December 13, 2006
Is David Stockman Headed Back to the Woodshed?
Former political wunderkind David Stockman was famously taken to the woodshed by President Reagan for his comments about the administration's tax and budget cuts when Stockman was head of the Office of Management and Budget. He may be headed back there, according to a report in the Detroit News (here) that a federal grand jury in New York is looking at whether he managed earnings through accounting gimmicks and made misleading statements about Collins & Aikman Corp. in 2005 when he was CEO of the company. After leaving the White House in 1985, Stockman moved to the world of finance, and in 2001 acquired control of various auto parts companies, rolling many of them into C&A, which entered bankruptcy in May 2005. The board ousted him a few days before filing bankruptcy, and in the months before the filing Stockman made optimistic statements about C&A's prospects. In addition to the criminal probe, the SEC sent Stockman a Wells Notice that the Enforcement Division staff intends to recommend the filing of a securities fraud action against him. It sounds like the government is preparing a coordinated criminal-civil case against Stockman, and perhaps other former C&A executives. (ph)
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