A former chief executive of Feltex Carpets Ltd has denied its directors were reticent in disclosing the company's full financial state to the markets in its 2005 half-yearly statements.
Five Feltex directors are on trial at the Auckland District Court accused of failing to make proper disclosures about the company.
John Feeney, John Hagen, Peter Hunter, Timothy Saunders and Peter Thomas face two charges relating to information provided in the company's 2005 half-yearly financial statements.
The Companies Office says investors were not told about the true state of Feltex, which went into liquidation in 2006. ANZ has since recouped all its money but investors are still owed about $40 million.
The charges have been brought under the Financial Reporting Act. Each accused faces a fine of up to $100,000 if convicted.
On Tuesday, Peter Thomas told the court the company's directors had received assurances from auditors that Feltex met all its legal financial requirements for the financial period in question.
Mr Thomas says a meeting in June 2005 with senior ANZ financial executives was the first time company management raised the probability it would breach its covenants with the bank.
He says the company and the bank kept an open dialogue after that meeting and there was no pressure from any of its creditors during this time.
He says a senior ANZ executive told him the company would not be put into receivership.
Earlier, the lawyer for two of the directors says a systematic failure by accounting firm Ernst and Young is to blame for inaccurate financial statements.
Paul Davison, QC, who is representing Mr Thomas and Mr Feeney, told the court Ernst and Young failed report the financial state of Feltex properly.
Mr Davison says the directors relied on the specialist advice of the accounting firm as a new set of accounting standards was being introduced to ensure compliance.
He says the directors took all reasonable steps to ensure compliance and had hired the firm to ensure this happened and there was no wilful intent by the directors to avoid or make misleading financial statements.