Caught at the trough: a sign of things to come

Feds arrest former DHB chief

BY ROBERT E. KESSLER | robert.kessler@newsday.com

The former head of the Long Island company that provided most of the body armor for U.S. soldiers in Iraq and Afghanistan was arrested at dawn Thursday in his Manhattan apartment by FBI and IRS agents on charges of fraudulently looting the company and investors to pay for a lavish lifestyle.

That lifestyle included supporting a stable of trotting horses; a face-lift for his wife; a diamond, ruby and sapphire-encrusted belt buckle in the shape of an U.S. flag; and an $8 million bat mitzvah for his daughter, which featured music stars including 50 Cent and Kenny G, according to Benton Campbell, the U.S. attorney for the eastern district.

David Brooks, 53, the founder and former head of DHB Industries, which had been located in Westbury, was the highest-paid head of a public company on Long Island in 2004, making $2.7 million in salary and bonuses, plus tens of millions of dollars in stock options.

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How David Brooks lives in Old Westbury
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List of riches: some of what feds say Brooks took
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All about Brooks and that $8M bat mitzvah
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Point Blank Solutions is trying to recover
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Document: United States vs. David H. Brooks indictment

Federal prosecutors charged Brooks in a 71-page indictment with securities fraud, insider trading, obstruction of justice and tax evasion for allegedly obtaining almost all of his income by two illegal methods. One was by having the company secretly underwrite $6 million of his personal expenses; the other was by artificially inflating the value of DHB company stock, which he then sold in a type of pump-and-dump scheme, prosecutors say.

In the latter, Brooks allegedly made $186 million in 2004 by selling shares in the company shortly after he said he had no intention of selling the stock and shortly before the stock plunged because of reports about the quality of its body armor, the indictment said.

Brooks, who has a mansion in Old Westbury and a home in Florida as well as a Manhtattan apartment, also used tens of millions of dollars he acquired illegally to set up a number of supposed charitable trusts, according to remarks in court by Assistant U.S. Attorney John Martin, a prosecutor in Campbell's office.

Brooks took tax exemptions for the trusts' operations, but instead of contributing their money to needy causes, he used the funds to pay for many of the entertainers at his daughter Elizabeth's bat mitzvah, Martin said at the court hearing. Those entertainers also included Tom Petty, Aerosmith and the Eagles, Martin said. The November 2005 bat mitzvah had been widely reported as costing as much as $10 million.

In addition to the bat mitzvah, horses and face-lift for his wife, Terry, the indictment also alleges that Brooks illegally got the company to pay for luxury cars, vacations, jewelry, cosmetic surgery and country club bills for himself and his family. DHB moved its headquarters to Pompano Beach, Fla., in July 2006, after Brooks was forced out, and the company changed its name earlier this month to Point Blank Solutions. Although the company has set aside $60 million to settle a lawsuit alleging it manufactured defective vests, the vests in question were not among those supplied to U.S. troops.

Brooks pleaded not guilty at arraignment in U.S. District Court in Central Islip, and was held without bail by U.S. District Court Judge Joanna Seybert, pending a hearing Monday.

Seybert acted after prosecutor Martin said that in the past year Brooks had purchased a single diamond worth $10 million, unspecified millions in gold and had surreptitiously moved $22 million to banks in Switzerland and Senegal. The United States does not have an extradition treaty with Senegal, Martin said.

"David Brooks grew up in Brooklyn and that means he doesn't run away from a fight. It's a lot easier \[for the government\] to make allegations than to prove them," Paul Shechtman of Manhattan, Brooks' attorney, said after the hearing.

Shechtman, one of New York's leading defense lawyers, who was the Director of Criminal Justice for the State of New York under Governor George E. Pataki, said some sort of bail arrangement could be arranged permitting his client to be monitored by guards in home detention. Such an arrangement had been worked out recently in the case of a Muttontown couple accused of enslaving two Indonesian housekeepers, said Shechtman.

A spokesman for Point Blank, Glenn Wiener said yesterday, "As Mr. Brooks is no longer employed by the Company, we cannot provide additional commentary."

Also charged in the indictment with Brooks was Sandra Hatfield, 54, of Pompano Beach, the former chief executive officer of DHB.

Hatfield was accused of making $5 million by selling her company stock before it dropped. In 2004 she was the highest paid woman executive on Long Island, earning almost $1 million in salary and bonuses.

Brooks and Hatfield allegedly used a number of schemes to artificially inflate the stock of DHB.

To make the company look more profitable, for example, in one scheme, the two allegedly exaggerated the amount earned by the sales of armored vests to the U.S. military by $6 million in 2003 and $13 million 2004, according to Martin.

Hatfield's attorney Roland Riopelle, of Manhattan, said his client was not guilty and "we believe she will be speedily acquitted at a trial." She is scheduled to be arraigned Tuesday.

Brooks and Hatfield theoretically face up to 140 years in prison if convicted on all charges, but would probably be sentenced to considerably less. They also face forfeiture of a total of $191 million, and additional multimillions of dollars in fines.

Original article posted here.