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August 15, 2013

Former NY exec gets prison for $185M stock swindle

CENTRAL ISLIP, N.Y. —

The founder of America's leading supplier of body armor to the U.S. military was sentenced Thursday to 17 years in prison for running a $185 million stock swindle in which he used the proceeds to finance luxuries such as lavish parties featuring Tom Petty, Aerosmith and the Eagles.

David H. Brooks, 58, founder and former chief executive of DHB Industries Inc., was convicted in 2010 of securities fraud and conspiracy. He and the company's former chief operating officer were accused of falsely inflating the value of the inventory of the company's top product, the Interceptor vest, to help meet profit margin projections.

U.S. District Judge Joanna Seybert said Thursday that Brooks displayed a total lack of remorse — "not a glimmer, not a whisper, not a moment of regret."

"He attempted to portray himself as a great patriot," she said, attracting investors who thought they were doing something to protect troops in Iraq and Afghanistan.

Last week, she ordered Brooks to forfeit nearly $60 million in proceeds from the insider trading scheme. He also must pay restitution; an amount will be determined within 90 days.

Sandra Hatfield, the former chief operating officer, was convicted of related charges but acquitted of mail and wire fraud at the same trial. She has yet to be sentenced.

There were no allegations that the company cheated the government or that there was anything wrong with the vests or other DHB products. The Interceptor vest, designed to withstand rifle fire and shrapnel, was made for the Marine Corps and other branches of the military.

The company saw its fortunes soar after the Sept. 11 attacks and the wars in Afghanistan and Iraq. Its stock skyrocketed $2 a share in early 2003 to nearly $20 a share in late 2004, something prosecutors said was due to the scheme.

When the pair sold several million DHB shares at that time, Brooks made more than $185 million and Hatfield more than $5 million, prosecutors said.

Prosecutors said Brooks bought a $100,000 diamond-encrusted American flag belt buckle and threw lavish parties for his children that featured big-name entertainers.

He resigned from DHB in July 2006, about the same time the company relocated its headquarters from Westbury, N.Y., to Pompano Beach, Fla., where it operates as Point Blank Solutions Inc. Hatfield left the company in November 2005.

Prosecutors had sought to put Brooks behind bars for at least 30 years.

"This is a fair and just sentence," said the judge, noting that the defendant won't get out of prison until he's in his 70s. She also took into account his documented history of mental illness.

"In an era where Draconian sentences are handed out in white collar and other cases, I am reasonably pleased," defense attorney Gerald Shargel said. Brooks is appealing the conviction.

 

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