Former Reagan Aide Stockman Charged with Securities Fraud
David Stockman, a former top budget official in the Reagan White House, was charged with securities fraud related to alleged financial misdeeds at an auto parts company he headed before it collapsed into bankruptcy.
Stockman served as budget director under President Reagan and was a former chairman and CEO of Michigan-based Collins & Aikman. Stockman and others are accused of misleading the company's investors to hide its declining financial condition, according to the indictment brought by federal prosecutors in Manhattan.
Stockman "hid the full truth from the company's investors and lenders," Manhattan U.S. Attorney Michael Garcia said at a news conference.
He said that Stockman and other executives "resorted to lies, tricks and fraud" to boost Collins & Aikman's financial performance when they could not improve it legitimately.
Stockman and three others -- former Collins & Aikman executives J. Michael Stepp, David Cosgrove and Paul Barnaba -- were charged in a criminal indictment unsealed on Monday with conspiracy, securities fraud and other charges related to the alleged scheme. Prosecutors said the fraud lasted from December 2001 until the company filed for bankruptcy in May 2005.
Four other former company officials have pleaded guilty to criminal charges related to the alleged scheme, bringing the total number of people charged in the case to eight, prosecutors said.
Collins & Aikman was not named in the indictment. Garcia said his office had reached a non-prosecution agreement with the company, which has agreed to continue to cooperate with the government in its investigation.
Stockman, in a statement posted on his lawyer's Web site, said that the government's charges were implausible.
"My actions were motivated by the goal of saving the company, its investors and thousands of employees from a brutal financial squeeze by the Big Three automakers," he said. "There is not a hint of wrongful gain."
Stockman left the company five days before it filed for bankruptcy.
Separately, the U.S. Securities and Exchange Commission brought civil charges against Stockman and other individuals, as well as against the company. The SEC said the auto parts supplier has settled the charges, without admitting or denying the allegations. The agreement requires court approval.
Collins & Aikman remains under bankruptcy protection and is in the process of selling its remaining assets. A former Michigan congressman, Stockman headed the Office of Management and Budget during the Reagan administration. He became famous as a promoter of supply-side economic policies, dubbed "Reaganomics."
Stockman became a private equity investor after leaving government. He joined Collins & Aikman in 2002, soon after Heartland Industrial Partners, a buyout fund that he co-founded in 1999, bought a controlling stake in the company. Stockman and Heartland lost hundreds of millions of dollars when Collins & Aikman sought bankruptcy protection.
Last week, in anticipation of government charges, Stockman told The Wall Street Journal he would "vigorously fight" any federal criminal charges filed against him.
A Collins & Aikman representative was not immediately available to comment on the indictments.