Ex-Reagan budget director indicted
Ex-Reagan budget director indicted
By Brooke Masters in New York
Copyright The Financial Times Limited 2007
Published: March 26 2007 23:35 | Last updated: March 26 2007 23:35
A New York federal grand jury on Monday charged David Stockman, who served as President Ronald Reagan’s budget director, with conspiracy, obstruction of justice and six counts of fraud, saying he misled investors in Collins & Aikman, a troubled car parts maker.
Mr Stockman’s private equity company, Heartland Industrial Partners, was the single largest shareholder in Collins & Aikman, and he served as the company’s chief executive from 2003 to May 2005. The Troy, Michigan, company declared bankruptcy a week after he stepped down.
Mr Stockman, a former Michigan congressman, drew national fame as the whizz-kid director of the Office of Management and Budget.
Known for espousing supply-side economics, Mr Stockman helped push through Mr Reagan’s first-term tax cuts but later grew disillusioned by the enormous deficits that followed.
Michael Garcia, the US attorney who brought the charges, alleged that between 2001 and 2005 Mr Stockman repeatedly misled investors and Collins & Aikman’s bankers about the company’s financial condition.
Three other top Collins & Aikman executives, including former chief financial officer Michael Stepp, were charged along with Mr Stockman and are awaiting trial. Four mid-level employees have pleaded guilty to conspiracy charges in the past few weeks in connection with the alleged scheme. All of them also face civil fraud charges filed by the Securities and Exchange Commission.
“They resorted to lies, tricks and fraud. This was an effort to buy themselves more and more time” to solve the company’s deepening financial troubles, Mr Garcia said. The allegations include disguising loans as revenue and booking revenue before it was earned. Collins & Aikman will not be charged criminally.
Mr Stockman, 60, called the charges “implausible”. He and his lawyers repeatedly met government lawyers before the indictments in the hope of heading off government action.
“My fund owned 40 per cent of the voting stock. During the period at issue we bought an additional $25m on 150 trading days and sold none.
“We weren’t trying to deceive ourselves or anyone else,” Mr Stockman said. “My actions were motivated by the goal of saving the company.”
Vince DiBlasi, Mr Stepp’s attorney, said his client had relied on the company’s accountants, a defence that outside lawyers said could be successful.
Heartland charged Collins & Aikman more than $40m in advisory and other fees including $20m that went directly to Mr Stockman, according to Linda Chatman Thomsen, SEC enforcement director.
By Brooke Masters in New York
Copyright The Financial Times Limited 2007
Published: March 26 2007 23:35 | Last updated: March 26 2007 23:35
A New York federal grand jury on Monday charged David Stockman, who served as President Ronald Reagan’s budget director, with conspiracy, obstruction of justice and six counts of fraud, saying he misled investors in Collins & Aikman, a troubled car parts maker.
Mr Stockman’s private equity company, Heartland Industrial Partners, was the single largest shareholder in Collins & Aikman, and he served as the company’s chief executive from 2003 to May 2005. The Troy, Michigan, company declared bankruptcy a week after he stepped down.
Mr Stockman, a former Michigan congressman, drew national fame as the whizz-kid director of the Office of Management and Budget.
Known for espousing supply-side economics, Mr Stockman helped push through Mr Reagan’s first-term tax cuts but later grew disillusioned by the enormous deficits that followed.
Michael Garcia, the US attorney who brought the charges, alleged that between 2001 and 2005 Mr Stockman repeatedly misled investors and Collins & Aikman’s bankers about the company’s financial condition.
Three other top Collins & Aikman executives, including former chief financial officer Michael Stepp, were charged along with Mr Stockman and are awaiting trial. Four mid-level employees have pleaded guilty to conspiracy charges in the past few weeks in connection with the alleged scheme. All of them also face civil fraud charges filed by the Securities and Exchange Commission.
“They resorted to lies, tricks and fraud. This was an effort to buy themselves more and more time” to solve the company’s deepening financial troubles, Mr Garcia said. The allegations include disguising loans as revenue and booking revenue before it was earned. Collins & Aikman will not be charged criminally.
Mr Stockman, 60, called the charges “implausible”. He and his lawyers repeatedly met government lawyers before the indictments in the hope of heading off government action.
“My fund owned 40 per cent of the voting stock. During the period at issue we bought an additional $25m on 150 trading days and sold none.
“We weren’t trying to deceive ourselves or anyone else,” Mr Stockman said. “My actions were motivated by the goal of saving the company.”
Vince DiBlasi, Mr Stepp’s attorney, said his client had relied on the company’s accountants, a defence that outside lawyers said could be successful.
Heartland charged Collins & Aikman more than $40m in advisory and other fees including $20m that went directly to Mr Stockman, according to Linda Chatman Thomsen, SEC enforcement director.
posted by Carlos T Mock @ 10:40 AM
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