David Stockman Charges Dropped; Defense Hits US Reliance on Davis Polk Probe
David Stockman’s lead defense lawyer claims the government made a mistake by relying on an internal corporate investigation by Davis Polk & Wardwell to bring criminal charges against his client.
Federal prosecutors announced Friday that they were dropping charges against Stockman, who served as budget director under Ronald Reagan, report the New York Times and the Wall Street Journal (sub. req.). Stockman had been accused of hiding financial problems at auto parts maker Collins & Aikman, where he was chief executive. He was charged with bank fraud, conspiracy and obstruction of justice.
Stockman’s legal team contended that rather than duping lenders, he was investing money in the company to keep it afloat, the Times story says. Stockman’s lead lawyer, Elkan Abramowitz, told Bloomberg News that the government filed criminal charges as a result of an internal investigation performed for the company’s board by Davis Polk & Wardwell.
Abramowitz said the government failed to conduct a thorough, independent investigation. “They didn’t spend the time to look through the evidence,” Abramowitz told Bloomberg. “It’s a perfect example of what’s happening with the outsourcing of prosecutions.”
In an interview with the New York Times, Abramowitz identified the Sarbanes-Oxley law as part of the problem. “I think that because of Sarbanes-Oxley, independent directors are forced to come to quick judgments as to whether to conduct an internal investigation into alleged misconduct or forward the result to a government organization,” he said. “Too often these investigations are hurried and come to quick judgments.”
Stockman’s lawyers had presented their defense to prosecutors in an unusual 221-page, single-spaced white paper, the Am Law Daily reports. The document argued the government failed to understand complex accounting issues unique to the automotive industry.
Prosecutors also dropped charges against three other company executives.
