Trial, Day 3: 'Great' is a subjective term

The second day of testimony in the Ken Lay/Jeff Skilling trial didn't go any better for ex-CEO Skilling than the first one did, as former investor relations head Mark Koenig continued his story of adjusted profits and inflated corporate health. Specifically, Koenig said company officials — including Skilling — didn't tell investors about $230 million in quarterly retail division losses during an April 2001 conference call, and in July 2001 he also neglected to mention Enron Energy Services' $726 million debt. Instead, he told investors things were "great" (granted, that's a relative term, but come on!).

Prosecutors also played the tape of an infamous phone call in which Skilling cursed Wall Street hedge-fund manager Richard Grubman when he pressed Skilling on Enron's finances:

"You know, you are the only financial institution that can't produce a balance sheet or a cash flow statement with their earnings," Grubman said. Skilling, laughing, shot back, "Thank you very much, we appreciate it ... asshole."

Koenig said they all just went on with the call and he later had the expletive deleted from as many copies of the taped call as possible.

When it was played in court, Skilling and his attorney Daniel Petrocelli smiled, Lay laughed and so did some of the jurors, though a few minutes later several jurors trained their eyes on Skilling.

Koenig, who pleaded guilty to aiding and abetting fraud, said he helped with the deception because he wanted to keep his job. The defense, of course, is expected to attack Koenig's testimony by asking whether he's lying in the trial, just as he did at Enron. Up next on the witness stand is Ken Rice, the former head of Enron's broadband division.