Watney's File is an item that can be found hidden in a copy of Crime and Punishment in the bookcase of Dr. Carrington's Office.
Reading it, one will discover that it details the criminal career of Watney Little, described as a "con-man extraordinaire". The file has a long and lengthy list of offenses, which include fraud, conspiracy to commit fraud, and various degrees of larceny.
The investigations into Watney Little's crimes were, according to the file, conducted by Scotland Yard. The last entry describes Little's recent escape from Dartmoor Prison.
Clipped to the outside of the folder is a small handwritten note that reads simply, "Remember our deal." Apparently this file was provided in exchange for somebody's silence...or service.
The file can be shown to Watney Little if he is still active and roaming the museum when you find it, but since he is impersonating Archibald Carrington III, he will deny knowing Watney Little or associating with criminals like him. The letters 'C' and 'P' written in blood after the murder of Watney Little clearly point to the file, but it can be found before the murder.