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Whistle-blower memo began with offer made by chairman to answer employee questions

Updated:

HOUSTON (AP) _ A memo in which an Enron Corp. whistle-blower raised serious concerns that the company would ``implode in a wave of accounting scandals'' was initially a response to chairman Kenneth Lay's promise to answer employee questions, a newspaper reported.

Lay offered on Aug. 14 to answer employees' questions, even anonymous ones, Houston attorney Philip Hilder, who represents Enron vice president Sherron Smith Watkins, told the Houston Chronicle in Saturday's editions. Lay made the offer after chief executive Jeffrey Skilling quit.

The first page of what subsequently became a seven-page memo by Watkins was her initial response to Lay's request, said Hilder, who was relaying Watkins' answers to questions by the newspaper.

Lay met with employees on Aug. 16. Hilder said Lay did not directly address Watkins' concerns. He said Watkins recalled that Lay said ``the visions and values of Enron are slipping'' and anyone still troubled could come and see him, so ``she read between the lines.''

Watkins met with Lay on Aug. 22 and had the other six pages of her memo and was confident that Lay was going to look into her concerns.

The memo was released this week by the House Energy and Commerce Committee. Congressional investigators are looking into reports that other Enron employees came forward to raise concerns about the company's use of questionable partnerships.

Enron has filed for bankruptcy court protection. It has admitted it kept hundreds of millions of dollars in debt off the company's books in partnerships _ which were paying millions of dollars in fees to the Enron executives who ran them.

Hilder said that Watkins was working for chief financial officer Andrew Fastow when she found problems in July with some of Enron's off-the-book deals.

``She was gathering for (Fastow) the impact of the sales of various assets and started to figure there were problems,'' Hilder said.

``Suddenly she's faced with something that doesn't add up. She wondered why somebody else didn't snap to it. A large accounting firm and very bright lawyers had looked at this,'' Hilder said. ``There was self doubt. It was a bold step.''

Hilder said Watkins was scared and nervous about coming forward, but ``felt duty-bound to report it.''

``As far as she knew, she was hanging out there alone. She knew others were concerned, but didn't know of anyone else who had come forward,'' Hilder said.
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