NEW YORK (AP) — David Stockman, a budget director in the Reagan White House, was charged in an indictment unsealed yesterday with overseeing a sweeping fraud at a troubled auto-parts supplier that he led before the company collapsed into bankruptcy.
Mr. Stockman, 60, was one of four former top Collins & Aikman Corp. executives named in the federal indictment. Four former company employees, including a former treasurer, have pleaded guilty in the case, prosecutors said.
At a press conference, U.S. Attorney Michael Garcia said Mr. Stockman and his co-defendants “resorted to lies, tricks and fraud” from 2001 to 2005 to hide the truth about his failing company from investors and creditors.
Mr. Garcia said Mr. Stockman let the company’s employees mislead creditors about the company’s revenue and the ability of Collins & Aikman to pay its bills until the company was forced to enter bankruptcy proceedings in May 2005.
The government said Mr. Stockman personally decided which of the company’s suppliers and creditors would get paid and managed all ofthe company’s liquidity during the crisis.
Collins & Aikman made auto interiors, carpets, acoustics, fabrics and convertible tops.
The company, based in Southfield, Mich., cooperated in the investigation and was rewarded with a nonprosecution agreement under which it will continue to help the government, prosecutors said.
The indictment charged Mr. Stockman and three others with conspiracy to commit securities fraud, making false statements in annual and quarterly reports, making false entries in books and records, lying to auditors and committing bank fraud, wire fraud and obstruction of an agency proceeding.
The others charged in the indictment were J. Michael Stepp, 62, of Charlotte, N.C.; David R. Cosgrove, 48, of Rochester, Mich.; and Paul C. Barnaba, 37, of Orion, Mich. All three pleaded not guilty and were released on $500,000 bail. They did not comment.
After he was freed on $1 million bail, Mr. Stockman walked out of the courthouse smiling.
“I have done absolutely nothing wrong, except to help save this company from a very dire circumstance,” he told reporters. “All of my actions were motivated by an effort to save the company.”
Mr. Stockman’s attorney, Elkan Abramowitz, said the evidence would show there was no looting or phony transactions, only disputes over accounting transactions. “We think this is not a crime.”
Craig A. Stewart, a lawyer for Mr. Cosgrove, said he would “discourage anybody from rushing to judgment” in the case.
Four others faced charges related to the scandal in separate court papers and had pleaded guilty, prosecutors said.
Separate civil fraud charges were filed by the Securities and Exchange Commission.
A spokesman for Collins & Aikman had no comment.
Mr. Stockman was President Reagan’s budget director from 1981 to 1985. He created a storm early in his tenure when he told an interviewer that he thought the administration’s signature “trickle-down” economics policy was a “Trojan horse” for the rich and predicted huge budget deficits. He said later he was summoned to the White House “woodshed” for his comments.
Mr. Stockman apologized and kept his job until 1985, when he resigned and wrote a book of scathing criticism of Mr. Reagan and his top aides.
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