Former Enron executives lied to investors about its financial state because they knew the truth would destroy the company, a court has heard.
Testifying at the trial of Ken Lay and Jeffrey Skilling, former Treasurer Ben Glisan Jr said his bosses were full aware of the firm’s growing debt.
He said Mr Lay asked him about managing the firm’s accounts in 2001 to avoid a cut in Enron’s credit rating.
Glisan Jr is the only former Enron executive currently in jail.
“By the summer of 2001 we had mounting debt, our balance sheet was well levered, we had a great deal of debt to carry for the credit rating we had, we were not generating much cash flow,” said Glisan.
A credit downgrade would have been disastrous for Enron because it borrowed heavily to finance its energy trading operations and to pay for its failing operations, he said.
Enron collapsed into bankruptcy in December 2001 after disclosures that it falsified accounts to hide debt and inflate profits.
Founder Kenneth Lay faces seven charges over accounting irregularities along with former Enron chief executive Jeffrey Skilling.
Glisan went to prison in 2003 after pleading guilty to a conspiracy charge in exchange for a five-year sentence.
Mr Lay and Mr Skilling face multiple charges of defrauding investors, but have pleaded not guilty, blaming Enron’s collapse on what they call rogue employees such has Glisan and former chief executive officer Andrew Fastow.
Mr Fastow has already testified to setting up partnerships designed to help the firm hide losses of millions of dollars.
Earlier this month, Mr Fastow pleaded guilty to conspiracy and is facing 10 years in jail.
Prosecutors have said they are nearing the end of their case in the trial which has, so far, lasted eight weeks.