Stockman charged with Fraud

David Stockman, President Reagan's budget director, was charged yesterday with overseeing an all-encompassing fraud at the besieged auto parts supplier he led. The company Collins & Aikman Corp. collapsed into bankruptcy days after he quit.

Mr. Stockman, 60, of Greenwich, Conn., and three others — J. Michael Stepp, the chief financial officer; David R. Cosgrove, the controller; and Paul C. Barnaba, director of purchasing — now face charges that include bank fraud and conspiracy and obstruction of justice.

An eight-count indictment unsealed in U.S. District Court in Manhattan court yesterday accused the four of misleading creditors about the company's revenues and the ability of Collins & Aikman to pay its bills.

Collins & Aikman, based in Southfield, Mich., made auto interiors, carpets, acoustics, fabrics and convertible tops. The company has been rewarded with a non-prosecution agreement as it is helping the government and prosecutors.

U.S. Attorney Michael Garcia alleged that Mr. Stockman and his co-defendants "resorted to lies, tricks and fraud" from 2001 to 2005 to hide the reality about his failing company from investors and creditors.

After being released on a $1-million bail, Mr. Stockman confidently remarked, “I have done absolutely nothing wrong, except to help save this company from a very dire circumstance. All of my actions were motivated by an effort to save the company."

In fact Mr Stockman said that he acted in the best interest of the organization and personally lost $13-million in trying to save the company from what he called a “brutal financial squeeze."

Claiming that he endured many hardships while working for the company, he said, “In this battle for survival, I moved into a motel next to the headquarters; worked long hours without any compensation; and personally absorbed millions in company expenses."

He also referred to the cause of financial distress at Collins & Aikman Corp. He said, "The massive loss of jobs and money which occurred at C&A was not due to fraud or deception, but was the consequence of an industry melt-down. The government's case amounts to a crimeless prosecution that I intend to vigorously challenge because I did nothing wrong."

Mr. Stockman served as a Michigan congressman from 1977 until Jan. 27, 1981, when he resigned to become the director of the U.S. Office of Management and Budget under former U.S. president Ronald Reagan.