power literally.


From gimlet media.

This is not past it a show about the stories.

We can’t quite leave behind every episode.

We take a moment from that very same week in history and tell you the story of how it shaped our world.

I’m Simone plannin on August 22nd 2001 20 years ago this week.


Sherron Watkins met with the company CEO to warn him of the accounting Scandal.

That was pushing the Need to the brink of collapse and sticking her neck out, Sharon, would expose a whole lot more about Corporate America than just the anatomy of one Scandal.


This is a story of white-collar crime greed and the costs of forsaking your tribe for the greater good.

We’re going to circle back on that action item after the break.

In 1993, Sharon Watkins was in her 30s.


Living in New York City and working for a big accounting firm performing audits on publicly traded companies.

She longed to move back to her beloved Texas though.

So she started looking for jobs, and she thought she found just the right place and a houston-based Energy company in Ron is a company that deals with everyone with absolute Integrity.


We play by all of the rule.

We stand by our word.

We mean, what we say, we say what we mean?

And, On had a reputation for hiring, the smartest people and Sharon wanted to be one of them.

She applied for a job and lucky her.

She was hired as a director and Finance in Ron was very fast-paced.


It was fun to work.


It was very entrepreneurial.

If you had a good idea.

It was actually fairly easy to get a budget approved and Chase that idea.

It was the place to work.

They had a Swanky office building in Downtown, Houston.


In, with all of those good, corporate perks, a gym, on-site a fabulous cafeteria.

Even a Starbucks in the lobby.

Remember, we’re in the 90s Starbucks is the height of culture employees.


Got luxurious getaways.

I used to brag that I didn’t have to pay to go skiing that I’d have one or two trips a year to Beaver Creek and veiled, you know, on in Ron’s dime.

But perhaps, the sweetest perk of all was the famed.


Enron bonus, Sharon says that she often got more than her annual salary all at once.

What you making a whole year more than that, just got deposited in your checking account.

Do you feel really flush with cash?

The reason Enron could make these insane deposits into their employees accounts is that frankly Enron was making a shit ton of money in the energy sector.


The company was founded in 1985, the result of a merger between two natural gas companies.

It owned thousands of miles of pipelines across North America, but by the time Sharon joined Enron had started venturing into less tangible types of business behaving more like a bank not just buying and selling natural gas, but A market where energy could be traded and they seem to be great at it.


They’ve been showing really steep growth for a while, while their peers were growing by single digit percentages.

It wasn’t unheard of for enron’s Revenue to more than double every year people.

Attributed, the Company Success, to three, Enron men in particular, chairman and CEO Ken Lay Co and eventual CEO, Jeff Skilling, and CFO Andy fast, ow.


I know that’s a lot of vague titles and a lot of nondescript dude names.

So let me break it down.

Ken Lay was an Enron man lay had established a long career in the Texas oil and gas industry and was close with people in that scene.


Notably the Bush family.

Well, first of all, Ken Lay is a supporter and I got to know Ken Lay when he was the head of the, what they call the governor’s Business Council in Texas.

Apparently they were so chummy.

George W.

Bush gave him his very own nickname, Kenny boy.


In the corporate.


Ken would often be pictured standing alongside Jeff Skilling.

Jeff had climbed the ladder within and Ron.

He was hired by Ken Lay and 1990 to help the company.

Make the transition from gas pipelines to trading, basically, the reason why and Ron’s growth took off, he was ultimately named CEO and early, 2001, kinda all you need to know about Jeff is that he famously told his interviewer for Harvard Business School, that he wasn’t just a smart.


He was fucking smart.

I’m sure, you know, the type and finally reporting to Ken and Jeff was Andy Fastow and Ron’s Chief Financial Officer since 1998 part of his job included, overseeing the company’s accounting and ensuring the Financial Health of Enron.


He was skilling’s Protege, and kind of a whiz kid under the leadership.

Of these men Enron stock price was strong more than ninety dollars.

A share at its peak.

Almost no one, questioned the company’s success least of all insiders like Sharon Watkins.


I never looked at our financial statements.

I never looked at our quarterly reporting, you know to me it wasn’t part of my job.

You’re just assuming Arthur Andersen’s well-regarded.

They’re auditing things.

It’s all okay.

