David A. Stockman was chief architect of President Ronald Reagan’s economic plan (a plan dubbed “voodoo economics” by George H.W. Bush). Stockman then became a high-profile Wall Street money man, but was indicted Monday on charges of conspiracy, securities fraud and obstruction of justice.
Stockman, 60, who faces the prospect of three decades in prison, is accused of defrauding investors and banks during his tenure as head of Collins & Aikman, a large auto-parts maker that descended into bankruptcy in 2005.
First elected to the House of Representatives at age 30, after serving only two terms in the House, Stockman was then named Reagan’s first director of the Office of Management and Budget. He was the highly visible spokesman for the “trickle-down” economic theory of the Reagan administration. However, private conversations over budget with a journalist caused Reagan to, as Stockman states, take him to the “woodshed”. He soon matriculated to the New York world of investment banking.
A lengthy investigation which led to recent charges. Manhattan U.S. Attorney Michael J. Garcia said Stockman and a team of handpicked executives entered into secret agreements with suppliers, created false documentation to fool auditors and lied repeatedly about a cash squeeze to ensure that banks would continue to finance their operations. It is reported that Stockman also misled company investigators examining deals between Collins & Aikman and a business owned by a board member, according to the grand jury indictment.
Stockman turned himself to authorities in and two hours later appeared in court wearing a navy pinstriped suit, tasseled loafers and a pair of tortoiseshell glasses. In a boisterous voice, Stockman pleaded “not guilty.” He was released on a $1 million personal recognizance bond.
Three other former Collins & Aikman officials were charged along with Stockman. Four other employees have pleaded guilty and agreed to testify against their onetime supervisors. Because he has already provided sworn testimony to securities regulators, Stockman is almost certain to take the witness stand when the case goes to trial
Calling the charges “hyper technical”, Stockman blamed his ouster from the company and the multiple federal probes that followed as a “reckless spasm” of the Sarbanes-Oxley corporate accountability law. He also asserts that his case is quite different than the accounting scandals that surfaced five years ago.
Since 1990, the law firm of Shepherd Smith and Edwards has helped victims of securities fraud recvoer damages. We have represented more than 1,000 clients and over 90% have recovered all or a portion of their losses. If you would like to speak with a securities litigation attorney, contact Shepherd Smith and Edwards to schedule a free consultation.