David Shanks

Apple’s head of iTunes, Eddy Cue, will testify Thursday as the central witness in the Justice Department’s lawsuit against the tech giant for allegedly conspiring to raise e-book prices.

According to prosecutors, Cue was the chief liaison between Apple — under late founder Steve Jobs — and five publishers, all trying to create a new model for e-book sales that would raise prices above Amazon’s average $9.99 offerings.

Prosecutors said Cue coordinated a joint plan for the publishers to move away from Amazon’s wholesale e-books model.

Apple Inc. (AAPL) executives were prepared to abandon plans to enter the e-book business on the eve of the company’s 2010 debut of the iPad, Penguin Group USA Inc. Chief Executive Officer David Shanks testified in the U.S. government’s civil antitrust trial against Apple.

Shanks, called on the second day of the trial in Manhattan federal court, yesterday described his company’s decision to sign a deal known as an agency agreement for Apple to sell Penguin’s electronic books. He said Penguin signed on after initially resisting Apple’s pricing model.

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