(The news featured below is a selection from the news covered in Federal Securities Law Reporter, which is distributed to subscribers of Federal Securities Law Reporter.)

Former Government Official Charged With Fraud

The SEC filed civil fraud charges against automobile parts manufacturer Collins & Aikman Corp., its former CEO and chairman David A. Stockman and eight other former company directors and officers. The SEC's complaint alleged that between 2001 and 2005, Mr. Stockman, a former congressman and White House budget director, personally directed fraudulent schemes to inflate the company's reported income by accounting improperly for supplier payments. In furtherance of those schemes, the complaint alleged that Mr. Stockman and other defendants obtained false documents from suppliers designed to mislead the company's external auditors.

According to the complaint, when aspects of the schemes were discovered in March 2005, Mr. Stockman embarked on a public campaign to mislead investors, potential financiers and others by minimizing the extent of the fraudulent accounting and hiding the company's dire financial condition. The other former officers, including the chief financial officer, corporate controller, and treasurer and a former member of the company's board of directors, are alleged to have participated in the accounting schemes or the campaign to mislead investors.

Linda Chatman Thomsen, director of the SEC's Enforcement Division, said that "this case demonstrates again that the Commission will take strong action when a company and its officers are alleged to have engaged in accounting fraud to inflate the company's reported operating results." She noted that "the conduct we allege here is especially egregious because Stockman and the other defendants not only repeatedly engaged in fraud, but went to great efforts to cover-up their misconduct, and the company's financial difficulties, from investors, analysts and others."

The SEC alleged violations of the antifraud, reporting, recordkeeping and certification provisions of the federal securities laws, as well as lying to auditors The complaint seeks permanent injunctions against future violations of these provisions, officer and director bars, disgorgement of ill-gotten gains with prejudgment interest and civil penalties.

Collins & Aikman Corp. simultaneously settled the SEC charges without admitting or denying the Commission's allegations by consenting to the entry of a final judgment permanently enjoining it from violating the antifraud, reporting, recordkeeping and internal controls provisions of the federal securities laws. The settlement is subject to the approval of the federal district court (SD NY). The U.S Attorney's Office for the Southern District of New York announced parallel indictments against Mr. Stockman and other individuals.