Ken Lay: "There are no accounting issues"

Even as an executive was warning Enron's CEO of impending problems, he was telling the press that all was well.

Published January 15, 2002 10:44PM (EST)

At some point between Aug. 14 and Aug. 31, Sherron S. Watkins, a vice president of corporate development at Enron, sent a letter to CEO Ken Lay, declaring that she was "incredibly nervous that we will implode in a wave of accounting scandals." As the New York Times reported Tuesday, the letter "expressed anguish" about an array of complex partnerships set up by Enron executives.

Her words were prophetic. In November, Enron's announcement that it was slashing the value of its shareholder equity because of losses associated with the partnerships triggered the implosion of the company.

On Aug. 14, Enron's then-CEO, Jeffrey Skilling, resigned, reportedly for personal reasons. On Aug. 20, Business Week interviewed Ken Lay. Here's an excerpt:

"Q: There has been some concern among investors that perhaps there is more to his [Skilling's] resignation than meets the eye, perhaps accounting or other issues that have yet to come to light. Is there anything more?

"A: There are absolutely no problems that had anything to do with Jeff's departure. There are no accounting issues, no trading issues, no reserve issues, no previously unknown problem issues. The company is probably in the strongest and best shape that it has ever been in.

"There are no surprises. We did file our 10-Q [with the Securities & Exchange Commission] a few days ago [Aug. 14]. And, if there were any serious problems, they would be in there. If there's anything material and we're not reporting it, we'd be breaking the law. We don't break the law."

Thanks to reader Patricia Sierra for bringing the Business Week interview to Salon's attention.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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