Reagan Aide Stockman Targeted in Fraud Probe

After leaving the government, Stockman received more than $2 million for a tell-all book, in which he skewered friends, enemies and himself. In it, Stockman wrote about his thought process as chief of the Office of Management and Budget, citing the hope that he and other officials could dig themselves out of the growing deficit hole. "All along I had assumed that somehow tomorrow it would all work out . . . All we needed was one more inning," he wrote.

Stockman, like many former politicians, decided to try his luck on Wall Street. He joined Salomon Bros. Inc. in an arrangement that both sides eventually agreed was a bad fit. Stockman preferred to crunch numbers rather than schmooze clients, colleagues told the Wall Street Journal at the time. Then he joined the Blackstone Group, a private New York investment fund that buys public companies with a little money down and lots of borrowing, then reshapes and ultimately sells them at large gains. Stockman prospered at Blackstone, taking a leading role in 10 deals with a combined value of $10 billion, including one involving Collins & Aikman, according to a biography since removed from the Heartland Web site.

His Blackstone tenure helped make Stockman wealthyHis stock sales of one company, GrafTech International Ltd., in the late 1990s had a market value of more than $800 million, according to securities filings.

Stockman is married to Jennifer Blei Stockman, a technology consultant. Friends credit Blei with giving the bookish Stockman social pizazz. In recent years, she has served as president of the Guggenheim Foundation and co-chair of abortion-rights group the Republican Majority for Choice. The Stockmans have two daughters, one of whom has attended Northwestern University. The couple owns a Greenwich, Conn., estate that was assessed at more than $11 million in 2003 and another multimillion-dollar home in Aspen, Colo.

Stockman's investment in Collins & Aikman was supposed to mark the triumphant return to the state he once represented in Congress. As part of a broader plan at Heartland to reinvigorate depressed Rust Belt companies, Stockman poured millions of dollars into Collins & Aikman, eventually becoming chief executive after he and the board expressed dissatisfaction with previous managers.

A lawsuit filed last year by debt-holder MacKay Shields LLC claimed that Stockman had a thorough grasp of the finances at Collins & Aikman, which outfits more than 90 percent of the vehicles made in North America with such items as cup holders, dashboards and floor mats. Stockman served as the company's chief liaison with Wall Street and investors, from whom he fielded increasingly pointed questions.

As costs for materials mounted and demand from the nation's biggest automakers dwindled, eventually squeezing Collins & Aikman's rivals into bankruptcy, Stockman acknowledged a "maelstrom" in the industry and said cash was a "challenge." On a March 17, 2005, conference call, Stockman assured Wall Street analysts that the company could manage its way out of trouble. He went on to call the rumors about a cash crisis "totally false" and said, according to conference call transcripts, "We're in a very good position over the next few weeks and months to improve our liquidity."

The sources sympathetic to Stockman said he genuinely thought that the company had enough cash and that he could force customers, including DaimlerChrysler AG, to accept price increases, giving it more room to maneuver.

In early April, an independent analyst issued a report asserting that the company's liquidity "is not as strong as recent headlines depict" and predicting that "bankruptcy is a definite possibility." Stockman raced to hit the phones, securing a $75 million line of credit from lenders, according to a company news release.

It was not enough. Stockman clashed with the board, which prodded him to resign May 12. Five days later, Collins & Aikman filed for bankruptcy protection. News reports at the time of Stockman's departure said company insiders had criticized Stockman for keeping information about the company's troubles too close to the vest.

The company's current management team has painted a dire portrait of Collins on the eve of its bankruptcy. Collins executives had "almost no working capital, had no source of liquidity and were leveraged," according to bankruptcy court documents filed last week. "The debtors had a negative cash balance and faced imminent interruptions in production . . . Cash management systems were in disarray."

Collins & Aikman is conducting its own investigation, for which the company's lawyers have reviewed 3 million documents and interviewed at least 70 current and former employees, according to papers filed with the bankruptcy court. The lawyers are negotiating with the SEC over whether Collins & Aikman will be required to pay fines to settle possible civil charges related to its accounting practices, the documents indicate. Dennis E. Glazer, a lawyer at Davis, Polk & Wardwell who is representing the company's board, declined to comment. A spokesman for Collins & Aikman said the company is "cooperating" with investigators.

Researcher Richard Drezen contributed to this report.