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HOUSTON - Enron Corp.'s former investor relations chief said Monday he spoke, to no avail, with company founder Kenneth Lay and former CEO Jeffrey Skilling about investors' concerns over murky financial disclosures months before Enron imploded in December 2001.

In his third day testifying in Lay and Skilling's fraud and conspiracy trial, Mark Koenig said the obfuscation continued even as Enron disclosed massive quarterly losses in mid-October 2001, two months after Skilling had resigned and Lay had resumed the role of chief executive officer.

When prosecutor Kathryn Ruemmler asked him if Lay encouraged him to always follow Enron's code of ethics requiring candor, honesty and fairness, Koenig replied, "At times, no."

But Skilling lawyer Daniel Petrocelli challenged the admitted liar's credibility. Koenig pleaded guilty in 2004 to aiding and abetting securities fraud for lying to investors and is testifying under a plea agreement with prosecutors. He told jurors last week that before he cut the deal with the government, he lied to a grand jury investigating Enron because he hoped to avoid being charged with a crime.

"You're still in a mode of trying to protect yourself, aren't you?" Petrocelli asked.

"I don't feel in the last three days I've protected myself," Koenig said, noting that he faces shareholders' lawsuits and will probably lose the $5 million he still has from his Enron days. He forfeited $1.5 million to the government as part of his plea.

He also acknowledged that prosecutors can recommend a lenient sentence if they are satisfied with his cooperation. Aiding and abetting securities fraud carries a maximum penalty of 10 years in prison.

The defense teams have suggested that most of the 16 ex-Enron executives who pleaded guilty to crimes are saying what they believe prosecutors want to hear to avoid lengthy prison terms.

Koenig sometimes appeared uncomfortable as Petrocelli grilled him, fidgeting in the witness chair. He fought back tears when Petrocelli asked how old his children were when he pleaded guilty.

U.S. District Judge Sim Lake called for a break though Koenig composed himself and insisted, "I'm fine." During the break a somber Skilling comforted his weeping wife, former Enron corporate secretary Rebecca Carter.

Later Koenig told Petrocelli he believed he would have been indicted had he not pleaded guilty. While answering a separate question, Koenig said he has two children in college and one in high school.

Lay's lead lawyer, Michael Ramsey, was expected to question Koenig Tuesday.

Enron went bankrupt in December 2001 within weeks of revelations of hidden debt and inflated profits. Prosecutors contend Lay and Skilling repeatedly lied about Enron's health when they knew that accounting maneuvers propped up a facade of success.

The defendants say there was no fraud at Enron except for three former executives who skimmed millions from some deals.

In mid-October 2001 Enron announced more than $600 million in quarterly losses because of money-losing broadband and water ventures and bad investments. The company also wrote down shareholder equity by $1.2 billion because of an accounting mistake that had gone unnoticed for months.

Koenig said Lay was among top executives who wanted to keep that detail out of the company's earnings press release.

"By not putting it in the earnings release, that was an attempt to minimize it," Koenig said.

Lay mentioned the shareholder-equity reduction in a conference call with analysts as a compromise, Koenig said.

Analysts then questioned partnerships run by former Enron finance chief Andrew Fastow that did deals with Enron. Fastow, also expected to testify in the trial, pleaded guilty two years ago to orchestrating schemes to use those partnerships to help Enron manipulate earnings while skimming millions for himself on the side.

Koenig said he attended a meeting where Lay and public relations executives sought to craft explanations about how the partnerships were legitimate because they had been approved by Enron directors and outside auditors and lawyers.

Koenig said he was a "lone wolf" in arguing that "just to say it was approved by the board and the accountants was not going to cut it. They were not happy," he said of the meeting attendees. Koenig also testified Monday that investors questioned the lack of detail in financial disclosures earlier in 2001. "To Mr. Lay and Mr. Skilling, I communicated that," he said.

On a second-quarter 2001 conference call, Skilling touted earnings in Enron's division that included its profitable trading unit, but didn't tell investors that up to half those earnings came from sales of power plants. The division recorded $1.5 billion in income in the first half of 2001, and $670 million of that came from the asset sales.

Koenig said that Skilling lied when he told analysts that Enron didn't track gains on those sales. But Koenig acknowledged he didn't know whether Skilling knew the statement was untrue when he made it.

"There's absolutely no way I can know for a fact what he had in his head," Koenig said.

Skilling faces 31 counts of fraud, conspiracy, insider trading and lying to auditors, while Lay faces seven counts of fraud and conspiracy. Both face decades in prison if convicted. Both sold millions of dollars in stock before Enron went bankrupt in December 2001, but only Skilling faces allegations of improper stock sales.

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