The two men allegedly made millions through the company unlawfully, spending the money on luxury cars and a yacht, among other things, prosecutors said.
Pelullo devised the plan, with a man named William Maxwell, to take over FirstPlus, prosecutors said.
The plan called for making false allegations and threatening a lawsuit against a board member of FirstPlus, forcing that person to use his influence and persuade the board to give up control of the company, prosecutors said.
Prosecutors cited a letter Wednesday as evidence of such allegations.
The letter was allegedly written by Jack Draper, who at one point worked with Phillips at the company. The letter accused Phillips of using the company as his "personal checkbook."
Phillips, who denied the allegation, said he believed someone other than Draper wrote the letter. That someone, Phillips alleged to jurors, was Maxwell, who authorities said was working with Pelullo and Scarfo to take over the company.
Maxwell's brother, John, became CEO of the company after the takeover, prosecutors say.
Draper "just wasn't capable of drafting a letter like this," Phillips said, citing the detail.
Phillips also recalled one of the first times he met Pelullo, to whom he was introduced by one of the Maxwell brothers, he said.
Phillips, in court, said that Pelullo accused him of being "asleep at the wheel" and told him that the takeover of FirstPlus would not be happening if Phillips was on top of things.
Phillips said that he eventually talked to company board members and that they decided to give up control of the company.
On Thursday, defense attorneys questioned the stability of FirstPlus before that moment, pointing to Phillips' affairs with coworkers as a sign of its fragility.
Mark Catanzaro, the attorney for John Maxwell, named two of the three women with whom Phillips admitted having affairs. "The third one, you can't even remember her name, correct?" Catanzaro said.
Phillips said he could not.
"Is that your idea of a professional atmosphere?" Catanzaro asked.
After being ordered by the judge to answer, Phillips replied, "It's not professional, no."
Michael Farrell, the attorney for Pelullo, repeatedly asked Phillips whether he was physically harmed by Pelullo. Each time, Phillips replied, "No."
The trial began in January and is expected to last at least through April.