Ex-Reagan official charged in fraud case

David Stockman rose to prominence as former President Reagan's budget director from 1981 to 1985, grabbing attention early in his tenure when he told an interviewer that he thought Reaganomics was a "Trojan horse" for the rich and predicted huge budget deficits.

The 60-year-old, who famously described how he was taken to the White House "woodshed" for his comments, now finds himself under scrutiny again. He was charged Monday with overseeing a sweeping fraud at a troubled auto parts supplier that he led before the company collapsed into bankruptcy.

He was one of four former top Collins & Aikman Corp. executives named in a federal indictment unsealed Monday. Four others, including a one-time treasurer, have pleaded guilty, prosecutors said.

At a news conference, U.S. Attorney Michael Garcia said 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. The company entered bankruptcy proceedings in May 2005 _ one of several collapses to rock the auto parts industry in recent years.

After he was freed on $1 million bail, 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."

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," Abramowitz said.

Collins & Aikman, based in Southfield, Mich., cooperated in the investigation and was rewarded with a deal that calls for the company not to be prosecuted if it continues to help the government.

Stockman became a member of a board of directors in 2000 and was the CEO from 2003 to 2005. The firm makes auto interiors, carpets, acoustics, fabrics and convertible tops.

The indictment charged 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, and lying to auditors as well as committing bank fraud, wire fraud and obstruction of an agency proceeding.

Garcia said Stockman and the others knew that C&A was in financial trouble in December 2001 and began manipulating the company's earnings reports to hide information that could trigger defaults in its deals with bondholders and banks.

The government said Stockman personally decided which of the company's suppliers and creditors would get paid and personally managed all of Collins & Aikman's liquidity during the crisis.

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.

If convicted, the defendants could face up to 30 years in prison on the most serious charge.

Stockman told reporters he had personally lost $13 million in the company's collapse and a business he owned lost $360 million as he tried to rescue the company from a "brutal financial squeeze" by the three big domestic automakers.

"This wasn't any kind of a joyride," he said of efforts to save Collins & Aikman, which included moving into a motel next to headquarters, working long hours without pay and spending millions of dollars of his own money on company expenses. "This was a disaster."

He added: "I didn't line my pockets in any way."

Stockman left his job as director of the Office of Management and Budget in 1985 and wrote a scathing criticism of Reagan and his top aides, "The Triumph of Politics: Why the Reagan Revolution Failed."

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On the Net:

http://www.collinsaikman.com

http://www.usdoj.gov/usao/nys