David Stockman, was indicted on fraud, conspiracy and other charges on March 26. The former head of auto parts firm Collins & Aikman was accused of misleading investors when he was CEO of the now bankrupt company.
The U.S. Attorney for the Southern District of New York, charged eight individuals, including former executives and employees of Collins & Aikman, with securities fraud and other related charges stemming from their investigation into accounts receivable, customer and/or supplier rebates and other matters for the fiscal years 2000-2005.
Stockman, who was charged with wire fraud, bank fraud and obstruction, was released on a $1 million bond. The most serious charge, bank fraud, carries a maximum sentence of 30 years in prison.
Former Chief Financial Officer J. Michael Stepp, former controller David Cosgrove and ex-purchasing director Paul Barnaba were charged with crimes including conspiracy and securities fraud. Prosecutors said the alleged fraud lasted from December 2001 until the company filed for bankruptcy. All four pleaded not guilty in U.S. Magistrate's Court. Stepp, Cosgrove and Barnaba were released on bonds of $500,000 apiece.
Stockman "hid the full truth from the company's investors and lenders," Manhattan U.S. Attorney Michael Garcia said at a news conference as reported by Rueters. He said the ex-CEO and others "resorted to lies, tricks and fraud" to boost Collins & Aikman's financial performance when they could not improve it legitimately.
Stockman left the company five days before it filed for bankruptcy in May 2005. He said he and his private equity fund took the largest single loss -- $360 million -- from the company's collapse.