Criminal charges for irregular accounting practices and inadequate disclosure will soon be brought against former White House budget director David Stockman, sources familiar with the situation told The Washington Post Wednesday.
The sources said a grand jury indictment sought by US Attorney Michael Garcia in Manhattan and officials at the US Postal Inspection Service may materialize Monday, while the Securites and Exchange Commission is mulling similar action, the Post reported.
Stockman’s misconduct allegedly took place while he was at the helm of Southfield, Michigan-based Collins & Aikman, a Heartland Industrial Partners portfolio company that supplies parts to nearly all major North American auto makers. Heartland purchased the firm for $260 million in 2001; in 2005, Stockman resigned days before the firm declared bankruptcy. Collins & Aikman was subsequently sold to distressed specialist WL Ross.
People familiar with the pending charges said that numerous former officials at both Collins & Aikman and Heartland may face similar charges. It emerged in December that former Collins & Aikman treasurer and Heartland executive, John Galante, has agreed to be a witness for the prosecution.
Founded with much fanfare in 1999, Greenwich, Connecticut-based Heartland was the brainchild of Stockman, who, in addition to his role in the Reagan White House, served stints as a US Congressman and, more recently, as a senior managing director at The Blackstone Group. Upon launching the auto industry-focused private equity firm, Stockman said that “traditional manufacturing businesses are undervalued and the industrial sector remains under-penetrated by private equity funds”.
One of Heartland’s biggest deals, valued at $2.6 billion, was the January 2001 roll-up of three mid-sized auto suppliers – MascoTech, Simpson Industries and Global Metal Technologies – into a single company called Metaldyne. Last July, three former Metaldyne employees were indicted for stealing company secrets and selling them to a Chinese rival; a couple of months later Heartland sold the firm for $1.2 billion to Japanese chassis and powertrain maker Asahi Tec. According to a person familiar with the transaction, Heartland rolled its equity into the new company, but did so at an unspecified discount to its cost basis.