Enron whistleblower tells court of Lay lies

The employee who predicted Enron would "implode in a wave of accounting scandals" took to the stand yesterday to accuse her former boss of lying about the state of the company's finances.

Sherron Watkins emerged as the lone heroine in the story of the energy company's 2001 collapse. Her now-famous memo to Kenneth Lay, Enron's chairman, blew the whistle on the company's dangerous financial deals, and launched her on a career as an author and public speaker.

Jurors in Houston heard that Mr Lay asked if she had raised her concerns outside the company, and promised to look into the issues. And yet, days later, he told employees the company was in rude health.

Ms Watkins said: "If my allegations were true, then those statements were very false."

Mr Lay denies seven fraud charges, while his number two, Jeffrey Skilling, faces 31 charges. It was Mr Skilling's abrupt resignation in August 2001, four months before Enron's bankruptcy, that prompted Ms Watkins to write her memo.

"Has Enron become a risky place to work?" her memo began. "I am incredibly nervous that we will implode in a wave of accounting scandals - and the business world will consider the past successes as nothing but an elaborate accounting hoax."

Ms Watkins described how Enron's chief financial officer, Andrew Fastow, tried to get her fired and have her computer destroyed, after he heard she had spoken to Mr Lay. Messrs Skilling and Lay put most of the blame for Enron's collapse on Fastow, who agreed a 10-year prison sentence in return for testifying against them. Ms Watkins resigned from Enron shortly after its bankruptcy and wrote a book about her experiences, Power Failure.