A former top budget official in the Reagan White House is a target of a criminal investigation into possible financial fraud at an auto parts company he headed before it collapsed into bankruptcy, a federal official told the Associated Press.

David Stockman, who rose to prominence as budget director under President Reagan, is the former chairman and CEO of Collins & Aikman Corp.

Federal investigators and prosecutors are preparing a case against Mr. Stockman and other corporate officers from Collins & Aikman and expect to present the findings soon to a grand jury in New York City, the official said.

The investigation is focused on whether Mr. Stockman and other corporate officers at Collins & Aikman misled investors about the financial health of the company by artificially inflating stock prices. ABC News reported on the case Monday.

The investigation began last summer, the federal official said, speaking on condition of anonymity because the probe is still under way.

Mr. Stockman could face charges of securities fraud, mail fraud, and wire fraud, the official said.

Mr. Stockman’s attorney, Elkan Abramowitz, said he did not believe that charges should be brought.

“We have been cooperating fully with both the U.S. attorney and the SEC,” he said. “We strongly believe that no criminal charges should be brought against Mr. Stockman.”