GREENVILLE — After hearing in early 2002 that the company he chaired was headed for collapse, Earle E. Morris Jr. did not mince words: "That's it. How are we going to be able to sell these notes and debentures to the public?"

In tearful testimony on Saturday, the former president of Carolina Investors quoted Morris as having made that statement a year before the company's bankruptcy. Prosecutors say Morris spent much of the next year lying to investors about the company's true condition.

Larry Owen's testimony came four months after pleading guilty to similar charges. He sat in the same chair where a slew of witnesses testified against him in July. This time, Owen found himself helping the same team of state attorneys, in hopes of securing a lenient sentence for himself.

With a halting voice and occasional tearful statements, Owen explained how he lied to the state, investors and his family since 1998 — when Carolina Investors' parent company HomeGold Financial first ran into trouble.

Owen spent the entire morning recalling how he and Morris routinely received information suggesting the parent company was not the picture of financial health often described by various HomeGold officials.

Joel Collins, Morris' lead defense attorney, spent the afternoon working to chip away at Owen's credibility while trying to reinforce how his client was left in the dark.

Collins showed letters sent to state securities officials from Carolina Investors and signed "Earl E. Morris." The only problem, Collins pointed out, is that Morris' first name is misspelled.

Owen said it was possible he signed the letter, which could have been authored by HomeGold officials.

"Don't you agree that this letter is strong evidence that Mr. Morris was used by HomeGold?" Collins asked.

When Collins asked Owen if he ever said that Morris "was on the outside looking in," Owen said no. That response triggered a lengthy delay that ended Saturday's session.

Collins hopes to show that Owen received more accurate financial information than Morris — despite Owen's testimony that Morris understood the financial problems.

By February 2003 — with expectations that HomeGold would lose $40 million to $98 million in the first quarter — Owen said he knew "there was no way without an act of God that Carolina Investors would survive."

Owen broke down at one point while on the stand, wiping tears away with a tissue handed to him by a bailiff. It was the first of several such moments while he described the final days of Carolina Investors, when Owen said he:

• Considered suicide.

• Called Morris for answers. Owen said Morris said he would talk to HomeGold officials about the problem.

• Tried being relieved by rosy predictions made by HomeGold officials. But he also said those predictions no longer carried much value with the Carolina Investors board, because they always failed to come true.

Both companies failed in the spring of 2003. More nearly 9,000 investors, including 20 members of Owen's family, lost their money.

Owen pleaded guilty to 21 counts of lying to individuals and another count of lying to the S.C. Securities Commission. He has not been sentenced yet and did not receive any plea agreement from S.C. Attorney General Henry McMaster, who attended Saturday's session.

Lead prosecutor Sherri Lydon asked Owen why he changed his plea.

"I decided it was time for me to come clean and tell the truth about what happened," Owen said, weeping. "God forgive me."

Reach Werner at (803) 771-8509 or bwerner@thestate.com.