David A. Stockman, the former budget director for President Reagan, was indicted today on charges that he covered up the dire financial state of his company as it was headed into bankruptcy.
Mr. Stockman and three other former executives at Collins & Aikman, an auto parts supplier, surrendered this morning in Manhattan and were later set free on bail.
The charges detailed in the indictment, which was unsealed today, range from bank fraud to conspiracy to obstruction of justice. Four other former Collins & Aikman officials were also charged but pleaded guilty.
The company’s former chief financial officer, J. Michael Stepp, the former controller, David R. Congrove, and the former director of purchasing, Paul C Barnaba, all pleaded not guilty today.
At a press conference, Michael J. Garcia, the United States attorney for the Southern District of New York, singled out Mr. Stockman as the mastermind behind the company’s deceptive financial bookkeeping and efforts to mislead lenders, investors and auditors.
“They resorted to lies, tricks and fraud,” Mr. Garcia said. “In the end, Stockman and his co-conspirators were unable to hide the truth.”
Mr. Stockman’s lawyer, Elkan Abramowitz, said today that his client did everything in his power to keep the company from going under. Collins & Aikman filed for bankruptcy protection in May 2005, five days before Mr. Stockman resigned. “He tried to save the company, and that’s the kind of thing you want a C.E.O. to do,” Mr. Abramowitz said.
Specifically, the indictment accuses Mr. Stockman of directing a scheme that duped Collins & Aikman’s lenders. The company exaggerated how much money it was due in its accounts receivable so it could obtain more credit, the indictment contends.
In addition to the criminal charges filed by the United States attorney’s office, the Securities and Exchange Commission also filed civil fraud charges against Mr. Stockman and eight others.
