|Besides inflating the price of his body-armor company's stock by false performance and inventory reports, and thus making $190 million from stock sales for himself and co-defendant Sandra Hatfield, David H. Brooks is accused of trying to obtain "memory erasing medicine" to disrupt the testimony of a witness. The witness exposed how company revenues from contracts with the U.S. military were used to pay for "university textbooks for his daughter, pornographic videos for his son, plastic surgery for his wife, a burial plot for his mother, prostitutes for his employees, and, for him, a $100,000 American-flag belt buckle encrusted with rubies, sapphires and diamonds." I may be wrong, but it is my impression that military contractors are generally less patriotic than we might hope, American flag belt buckles notwithstanding. There doesn't seem to be any sphere of our economy, from medicine to media to military contracting, where anything but money matters. The military should be an honorable institution, and that includes affiliated industry.|
|Brooks and Hatfield|
New York Times, July 26, 2010
Several years ago, David H. Brooks, the chief executive
and chairman of a body-armor company enriched by
It was not just fanciful curiosity. A veterinarian who cared for his stable of racehorses said Mr. Brooks continually talked about the subject, pressing him repeatedly to supply the pill. According to Dr. Seth Fishman, the veterinarian, Mr. Brooks said he had a specific recipient in mind: Dawn Schlegel, the former chief financial officer of the company he led until 2006, DHB Industries.
There is no memory-erasing pill. And so Mr. Brooks sat and listened this year as Ms. Schlegel, her memory apparently intact and keen, spent 23 days testifying against him in a highly unusual trial in United States District Court on Long Island that has been highlighted by sweeping accusations of fraud, insider trading, and company-financed personal extravagance.
DHB, which specialized in making body armor used by the military in Iraq and Afghanistan, paid for more than $6 million in personal expenses on behalf of Mr. Brooks, covering items as expensive as luxury cars and as prosaic as party invitations, Ms. Schlegel testified.
Also included were university textbooks for his daughter, pornographic videos for his son, plastic surgery for his wife, a burial plot for his mother, prostitutes for his employees, and, for him, a $100,000 American-flag belt buckle encrusted with rubies, sapphires and diamonds.
The expense-account abuse, the prosecution has said, represented a pittance compared with the $190 million that Mr. Brooks and another top employee are accused of making through a stock fraud scheme in which he falsified information about his company’s performance — including significantly overstating the inventory of bulletproof vests — to inflate the price of the stock before selling his shares in 2004.
As a whole, the accusations might present just another cautionary tale of excess and entitlement in a powerful individual, but Mr. Brooks’s story stands out because of details and characters that give it the strange and sordid depth of a long-running soap opera.
“What makes it interesting isn’t that there is anything novel legally about it, but just how egregious this guy’s alleged behavior is, how gross the abuses are and how much greed is involved,” said Meredith R. Miller, an associate law professor at Touro College in Central Islip, N.Y. “Add in what the company does — the fact that this is a military contractor — and the facts are really interesting,” she said.
Lawyers for Mr. Brooks have repeatedly pressed for a mistrial, accusing the prosecution of highlighting irrelevant evidence to portray Mr. Brooks “as a sex-obsessed, tax-cheating boor.”
“The accumulation of titillating and scandalous evidence,” Mr. Brooks’s lawyers wrote in one court filing, “has become a centerpiece of the trial and has incurably prejudiced the jury.”
Despite the drama, the trial has largely been ignored outside
Christopher Ott, of the
Mr. Ott held up the belt buckle and declared, “Instead of a gun or a crowbar, they used a trick, a scheme.”
Mr. Brooks, who his lawyers have said is in a “tenuous emotional state,” has watched much of the proceedings with glassy eyes and a nervous demeanor.
The diminished appearance bore little resemblance to the image of the man who bought a business out of bankruptcy and transformed it into one of the nation’s largest manufacturers of body armor for law enforcement and the military.
That was the man who told investors, “Adversity and challenges have been confronted and defeated,” and who threw his daughter a multimillion-dollar bat mitzvah party featuring performances from the rapper 50 Cent and the rock group Aerosmith, even as federal investigations into his actions were widening and his business was crumbling.
A lawyer for Mr. Brooks, Kenneth Ravenell, told the jury on Monday afternoon that his client represented the realization of the American dream, someone who made money while helping his country “when the military called.”
Mr. Brooks has not disputed that many of his personal expenses were paid for by the company, but his lawyers have maintained that the practice was authorized.
His lawyers also defended the hiring of prostitutes for employees and board members, arguing in court papers that it represented a legitimate business expense “if Mr. Brooks thought such services could motivate his employees and make them more productive.”
His lawyers pointed to a board resolution that stipulated that Mr. Brooks was entitled to 10 percent of the company’s profits.
Prosecutors said the document was a forgery that he had made to justify the personal expenses, and Ms. Schlegel testified that the document, dated 1997, first appeared in her files in 2004, after the Securities and Exchange Commission began investigating the company.
A former president of the company, Douglas Burns, testified that his signature had been forged on an earlier document detailing the arrangement.
Mr. Brooks, who had previously been fined by the S.E.C. for insider trading, also denied having participated in a scheme to push up the price of the stock.
He sold his holdings in the company in 2004 when the share price peaked at more than $20. The price dropped to less than $2 in 2005 after the company admitted to accounting fraud.
body-armor company declined to discuss the case, noting that Mr. Brooks had left
it in 2006. The company, now called
Point Blank Solutions, has moved to
There have been questions about the vests produced by the company, similar to questions faced by others in the industry, regarding both the use of a material now known to become more permeable in high heat and the lack of protection provided to some vital areas. Those issues, however, are not related to the current case.
If convicted, Mr. Brooks could be sentenced to more than 30 years in prison. And after the jury returns a verdict, he faces two more trials, one for contempt of court and another for tax evasion.
He may also face additional charges stemming from an episode last week when he was caught for a second time trying to smuggle into jail prescription anti-anxiety pills, which were similar to medication he was already taking at an unusually high dose. The pills had been hidden in pens that a supporter of Mr. Brooks’s had placed near the defendant’s seat in the courtroom.
That prompted the normally mild-mannered Judge Joanna Seybert, who has seemed increasingly frustrated with Mr. Brooks and his lead lawyer, to angrily declare: “Mr. Brooks has got to get control of himself or he will be removed from this courtroom.”
Mr. Brooks, 55, has been in federal custody since his bail was revoked shortly before the trial began, after law enforcement officials said they discovered that he had hidden millions of dollars’ worth of assets abroad.
A co-defendant in the trial, Sandra Hatfield, 56, the former chief operating officer at the company, is accused of receiving $5 million from the fraudulent stock sales and faces similar charges.
Ms. Schlegel was originally named as a defendant but pleaded guilty and agreed to testify in exchange for sentencing considerations.
One of the many former shareholders who have been tracking the trial is Michael Adair, an accountant in his 60s who says he lost most of his retirement savings, $525,000, when the stock plummeted.
He felt patriotic investing in a company providing life-saving equipment to the troops, Mr. Adair said, but first he had read the financial statements, had listened to the conference calls and had toured the company headquarters.
“I did due diligence and it turned out it was all a lie,” he said in a recent interview. “This is a trial of greed. I’m hoping to get some justice.”