The trial of former Enron executives Ken Lay and Jeffrey Skilling has begun in Houston, Texas, with a prosecutor telling jurors that the case was "about lies".

Prosecutor John Hueston promised to give jurors a look inside the company that collapsed in 2001, triggering the biggest corporate fraud scandal in recent American history.

"You will see that defendants Lay and Skilling knew key facts about the true condition of Enron, facts that the investing public did not know," Mr Hueston said.

Enron, an energy giant that had been the United States's seventh-largest company, collapsed after it emerged that an estimated $40 billion (€33 billion) of debts had been hidden in secret accounts to protect the firm's core balance sheet.

Enron had more than $68 billion in market value before its bankruptcy wiped out more than 5,000 jobs and at least $1 billion in retirement funds.

Mr Lay, Enron's founder and former chairman, faces seven counts of fraud and conspiracy. Former chief executive Mr Skilling faces 31 counts of fraud, conspiracy, insider trading and lying to auditors about Enron's financial position.

If convicted, the two men could spend most of the rest of their lives in prison.

"This is a simple case. It is not about accounting. It is about lies and choices," Mr Hueston told jurors in his opening statement yesterday.

The prosecutor said Mr Skilling and Mr Lay gave false assurances to the investing public that there were no problems at Enron and, in doing so, they chose to lie - a lie that is a crime if it comes from a chief officer of a publicly traded company.

Mr Hueston said that when shareholders buy shares, they buy the right to trust the top company officers.

He played recorded excerpts from a meeting Mr Skilling had with employees of Enron Broadband Services in Oregon and contrasted them with excerpts from an analyst's call eight days later in which the executive appears to be giving opposite messages.

Mr Skilling told employees in March 2001 that the telecom market was in "absolute meltdown" and workers needed to be moved elsewhere in the company because "the whole revenue opportunity we saw is gone or shrunk significantly".

Eight days later Mr Skilling told analysts that the broadband division was "coming along just fine" and "in fact, I'm pretty optimistic about it".

Mr Hueston said that Mr Lay and Mr Skilling also lied to outsiders about the value of Enron Energy Services, the company's energy retail division.

Shortly after Mr Lay heard about the division's terminal problems, he told analysts it was a success, claiming it had a $40 million profit when the prosecutor claims there were really $500 million in losses.

"It was nothing but good news and sunshine to investors. The reality was grim," Mr Hueston said.

The prosecutor said that, between 1999 and 2001, Mr Skilling was paid more than $150 million in salary and compensation, while Mr Lay was paid over $220 million as the company's stock skyrocketed. Mr Hueston told the jury, "as the stock went up, these men got richer and richer".

Lawyers for Mr Lay and Mr Skilling were due to make opening statements yesterday and the prosecution will start calling witnesses today in a case that is expected to last four months.

The defendants say they were unaware of any criminal activity within the company and blame former financial chief Andrew Fastow, who pleaded guilty to two counts of fraud in 2003 and was sentenced to 10 years in prison in return for his expected testimony.

The prosecution's first witness is expected to be Mark Koenig, a former head of investor relations at Enron.

He pleaded guilty in 2004 to aiding and abetting securities fraud and is co-operating with the prosecution. In his plea agreement, Mr Koenig said he misrepresented Enron's value to analysts.