Ex-Enron manager expected to say there was debt conspiracy

Enron's former head of investor relations has testified that the failed energy giant's former chairman Kenneth Lay and chief executive Jeffrey Skilling played a key role in shaping the company's message to investors.

Mark Koenig (50), the first witness in a trial expected to last four months, is expected to testify that there was a conspiracy to hide debt and losses from investors in an effort to boost Enron's share price.

Mr Koenig, whose job was to communicate with industry analysts and shareholders, said it was important that companies give investors accurate information.

"Their investment is at stake. If they're not fully informed, they're being cheated out of some information. And they may not have all the information they need to decide what to do with that investment."

Mr Koenig said that Mr Lay and Mr Skilling took a close interest in the information being communicated to investors and often made changes to press releases that could influence the share price.

Prosecutors say that Mr Lay and Mr Skilling ignored warnings about the true state of the company's health, manipulated financial results and deceived investors while enriching themselves.

Defence lawyers said the defendants were hard-working, civic-spirited figures who tried to save Enron but failed after banks panicked. They said the company, which relied heavily on low-cost capital to finance its trading positions, met liquidity problems following rumours that chief financial officer Andrew Fastow was being investigated.

Mr Fastow has pleaded guilty to defrauding the company of $25 million (€20.72 million) and may testify against Mr Skilling and Mr Lay.

"The odour of the wolf got into the flock and the flock stampeded," declared Michael Ramsey, Mr Lay's lawyer.

Mr Ramsey said that Mr Lay accepted responsibility for the company's collapse but denied any criminal activity.

"Failure is not a crime, bankruptcy is not a crime. If it were, we'd have to turn Oklahoma back into a penal colony," he said.

Describing the failure of Enron as "almost Greek-like in its tragic proportions", Mr Ramsey showed the jury photographs of Mr Lay with former president George Bush snr and former secretary of state Henry Kissinger and listed his charitable works in Houston, where the trial is taking place.

Daniel Petrocelli, representing Mr Skilling, said his client had never been part of any criminal conspiracy and had not been aware of one. "This isn't a case of see-no-evil, hear-no-evil. This is a case of there is no evil," he said.