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Stockman indicted in $1.6b federal fraud case

David Stockman David Stockman

NEW YORK -- David Stockman, President Reagan's budget director, was indicted on charges of defrauding investors and banks of $1.6 billion while chairman of Collins & Aikman Corp., an auto parts maker that collapsed days after he quit.

Stockman, who was also the company's chief executive, is accused of issuing fraudulent statements to raise capital and avoid defaulting on credit agreements. An indictment unsealed yesterday in Manhattan federal court charges him and other former company executives with conspiracy, bank fraud, securities fraud, wire fraud, and obstruction.

"They resorted to lies, tricks, and fraud," New York US Attorney Michael Garcia said at a news conference .

Stockman, 60, pleaded not guilty and was released on $1 million bond. He is the first CEO of a bankrupt US auto parts company to be charged after regulators began probing the industry. Five of the companies filed bankruptcy in the last two years.

Collins & Aikman went bankrupt in 2005, five days after Stockman resigned. A resident of Greenwich, Conn., he faces up to 20 years in prison if convicted of the most serious charges. Collins & Aikman entered an agreement with prosecutors that will avoid criminal charges against the company. Details of the settlement weren't revealed.

Federal prosecutors claimed that, as Collins & Aikman's business deteriorated in 2001, Stockman orchestrated a sweeping fraud in which he lied to auditor KPMG LLP and lenders including JPMorgan Chase & Co. and Credit Suisse Group.

"I have done absolutely nothing wrong," Stockman said after his court appearance. "All of the statements I made publicly were based on good business judgment."