Report: Ex-Reagan aide may be charged
Former budget director David Stockman could soon face federal charges related to accounting at bankrupt auto parts manufacturer, newspaper says.
NEW YORK (CNNMoney.com) -- Former Reagan administration budget official David Stockman could be hit with federal criminal charges for incomplete disclosures and improper accounting practices at a now-bankrupt auto parts maker he once headed, according to a published report.
The Washington Post reported that a grand jury indictment sought by U.S. Attorney Michael Garcia in Manhattan and officials at the U.S. Postal Inspection Service could be revealed as early as Monday.
Stockman, a former Michigan congressman who gained national fame as the director of the Office of Management and Budget under President Reagan, worked in the private equity sector after leaving the government, including time at the Blackstone Group.
The paper says that Stockman co-founded Heartland Industrial Partners in 1999 to invest in the auto industry, and through that firm invested more than $350 million in parts maker Collins & Aikman (Charts). Stockman personally shelled out millions in the firm as well, the report said.
Stockman served as chairman and later CEO of Collins & Aikman from 2002 until his ouster in May 2005, days before the company was forced to file for bankruptcy court protections. The paper reports that he allegedly failed to inform board members about its mounting financial woes.
The company announced in November it plans to sell its operations in whole or in parts rather than emerge from bankruptcy as an independent concern. The auto parts sector has been battered by the downturn in production at U.S. automakers such as General Motors (Charts), Ford Motor (Charts) and the Chrysler Group of DaimlerChrysler (Charts). Collins & Aikman supplied parts for all three of those companies.
Former GM parts unit Delphi (Charts), the No. 1 auto parts maker, filed for bankruptcy in October 2005, while former Ford parts unit Visteon (Charts) avoided bankruptcy only with help from its former parent.
The paper reports that Stockman and former officials at Heartland and Collins & Aikman are expected to face criminal charges for their roles in accounting for rebates from suppliers and for allegedly failing to disclose deal terms as the company used its stock five years ago to purchase rivals and consolidate operations.
It also reports that John Galante, a former treasurer and planning director at Collins & Aikman, is cooperating with investigators and is expected to be a key government witness.
Stockman's defense lawyers told the paper last year that unlike other CEOs under investigation for accounting malfeasance, Stockman had no motive to mislead the market because he lost money alongside average investors. They told the paper Stockman did not sell his Collins & Aikman shares even as its price plunged.