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Vinson & Elkins, which was once Enron Corp.’s go-to outside law firm, took some major hits from Sherron Watkins last week during her testimony in the criminal trial of former Enron Chairman Kenneth Lay and former Enron Chief Executive Officer Jeffrey Skilling. Watkins testified March 15 that an investigation into possible accounting irregularities at Enron conducted by V&E in the fall of 2001 was “bogus” in her estimation. At one point in her testimony, Watkins suggested that V&E may have breached a duty to Enron, once a high-flying energy company, by failing to fully investigate the complaints she brought to Lay in August 2001. “I thought it was going to be a full-blown investigation,” testified Watkins, who spent about five hours on the witness stand. Watkins testified that V&E did not contact all of the former and current Enron employees she thought might provide information about the accounting she found problematic. V&E issued a report Oct. 15, 2001, titled “Preliminary Investigation of Allegations of an Anonymous Employee,” which the firm gave to Enron. Watkins said lawyers from V&E, who were hired by Enron General Counsel James Derrick to look into Watkins’ allegations, met with her in October 2001 to tell her the results of their investigation. At that meeting, Watkins testified, V&E partner Joe Dilg became emotional. “His voice started to shake. . . as he talked to me. I thought this man was about to cry,” Watkins testified. “What in the world is going on? Why is this very senior, experienced, top-dog lawyer sounding like this when he was talking to me?” Later in the day, under cross-examination, Watkins testified that V&E may have breached a duty to Enron by failing to do a full investigation at that time into her allegations. “They have a duty to the corporation. It is a duty they have if they believe representatives of the company have become corrupt. I do believe they broke the law,” Watkins testified under aggressive cross-examination by Chip Lewis, a defense attorney for Lay. “Are you telling these ladies and gentlemen [of the jury] that V&E was involved in some cover-up?” Lewis asked Watkins. “Why else would Joe Dilg’s voice sound like that? I’ve never seen such an experienced, mature, well-regarded lawyer act so nervous with me,” Watkins replied as she rubbed her throat. “I think he hated what he was doing.” Dilg, the 720-lawyer firm’s managing partner, says: “I really don’t want to comment on testimony in an ongoing criminal trial. I don’t think that’s a professional thing to do.”
Brenda Sapino Jeffreys is a reporter for Texas Lawyer , an ALM publication.

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