Sherron Watkins wrote a letter to the SEC on August 15, worried about its rule proposals for whistleblower/s.
“My name is Sherron Watkins, and I am best known as the Enron Whistleblower because I met with our CEO, Ken Lay, in August of 2001 to warn him of massive fraud at Enron. I also contacted a mentor at Arthur Andersen, and I contemplated who I might contact at the SEC.” She stated in the letter, “Although I am technically an internal whistleblower, I wanted to go outside to warn others, but lacked a clear path to make that happen. Thanks to the bounty provisions of the Dodd-Frank law passed in 2010, that path is now clear and I am a firm believer that having that path of reporting to the SEC is essential to helping the securities industry be a safer place of investment for shareholders.
“When I speak on Enron and the warning signs of a cultural rot at an organization, I now add an optimistic sign – how if Dodd-Frank had been in existence in the 90s, I would have been able to contact a law firm and report to the SEC when I was first troubled in late 1996 about two accounting treatments at Enron that became the seeds of the massive fraud to occur a few years later. My firm belief is that by doing so, the SEC would have conducted an investigation, slapped Enron with a fine and told the company to ‘cut it out’ basically. I’d be anonymous via my use of that law firm, Enron would still be alive today and I’d still be gainfully employed there and shareholders would not have lost $60 billion in value.”
Watkins was particularly concerned about two proposals.
“There are two proposed amendments to your extremely successful whistleblower program (File Number S7-16-18) that, if enacted, would gut the program. One is the proposed revision to Exchange Act Rule 21F-9(e), which puts up reporting mechanism hurdles; and the other is proposed revisions to Exchange Act Rule 21F-6, which would place an arbitrary limit on the bounty reward. Please reject these proposed revisions. Not only because your current whistleblower program is successful AND it does prevent future Enron’s (as I’ve outlined in my “if only” best case dream scenario from 1996), but also from a truly personal perspective.”
The revision to SEC Rule 21F-9 (e) was proposed in June; the SEC released a press release which stated in part.
“After nearly seven years of experience administering the whistleblower program, the SEC has identified various ways in which the program might benefit from additional rulemaking. The proposed rules would, among other things, provide the Commission with additional tools in making whistleblower awards to ensure that meritorious whistleblowers are appropriately rewarded for their efforts, increase efficiencies in the whistleblower claims review process, and clarify the requirements for anti-retaliation protection under the whistleblower statute.”
The revision to SEC Rule 21 F-6 was also proposed in June.The revision would limit the award to $2 million or less.
Watkins is a former Vice President at Enron. In August 2001, she alerted then Enron Chief Executive Officer Ken Lay of accounting irregularities.
She was named Time Person of the Year in 2002.