Arthur Andersen was enron’s accounting.


Confirm and had been since enron’s Inception.

They were one of the most prestigious firms in the industry.

And so everyone who was familiar with Enron the industry experts beat reporters.

Stock analysts.

They assumed everything was above board, but in certain and cidery circles.


Rumors were starting to spread about n.

Ron’s credibility.

There was a sneaking suspicion that the company was flying too close to the Sun and just like Icarus.

And It was about to plummet and sort of an odd background for a journalist.


I had worked as a banker on Wall Street.

A very junior level Banker, in 2001.

Bethany McLean was a reporter at Fortune Magazine and she was hearing these rumors.

She started asking a simple question.

How does Enron make its money?

The people she was questioning should have been able to answer, but instead.


The responses she got were kind of weird like this one analyst she spoke to from a credit agency.

He started laughing and said, well if you figure it out, why don’t you let me know everyone Bethany talk to kept telling her versions of the same thing.


Don’t worry about it sweetheart because they’re just smart and they’re going to figure it out.

So you don’t have to immerse yourself in the details of how they make money.

Why would you care?

They’re smart.

They’re going to make money in March of On Bethany published an article pushing back against the overconfidence in Enron.


The headline was is Enron overpriced.

So the Micah’s title and history, right?

For a story that later became so well-known it landed with a distinct thud ain’t nobody.

Nobody really cared people like yeah.

And runs over price.

Whatever be article may have landed with a thud, but Sharon Watkins.


Remember seeing it Bethany McLean had looked At in Ron’s quarterly financial reporting that was public filed with the SEC and notice that our cash flow was typically negative or break, even the first three quarters of the year and then whammo fourth quarter, we’d have this massive amount of cash flow.


So it was a very good point.

Around the time the article came out Sharon had just been reassigned to work, directly under Andy fast how the CFO Sharon was tasked with looking at all the stuff, the company owned its assets to see what Enron could sell off to make some extra money.


The assets could be anything from a physical gas storage facility to an equity investment in an outside company.

As she poured, over spreadsheets, Sharon started to notice that something was off.

In the way.

The accounting had been structured, the math didn’t add up, Sharon kept trying to understand what she was seeing in the numbers.


Pulling a couple of her colleagues into a meeting.

I just kept asking question after question and finally, they both after more than a couple hours threw up their hands and just said Sharon, we don’t understand how it works.

But you know Arthur Andersen is signed off on it.


Blessed it and some way form or fashion, you know, we don’t understand but it must work but Sharon couldn’t let it go.

She started to try and detangle and Ron’s totally convoluted accounting, structures.

That’s when she noticed some fishy-looking transactions.


So I kept digging and the more I dug, the more, it just looked horrible and I’m like, oh my gosh, we have committed, horrible fraud.

Okay, here’s where things get technical.


I’m like so not a finance person so I’ll let Bethany The Fortune Magazine reporter who is a finance person explain and Ron had devised.


This really unique scheme where they were essentially using the company’s increasing stock price to mask losses in a portfolio of Investments.

They made that were performing disastrously.

Enron was actually losing a ton of money on bad Investments, but they were the smartest.


Is in the room.

All right, at least, smart enough to devise a way to hide their company’s losses using complex accounting Maneuvers.

So, instead of having to go to analysts and investors, who followed the company and say, we made all these bad Investments.

We really suck.


We screwed up.

They figured out a way to hide it by using gains in the company.

Stock price to offset these losses and making the losses go poof and just disappear, essentially, Enron was using their climbing stock price like a magic.

Eraser for all of their poor Investments.


And if it sounds complicated like how does that even work?

Don’t worry.

It was designed to be that way complexity was sort of Enron specialty the Enron bankruptcy examiner.

Said when he went through and Ron’s financial statements, he was like if normal Finance is algebra.


This is like college-level calculus.

It’s so incredibly twisted and Tangled.

And if word of this complicated scheme ever became public, it had the potential to completely tanked the company by July just four months.


After Bethany’s article, Sharon had pretty much connected.

All the dots, everyone else still seem to be wrapped up in the fantasy of Enron.

But Sharon, she was trying to figure out her next move.

My first reaction was to dust off my resume, you know, I hadn’t really updated.


