Tuesday, March 27, 2007

Collins & Aikman Settlements Reached, Former Executives Charged

Collins & Aikman confirmed that it had reached a non-prosecution agreement with the United States Attorney in connection with that office's investigation into matters investigated by the Company's audit committee and certain other conduct undertaken by executives and employees who were in place at the Company on or before May 1, 2005. The non-prosecution agreement removes the threat of an indictment of Collins & Aikman by the United States government for any such conduct. The Company also confirmed it had reached a settlement with the S.E.C., under which the Company agreed--without admitting or denying any wrongdoing--to be enjoined from future violations of the securities laws. The S.E.C. did not impose civil monetary penalties against Collins & Aikman, noting the significant remedial steps and extensive cooperation provided by the Company. The S.E.C. settlement was effectuated by the S.E.C. commencing and simultaneously settling a lawsuit alleging violations of federal securities laws. The lawsuit and settlement relate to matters that were the subject of an audit committee investigation of, among other things, the Company's accounting for certain supplier rebates and the Company's forecasts for the first quarter 2005 as well as the Company's accounts receivable securitization facility. In a related matter, the United States Attorney also unsealed one indictment and four criminal informations charging eight individuals, including former executives and employees of Collins & Aikman with securities fraud and other related charges stemming from their investigation into accounts receivable, customer and/or supplier rebates and other matters for the fiscal years 2000-2005. The indictment charged Collins & Aikman's former chairman and chief executive officer, David Stockman and three others with conspiracy to commit securities fraud, making false statements in annual and quarterly reports, making false entries in books and records and lying to auditors as well as committing bank fraud, wire fraud and obstruction of an agency proceeding. The others charged in the indictment were J. Michael Stepp, David R. Cosgrove and Paul C. Barnaba. All three pleaded not guilty and were released on $500,000 bail.

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