Enron vice president saw problems in advance

Enron Corp. vice president Sherron Watkins, who in August voiced fears of an imminent financial crisis at the energy giant, later…

Enron Corp. vice president Sherron Watkins, who in August voiced fears of an imminent financial crisis at the energy giant, later recommended that former chairman Kenneth Lay restate earnings and put the blame on others.

An October 30 company memo from Watkins, obtained by lawmakers ahead of her appearance today before a House Energy and Commerce subcommittee, recommended that Mr Lay say he wrongly trusted other executives and got bad advice from Enron auditor Andersen and outside counsel Vinson & Elkins.

To rebuild investor confidence, Ms Watkins suggested Lay be open about his involvement, or more importantly, "his lack thereof," in the problems that led, just over a month later, to the biggest ever US bankruptcy filing on December 2.

House Energy and Commerce Committee Chairman Billy Tauzin praised Ms Watkins for attempting to draw attention to her concerns inside Enron and that some inquiry within the company did result.

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"But these were not enough to correct matters - indeed some action aimed to hide matters further from public view," the Louisiana Republican said in remarks prepared for the subcommittee hearing.

The Justice Department, the Securities and Exchange Commission and 10 congressional committees are probing Enron's collapse, which has cost thousands of jobs and billions of dollars in shareholder equity.

On November 8, Enron did restate its earnings, saying it had overstated earnings since 1997 by $600 million.

An Enron board report - on the company's dubious business dealings and questionable accounting practices - faults Mr Lay for failing to watch over partnerships created and managed by former Enron Chief Financial Officer Andrew Fastow.