Chris Richards / Arizona Daily Star 2007

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An executive of First Magnus Financial Corp. testified in U.S. Bankruptcy Court this morning that executives thought until the end that they would be able to pay employees.

First Magnus Chief Financial Officer Gary Malis was questioned by a bankruptcy judge today about circumstances that led to the company's filing for bankruptcy without paying employees.

Malis told U.S. Bankruptcy Judge James Marlar executives were doing everything they could to keep the business afloat before it collapsed Aug. 16.

But at the time, Malis said, the executives did not believe paying workers would be a problem.

"We knew it was going to be a crisis, but we did not think it (paying workers) was going to be an issue," Malis told the judge. "It happened quite suddenly, sir."

Malis said some of the company's cash was kept in accounts controlled by creditors. After the crisis in the credit market erupted, the company lost access to those accounts and couldn't pay workers, Malis said.

Malis' testimony came on the second day of a hearing to consider the company's plan for liquidating its assets and paying creditors. First Magnus employed about 800 people in Tucson and about 5,500 nationwide before its sudden collapse and subsequent bankruptcy filing in August last year.