Enron Got Advice on How to Deal With Inquisitive Employees

Days after Enron executive Sherron Watkins delivered an explosive memo to then-company chairman Kenneth Lay, an attorney at Enron Corp.'s outside law firm advised the company on how to handle employees who questioned Enron's accounting practices, a lawmaker leading one of the congressional investigations of the company told Fox News.

"They're asking the lawyers ... what happens if we fire her?" Rep. Billy Tauzin, R-La., chairman of the House Committee on Energy and Commerce, said on Fox News Sunday.

Days before the lawyer's Aug. 24 correspondence, Watkins wrote Lay a memo questioning the use of outside partnerships, run by Enron executives, to keep hundreds of millions of dollars in debt off the parent company's books.

E-mail dated Aug. 24 from Carl Jordan, a lawyer for the Houston firm Vinson & Elkins, provided Enron employee Sharon Butcher with "thoughts on how to manage the situation with the employee who made the sensitive report." Tauzin said Butcher worked for James V. Derrick Jr., Enron's general counsel.

The e-mail noted the employee "requested reassignment to another department," then advised, "Assuming a suitable position can be found, I recommend documenting in memo form that the transfer is being effected per her request."

"It's the ultimate in skullduggery," said Ken Johnson, spokesman for the House committee.

Jordan later summarized "the possible risks associated with discharging (or constructively discharging) employees who report allegations of improper accounting practices."

"There is the risk that the discharged employee will seek to convince some government oversight agency ... that the corporation has engaged in materially misleading reporting or is otherwise noncompliant," the memo read.

Tauzin said Enron's former chief financial officer, Andrew Fastow, "did try to get Sherron Watkins fired. We know that. ... The fact that they were asking Vinson & Elkins to tell them what are the consequences of doing this means somebody was thinking about it."

Messages left with Enron and Vinson & Elkins seeking comment were not returned.

The Associated Press contributed to this report.