Washington ? Enron executive Sherron Watkins said Thursday it was common knowledge at the company that partnerships were used improperly to hide debt and inflate profits but chairman Kenneth Lay was duped into acceptance and others were intimidated into silence.

Watkins, who wrote Lay a memo in August warning that Enron could collapse and later urged him to “come clean” to save the company, described a tense atmosphere in which few challenged top executives, especially Andrew Fastow, the architect of some of the partnership transactions.

“I did feel like a lone fish swimming upstream,” Watkins told a House Energy and Commerce investigations subcommittee. She said she struggled last year to persuade Lay and other executives to fix the problems that would drive the company under.

In contrast to lawmakers’ sharp, often skeptical comments during other Enron executives’ appearances, Watkins was welcomed on Capitol Hill as a breath of fresh air amid the stench of the Enron case.

“You were the conscience of this corporation. You warned them. You are a hero,” Rep. Edward Markey, D-Mass., told her.

Enron’s bankruptcy last December was the largest corporate failure ever, throwing thousands of employees out of work, leaving their retirement accounts in shambles and causing investors around the country to lose billions of dollars as Enron stock became virtually worthless.

Watkins said that when she brought her concerns to Lay, calling Enron a “crooked company” during a half-hour meeting in August, “he winced” and promised to look into the problems. Still, Watkins said, it appeared Lay “didn’t understand the gravity of the situation.”

“You’re basically saying he didn’t get it?” asked Rep. Billy Tauzin, R-La.

“Yes,” replied Watkins.

Contradictions

Repeatedly, Watkins’ recollection of events clashed with those of former Enron chief executive Jeffrey Skilling, who testified to lawmakers last week that he knew nothing improper about the partnerships that investigators say hid more than $1 billion in debt, inflated Enron’s profits and eventually triggered the company’s collapse.

Watkins called Skilling “a very intense, hands-on manager” and said she “would find it hard to believe that he was not fully aware” that Fastow’s partnerships were largely financed by Enron stock contrary to normal accounting practices.

She said she believed that Skilling and Fastow  along with Enron’s accounting firm, Arthur Andersen and its outside legal advisers  “did dupe Ken Lay and board.”

When discussing the partnerships with Lay, “they were swindlers in the emperor’s new clothes discussing the fine material that they were weaving,” she said of Skilling and Fastow.

She said a dozen or more executives knew the partnerships were improper and dangerous. Still, the subject was relegated to talk “around the water cooler” as people were intimidated by Fastow and Skilling.

Watkins said she, too, hesitated to take her concerns to Lay and initially raised her warning that Enron could “implode in a wave of accounting scandals” in an anonymous memo. But when she heard that Fastow might be promoted to replace Skilling, who was resigning, she asked to see Lay.

When Fastow learned of the meeting, he demanded that she be fired and commandeered her computer, Watkins said. She is still vice president of corporate development at the company.

Fastow and three other executives who were at Enron have refused to testify, pleading the Fifth Amendment before the House panel last week. Lay did the same in the Senate this week.

Response to testimony

Skilling’s attorney, Bruce Hiler, disputed Watkins’ statements. “Everything she said about my client is based either on hearsay, rumor or opinion,” he said. “She did not talk to my client. She has no basis in fact for her views.”

Watkins said she knew she was taking risks by raising her concerns to the highest level of the company, bypassing Skilling and Fastow.

She took care to keep her notes and copies of her memo in a safe place outside Enron’s corporate headquarters and said that at times she feared for her safety.

“Why were you afraid?” asked a lawmaker. “It was the seventh largest company in America,” she said, and she was a lone voice speaking out  although not publicly. She said she had been reluctant to take her concerns outside the company or to federal regulators because “I didn’t want to hasten our demise.”

Senior Enron executives have been criticized for unloading about $1 billion worth of Enron stock before it lost nearly all its value, and Watkins said she, too, sold about $31,000 worth last August. She sold an additional $17,000 worth last fall.

Rep. John Dingell of Michigan, the panel’s ranking Democrat, called her “an extraordinary and courageous woman” and a “bright spot” in a company where executives turned a blind eye to abuses.

Rep. James Greenwood, R-Pa., the subcommittee chairman, called her valiant and “a loyal company employee.”