NEW YORK -- David Stockman was back in the woodshed Monday, this time for allegedly masterminding an investment fraud.
As a youthful White House budget director in 1981, Stockman was famously scolded by President Reagan for disagreeing with his economic policy.
The situation was more somber Monday: Stockman, 60, was charged with criminal securities fraud, bank fraud and other charges stemming from the bankruptcy of auto-parts maker Collins & Aikman Inc. of Troy, Mich., where he was chief executive. He could face as many as 30 years in prison on the most serious count of bank fraud.
The U.S. attorney's office in Manhattan accused Stockman of using bogus accounting to keep the ailing company afloat and preserve his image.
"Stockman did not only have money at stake," U.S. Atty. Michael Garcia said at a news conference in Manhattan. "His reputation was on the line as well."
Stockman pleaded not guilty and was released on $1 million bail. In an interview, he vehemently denied the allegations, saying he showed his faith in the company by purchasing its shares repeatedly from August 2002 to December 2004.
"I was buying stock on the open market on 150 occasions because I believed we could turn the corner even though it was tough," Stockman said.
The company's failure cost him $13 million, he said, and cost his private equity firm nearly $350 million. He also said he used his own money to pay for employee Christmas parties and for meals for executives working overtime.
"I took millions of dollars out of my pocket to help the company meet expenses that it couldn't afford, which is just the opposite of the normal guy fleecing shareholders," he said. "The thing the government can't explain is why did I start an [alleged] crime spree at 55 when I had led a life as a good citizen."
A former congressman from Michigan, Stockman gained fame as Reagan's boy-wonder budget director: a bespectacled figure in his early 30s carrying a black binder packed with arcane details of the federal budget.
Stockman played a central role in crafting fiscal strategies to promote Reagan's vision of "supply side" economics, in which strategic tax cuts would pay for themselves by spurring more economic activity.
Yet he concluded early on that political realities were making a sham of his stated objectives, according to his 1986 book "The Triumph of Politics: Why the Reagan Revolution Failed."