Had it since I was hired at Enron eight years prior, so I had to put, you know, all my Enron experience on it.

I had a two-year-old at home and we were attempting to have a second child.

I put the second child on hold I started interviewing.


And, you know, the back of my mind I was like, okay, when I have the safety, net of another job, you know, I need to get up the courage to tell Skilling, you know, this is Sharon was in survival mode, but she wouldn’t get very far into her job.


Search before the next bomb dropped because two weeks later, Jeff Skilling quit it was August 14. 2001 out of nowhere, The Golden Boy, Jeff Skilling abruptly announced he was resigning for Sharon.


It was the big frantically waving red flag.

She needed to take action.

I can’t explain what a shock that is.

It just my chief executive officer that January, you know, eight months later.

He’s quitting and no good reason was forthcoming.


So that told me, oh, you know, he knows these structures are going to blow up on the company in a couple of years and he’s just getting out while the getting’s good.

You know, he can say oh, when I left the company, we were in, good shape.

Can lay the company’s chairman stepped back in as CEO after Jeff’s departure, and he tried to cool down concerns from employees.


Can I immediately said we’ll have an all employee meeting on Thursday about it, you know, send us questions, do whatever Sharon saw, this as her chance to speak up an invitation.

She wrote up a memo.

I really reacted very nature, you know, let me send.


But one page Anonymous employee hotline, you know, message to Ken Lay.

I did use some pretty inflammatory language.

You know, I think I said has Enron become a risky place to work for those of us who haven’t gotten rich in the last couple years.


Can we afford to stay?

I’m incredibly nervous.

We will implode in a wave of accounting scandals.

I think I was trying to get his attention with that choice of wording.

Sharon decided to submit the memo anonymously.


She wanted to get Ken Lay’s attention.

But without drawing too much attention to herself.

I was nervous.

I mean I printed it out and fold it.

Put it in an interoffice, memo envelope and ask my assistant to, you know, go down to the floor where the employee Dropbox was and, you know, try to be not noticed, you know, don’t stop and talk to friends.


You might know, you know, just slip it in the box and keep Going, two days later at the all company meeting Ken, Lay takes the stage to a packed House of confused.

Employees supposed to be quite a bit of interest in this meeting.

Well, I’m delighted to be back.


I did go to the meeting early so I could get, you know, a close third row seat.

I really wanted to see what the attitude was.

I’m sorry, Jeff did resign.

But you know, he did resign, it was voluntary.

I think that’s all been pretty well explained now, so the board accepted his resignation and asked me to reassume, the CEOs job.


I was reassured.

I mean, can I got a standing ovation?

It was evident that all the employees were kind of happy that he was back as CEO.

He was much more warm and fuzzy than Jeff Skilling.

He have this kind of grandfatherly image and I do think that the next several months next few years are going to be great for Enron and great for in Ron’s employees.


And I heard him say, you know, we want to be doing things the right way, you know, if anyone’s true Lee troubled out there, you know, you can talk to me, Sharon had already sent in her Memo anonymously, but after seeing Ken, Lay’s speech, she felt reassured like he genuinely cared about writing the Enron ship.


So she did what she thought was, right?

And within a day identified myself, to the head of HR and I was on Ken Lay’s calendar.

Just a few days later, Sharon took the long elevator Journey up to the 50th floor to Lay’s office.


It’s never fun to be the bearer of bad news.

But Sharon felt she had to do it.

Maybe there was a chance to save this thing.

At least that’s what she hoped as she waited to be called in.

Waited much like you will have to Dear listener after the break Sharon walks into the lions den.


Welcome back before the break, Sharon Watkins had just revealed herself as the author behind the anonymous.

Memo warning of widespread accounting.

Fraud at Enron the energy Giant.

And on August 22nd 2001.

She headed to a meeting with Enron CEO to lay it all out to Ken Lay.


She came prepared to bolster her claims.

She compiled additional memos and spreadsheets and a PowerPoint slide show.

She wanted Ken Lay to know.

How deep in the shit and Ron was finally the moment arrived and she stepped into his office.


I’ve been nervous, you know kind of practicing what I was going to say and I will tell you that I thought, okay, I’m delivering horrible news.

Arthur Andersen’s done, flawed audit work.

