They had millions of dollars coming in, but it was never enough to pay everyone back.

The first days of testimony in the trial of Ted James Johnson Jr., the one-time Giles County financial adviser and public official accused of fraud, paint a picture of a would-be investment firm locked in grueling churn, frantically hunting new money amid growing debt in a classic Ponzi scheme.

Not that it started that way, testified Frank Graham Farrier Jr., Johnson's former partner and fellow defendant in a 42-count federal indictment handed down last year. Earlier this month, Farrier pleaded guilty to various charges linked to securities fraud and agreed to assist authorities.

On the witness stand Tuesday and Wednesday, the second and third days of what is expected to be a three-week jury trial in Roanoke's federal court, Farrier recounted how he and Johnson launched Mountain Investments in 1992 in an attempt to get rich from commodities trading. Neither knew much about it, but Johnson, who had been Giles County's circuit court clerk and commissioner of the revenue, and Farrier, an accountant, thought they could figure it out as they began collecting money from investors.

Johnson and Farrier were Giles natives, well-connected throughout the county and beyond, and they quickly began attracting interest with rate schedules that promised a 23 percent annual return on an investment of $25,000, and higher returns for larger amounts. By 1999, they had brought in more than $5 million, Assistant U.S. Attorney Jennie Waering said.

But very little of the money was invested, and despite investigating more than 40 trading systems and spending about $250,000 on seminars and investment programs, the company never had a profitable year from its market activities.

Instead, Farrier said, he and Johnson paid what they'd promised investors by finding more investors, and using the new money to pay old obligations, as well as their personal expenses. It was the same scheme used by Charles Ponzi, the swindler who in 1920 amassed a fortune in Boston before being discovered.

Mountain Investments had been in business for four or five years before the partners openly discussed what they were doing, Farrier said. He recounted how Johnson one day said, "We're Ponzi-ers."

"We've got to trade," Farrier said he replied.

But what little trading they did continued to lose money, and the pair continued to stay afloat only by finding new investors.

That must have been complicated, said U.S. District Court Judge Samuel Wilson, adding, "How could you sleep?"

Farrier's reply could not be heard from the spectator benches.

The trial is set to resume this morning.