The founder of America’s leading supplier of body armor to the U.S. military was convicted Tuesday of charges that he ran a $185 million stock scheme.
David H. Brooks, founder and former chief executive of DHB Industries Inc., was convicted of 17 counts, including securities fraud and conspiracy. Prosecutors said he used the company treasury for personal luxuries, with more than $6 million in unauthorized expenditures. Sandra Hatfield, the company’s former chief operating officer, was convicted of related charges, but acquitted of mail and wire fraud.
The trial in U.S. District Court lasted more than eight months in all.
Defense attorneys and prosecutors declined to comment, because the jury must return Oct. 5 for a forfeiture hearing. The jury, which deliberated on and off for five weeks because of scheduling conflicts and other issues, pronounced its verdict on the 13th day of deliberations.
The defendants 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.
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.
Brooks’ attorney, Kenneth Ravenell, told jurors all the expenditures were approved by the company’s board and in various agreements between Brooks and the company, specifically a 1997 memorandum that prosecutors allege was a forgery.
Ravenell said Brooks had put as much as $20 million of his own money into the business in the years after acquiring it in 1995 and contended the spending on personal items amounted to less than what he was owed.
The company saw its fiscal fortunes soar after the Sept. 11, 2001, terrorist attacks and the wars in Afghanistan and Iraq. Authorities allege the scheme propelled the company’s stock from $2 a share in early 2003 to nearly $20 a share in late 2004. When the pair sold several million DHB shares at that time, Brooks made more than $185 million and Hatfield more than $5 million.
Source: ABC News