Enron is cooked its books, you know, this is horrible.

But if we’ve cooked the books we need to come clean, you know, we need to fess up if we hope to survive, Sharon took a deep breath.


Breath and waited for a response.

He said, well, have you gone outside the company?

Will you give me time to investigate?

And I said, that’s why I’m here because it’s better off.

If Enron comes clean about manipulating financial statements.

If you’re caught from the outside, you’re almost definitely going to go bankrupt in the months that followed can lay did take some action.


He called on the company’s outside, counsel to conduct an investigation into Sharon’s allegations, but it was kind of a joke.

Look, the lawyers weren’t allowed to do basic things like question and Ron’s accounting practices.

It gave very much investigation.


Light all Flash no substance and behind-the-scenes go told.

Kenny boy, also turned his attention to Sharon herself.

She would later.

Learn that shortly after their meeting can try to fire her.

She would also learn it didn’t happen because there was a real fear that if she did get fired.


She’d Sue.

Zoo and all the evidence of fraud that she documented would come out in the process for her part though.

Sharon didn’t want to stick around and Ron’s finance department.

She asked for a transfer and the company obliged.

It wasn’t exactly great though.


It was a horrible situation.

Everything went South for me and I was down in the HR department with no real work to do over the next several months.

Sharon started to look for other jobs, but to no avail to things.

Got in the way one, 9/11 happened sending waves of uncertainty and instability Rippling throughout the country and to Enron continued to be a growing stain on Sharon’s.


Otherwise pristine resume.

Ever since killing quit his post as CEO.

Enron stock had been tanking in October of 2001.

The company reported massive third quarter losses, The Wall Street Journal launched a series of expose days, Andy fast.


Ow, the CFO behind all the fraudulent dealings got sacked Enron attempted to merge with a rival, but that fell through and in December of 2001.

The company was forced to declare bankruptcy.

Hey Mom, once the world’s largest energy Trading Company.


And now the biggest bankruptcy in history overnight, many of enron’s 19,000 employees lost their jobs and savings.

These Executives help floor meetings and told everyone.

You know, last Friday was your last paycheck, go back to your desk.


Clear out your personal items and go people were saying, what about insurance?

What about Severance?

And it was just kind of like, no, sorry.

And this three weeks before Christmas.

It wasn’t just the Swanky white collar workers in Houston who lost their jobs.


The Enron Corporation was also giving the boot to lots of blue collar workers.

Folks, who worked at utility companies, the Enron had bought over the years.

And a lot of these people had banked, their savings and retirement, and Enron stock.

And now it was worthless.


Of course, Enron leadership.

Saw those stock losses coming up.

Mile away for a couple of years.


They’ve been unloading their shares like crazy to the tune of over 1 billion dollars, worth of stock and his final three years at Enron Ken Lay alone made about 100 million dollars from selling Enron stock.


That sounds like a lot, but actually, he only sold a fraction of his shares, but the top dogs at Enron wouldn’t get away.

So easily the justice department was paying attention to all of this.

This and they started a criminal investigation into possible fraud this week, with Revelations, continuing to emerge about the collapse of Enron Corporation, government investigators focused on how the company managed, to hide its losses and debts from the public and the role on top of that the Securities and Exchange Commission and both houses of Congress started investigating and it’s these investigations which on Earth Sharon’s memo to The Wider World.


Officially crowning her as Enron.

Internal whistleblower.

And that’s how she ended up here testifying before Congress.

In February of 2002.

She was still a full-time Enron employee.

I believe that Enron had a brief window to salvage itself, this past fall, and we missed that opportunity because of mr.


Lee’s failure to recognize or accept that the company had manipulated its financial statements.

These hearings transformed Sharon and her Prospects bleaching the stain of Enron from her resume.

They set her free ready to catch whatever opportunities were coming her way and they were coming.


A couple of months after publicly testifying and DC, Sharon started getting calls for speaking requests to share her story and her take on corporate ethics.

A few months after that and November 2002.

She finally left and Ron, by the end of that year.


She landed herself on the cover of Time magazine’s, famous person of the year issue that year, it was percents Sharon and two other women, Coleen Rowley and A Cooper who had also called out massive misconduct at their own workplaces timed up them the whistleblowers.


