Stockman fraud trial puts Enron in the shade

The date has been set for what will surely be one of America's trials of the decade. Last week, a New York judge ruled that on May 4, 2009 - more than two years after he was indicted - David A. Stockman will go to trial on charges of fraudulent accounting and of misleading banks and shareholders.

Along with former colleagues who are now co-defendants, Stockman will be accused of overseeing the ruination of Collins and Aikman Corp - a Detroit-based supplier of components to the automotive industry which was founded in 1891 and supported 15,000 jobs worldwide. The sum total of the defendants' alleged malfeasance is $1.35bn.

That is a breathtaking figure even by the standards of Enron and Conrad Black. But David Stockman's trial will be uniquely fascinating because, in many ways, he is an even more emblematic figure of our age than Enron's Kenneth Lay or Hollinger's Lord Black of Crossharbour.  

The greedy yuppie culture of the 1980s, the credit-fuelled property boom of the last 10 years and, especially, the neo-conservative 'trickle-down' economic ambitions of a succession of Republican presidents, have all been embodied in this slight, earnest, dome-headed figure with his big, harvest mouse eyes and even bigger spectacles. Now, by the most acute paradox, as he stands awaiting trial, Stockman has become the living incarnation of the credit crunch and the impending crash of the Western world's economy.

From 1981-1985, David Stockman was President Reagan's budget director, the 20th century's youngest member of the US Cabinet. With his notorious "black books" of economic accounting ever present under his arm, Stockman was Washington's keeper of the holy scriptures of "the Reagan Revolution" which promised to reduce taxes, cut federal government spending and liberate the entrepreneurial spirit of American capitalism.

A former theology student at Harvard who had dabbled in left-wing student politics, he was the mastermind of Reagan's 'supply-side' policies, the theory drawn from Milton Friedman and Friedrich Hayek that government spending inhibited economic growth and that monetary control was the cure for inflation.

Not since Keynes was at the Treasury in the First World War had a more committed economic ideologue occupied so senior a post at the heart of a Western government. And nobody since Keynes has written more revealingly about the clash between abstract economic principles and the overriding demands of political expediency than Stockman did in his own book, The Triumph of Politics. Following his self-confessed failure to achieve the spending cuts and the balanced budget demanded by his creed, Stockman wrote a hair-raisingly detailed study of the Reagan government's fallibilities - including a merciless portrait of the homely old President's economic illiteracy - which is indispensable to the student of government.

After failing to liberate America's entrepreneurial spirit, Stockman gave rein to his own. He took a job with the Wall St investment house Salomon Brothers, founded a private equity firm and then a private equity fund, Heartland Industrial Partners. He piled up tens of millions of personal wealth and bought a huge estate outside Greenwich, Connecticut.

It was Heartland which raised the $9bn worth of debt financing from Wall Street through which Stockman and his partners bought controlling interests in failing businesses in America's rustbelt industries. And it was that same debt-laden vehicle which acquired Collins and Aikman, where Stockman installed himself as CEO in 2003.

Less than two years later, Collins and Aikman filed for Chapter 11 protection from its creditors and Stockman was ousted. The historic company was liquidated last year.

Stockman and the others are now charged with falsifying Collins and Aikman's accounts in order to defraud investors and creditors and with siphoning millions of dollars from the ruined company in consultancy fees to Heartland. His lawyer claims he suffered a personal loss of $13m and says: "Here's a guy who was putting money in to keep the company afloat." A jury will decide. The world will watch. ·