Stockman indicted
[given the federal prosecutors’ kill rate, Stockman’s future is not
so bright]
Washington Post - March 26, 2007
Ex-Reagan Budget Director Charged By Carrie Johnson Washington Post Staff Writer
Federal prosecutors announced conspiracy and securities and bank
fraud charges this morning against Reagan-era budget director David
A. Stockman, accusing the former Republican lawmaker of misleading
investors about the finances of a troubled Michigan auto parts company.
Stockman, 60, surrendered to authorities early today and appeared
before a federal magistrate judge in Manhattan this afternoon. He
entered a plea of not guilty to the charges and was released on a $1
million bond.
The grand jury indictment includes allegations that Stockman engaged
in securities fraud and made overly optimistic statements to
investors about his company’s financial prospects. The charges are
conspiracy, securities fraud, bank fraud, and obstruction of the SEC
investigation.
Stockman is charged with three other people, including former finance
chief J. Michael Stepp, accounting expert David R. Cosgrove and
another employee, Paul C. Barnaba. They all pleaded not guilty and
were released on bail.
In interviews, Stockman has vigorously denied the accusations, which
carry maximum prison terms of five or 10 years apiece. After his
court appearance today, he again denied doing anything illegal and
said he had been trying to save the company from “a very dire
circumstance.”
The charges stem from Stockman’s tenure as board chairman and chief
executive of Collins & Aikman, which at one point equipped 90 percent
of the vehicles manufactured in North America with dashboards and
floor mats. Squeezed by the nation’s three largest automakers, the
company filed for bankruptcy protection in May 2005, a few days after
board members pressured Stockman to resign.
Stockman and defense lawyer Elkan Abramowitz repeatedly met with
government officials in an unsuccessful bid to avert criminal
charges. The SEC today filed a joint civil case that accuses Stockman
of downplaying the company’s cash squeeze in a March 17, 2005,
conference call with analysts and investors.
Stockman’s private investment firm, Heartland Industrial Partners,
lost more than $350 million upon the company’s collapse, and Stockman
personally lost $13 million more. Stockman argues that he and
Heartland purchased Collins & Aikman stock on 150 separate trading
days leading up to the bankruptcy, never selling their shares.
“My actions involve no wrongful gains,” he said in a telephone
interview conducted before he turned himself in to authorities. “The
charges consist of hyper-technical accounting and disclosure items
which reflected reasonable business judgments and good faith
applications of accounting rules.”
As a private investor at the Blackstone Group and later at his own
private equity firm, Stockman grew wealthy enough to amass homes in
Greenwich, Conn., and Aspen, Colo. He returned to public view five
years ago, when he took over day-to-day control of Collins & Aikman.