To blow the whistle on a massive Corporation.

It takes guts something deep down, in a person’s soul and in Sharon’s case something, akin to a spiritual calling.

There is a parable of the talents and Matthew in the New Testament of the Bible that we’re all given certain talents and that the people who take a risk with the talents are rewarded with come and share, the Masters happiness, and the person that just kind of berries, the talent and Turns it is not and so I do feel like I triggered that biblical promise, so I can’t say I wish I hadn’t have done it because you know, spiritually and emotionally.


There’s been so many amazing things happen, What Sharon did at Enron didn’t just have a positive effect on her.

It also helped bring about some real policy change in 2010 Congress.

Passed the Dodd-Frank Wall Street reform and consumer protection.



This law made sweeping changes to financial regulations in America and created The Whistleblower program run by the Securities and Exchange Commission that partly serves to reward and protect those who report violations of federal Securities laws.


Which, okay, I get incentivize people to come forward.

Sure, but I find it kind of shitty that we’re putting that expectation on individuals to hold these institutions accountable.

Because of the story of Enron is any indication.


It’s really not in most people’s nature to stick their necks out like that and Sharon agrees the strongest impression.

I have from really dissecting Enron and what happened is how important belonging and being part of a tribe is within organizations that good people.


Set by and watched bad things happen, really?

Because they did not want to risk being kicked out of the tribe.

You’ve got to give people a way of addressing bad behavior.


And without the fear that they’ll be, they’ll be ostracized.

People like to belong sometimes to the detriment of their own inner voice.

Telling them.

Hey, there’s something fishy going on here.


Even as Bad, actors are exploiting that loyalty to the tribe, using it to obscure their misconduct.

Just like at Enron.

I’ve been thinking about something that Bethenny McClain, the woman, who wrote The Early Fortune magazine article about Enron said to me in our interview about the lasting Legacy of the company.


I think it was the beginning of the beginning of a sort of cynicism and, and a deserving cynicism about Corporate America that prevails to this this day.

And I think the financial crisis which came shortly thereafter less than a decade after that was a continuation of that in a way.


And I think the failure of institutions in that way dense, all of our Collective faith, it done Society in a way that is really pernicious.

And so, I think that’s that to me, is the legacy of Enron.

But cynicism that Bethany talks about, I totally feel that if you’re a major institution, I’m looking at you sideways.


I’m expecting the worst.

I’m assuming you have no other incentive but to accumulate and hold as much power as possible.

And you’re figuring out how to use me to do that, ugly stuff.

But I agree with Bethenny when she calls it deserved.


Which is why I admire what Sharon did coming forward and proposing.

Hey, we could be doing better, rejecting cynicism and choosing optimism, whatever, whistleblower Gene.

She has that impulse to stand up to the bully.


It feels rooted in a genuine belief that things can change for the better that it’s not too late and it’s worth the risk of being ostracized by the tribe.

If it can serve the greater good and while I’m For people, like Sharon, have that impulse to speak up.


I don’t want to count on it.

I’m much more interested in how institutions plan to rebuild.

Trust, make accountability a priority.

Don’t worry.

I’m not holding my breath, cynicism dies hard.


Not passed it as a Spotify original produced by gimlet and zsp media.

This episode was produced by Kinsey Clark and Laura Newcomb.

Next week.

We are revisiting the coolest toy of the 90s Beanie Babies.


I’m like, I gotta buy these.

I gotta buy these, and I’m like, okay, I’m going to go for it.

I’m going to spend $25 for these gift baskets, just to get the beanies.

The rest of our team, our producer, Sarah Craig and Associate producer, Julie Carly.


The supervising producer is Erica Morrison editing by Andrea, be Scott.

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Lord, and Matt Bowl, original music by Sachs kicks.



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Provision by list Fulton, technical Direction by Zach Schmidt show art by Elysee Harvin and Talia Rahman, the executive producer at CSP media is Zach Stewart Ponte.


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Not past it now, to listen for free exclusively on.

On Spotify and follow me on Twitter at Simone palamon.

Thanks for Hangin.

We’ll see you next week.

This may be an appropriate.


Just tiny word of advice.

Don’t get bogged down in thinking that there are things that Enron was doing that.

You should understand.