An Old Westbury businessman whose company had become one of the primary body armor suppliers for the military and law enforcement was sentenced to 17 years in prison Thursday following his conviction for defrauding investors of more than $200 million.
David H. Brooks, 58, the former chief executive officer of the Westbury-based DHB Industries, Inc. of Westbury, will also serve five years of supervised release and pay $8.7 in fines and forfeit $59.6 million to the United States in insider trading proceeds, in addition to a yet-to-be-determined amount in restitution to the victims of his fraud schemes.
In September of 2010, Brooks and former DHB Chief Operating Officer Sandra Hatfield were found guilty of insider trading, fraud and obstruction of justice following an eight-month trial. Brooks was also found guilty of lying to auditors and falsely inflating the company’s inventory to artificially boost reported profits.
Though U.S. prosecutors recommended a 30-year sentence comparable to those sentenced from similar white-collar crimes, Seybert determined that 17 years behind bars would ensure Brooks did not repeat his crimes once released due to his age and history of mental illness. Brooks will be 75 when released.
“He attempted to portray himself as a great patriot, but he still used money that he could have used to improve those products, and he used the money that could have been used for improved body armor for our troops for his and his family’s lavish lifestyle,” said Judge Joanna Seybert, who presided over the case and sentencing in U.S. District Court in Central Islip.
Brooks used corporate funds to finance trips to exotic locations, the purchase of an armor-plated vehicle, cosmetic surgeries and country club bills, in addition to various other family expenses. He also owned a diamond-encrusted American flag belt buckle valued at $100,000 and threw parties that featured Tom Petty, the Eagles and Aerosmith.
Brooks also used unreported corporate money to finance a horse-racing business that had no relationship to DHB, hosting a lavish bar mitzvah for his son for which he spent $40,000 in leather-bound invitations, according to the FBI.
Brooks, appearing in court dressed in a gray prison-issued uniform and wearing a clean shave, apologized to his family and to the court. He did not apologize to victims.
“I’m sorry to take your honor’s time, effort and responsibility and I’m sorry for the headache that this entire manner that has been put upon you,” Brooks said. “I apologize in that manner. I apologize to my family for putting them in the situation I’ve placed them in at this point. I hope you understand that I mean that sincerely to you.”
The defense pushed for a sentence of less than 10 years, citing the testimony of medical professionals who declared Brooks had shown symptoms of depression and bipolar disorder that were among the worst they had ever seen.
The prosecution of Brooks and other DHB officers has taken nearly seven years, as Brooks first protested his innocence and has more recently claimed to suffer from mental problems. Brooks was denied a motion in 2012 to overturn his conviction because the medication he was taking made him unable to assist in his own defense.
Though he was initially released on bail on the condition that he account for and repatriate his foreign assets, Brooks was arrested in January 2010 after the government discovered he had concealed millions in accounts in the Republic of San Marino and London, England.
During the trial, it was found that Brooks smuggled prescription pills into the courtroom and created a fake e-mail that his defense team used to cross examine a government witness, then disobeyed a court order to prove the email’s authenticity.
“For Brooks, it was never about what the company did, it was about the money,” said Assistant U.S. Attorney Richard Lunger in his closing remarks before the sentencing. “I didn’t hear a single apology from the defense to the victims, and I don’t imagine we ever will.”
Using insider information, Brooks and Hatfield traded nearly $200 million in DHB stock in November and December 2004, just before the stock’s price plummeted to pennies on the dollar. Shortly thereafter, the stock was de-listed from the American Stock Exchange.
Brooks also engaged in a related party scheme in which he siphoned more than $10 million from DHB to pay for obsolete body armor from Tactical Armor Products, a company thought to be run independently of DHB by Brooks’ wife. According to FBI officials, Tactical Armor Products was run entirely by Brooks, and profits from his transactions were used to pay for more than $16 million in Brooks’ horse racing business, jewelry and cash investments.
To cover up the scheme, Brooks created fraudulent multi-million dollar transactions and doctored DHB documents to deceive investors and auditors.
Brooks and Hatfield also added non-existent inventory to DHB records and fraudulently reclassified the company’s expenses, which increased the company’s net income and profits reported in press releases and filings with the Security Exchange Commission.
To cover up many of their schemes, Brooks and Hatfield submitted false reports to the SEC during the agency’s investigation into DHB’s wrongdoing.
Brooks lied to DHB’s independent auditors about the company’s inventory. When auditors tried to view the phony inventory, Brooks claimed it had been destroyed in a hurricane, though he later admitted to investigators that the inventory never actually existed.
Brooks was removed as the company’s CEO in July 2006. DHB then relocated its headquarters to Pompano Beach, Fla. and changed its name to Point Blank Solutions, and filed for bankruptcy in April 2010. Using insider information, Brooks and Hatfield traded nearly $200 million in DHB stock in November and December 2004, just before the stock’s price plummeted to pennies on the dollar. Shortly thereafter, the stock was de-listed from the American Stock Exchange.
“His actions turned GHB stock into mere pieces of paper,” Lunger said. “He corrupted GHB and robbed his company of its public existence. It was a company supported by investors who thought its mission was to protect others, not his vanity.”
Brooks and Hatfield also added non-existent inventory to DHB records and fraudulently reclassified the company’s expenses, which increased the company’s net income and profits reported in press releases and filings with the Security Exchange Commission.
Hatfield left the company in 2005. Though convicted of similar charges, she was acquitted of wire and mail fraud and has not yet been sentenced.
