The former CEO and COO of one of the primary
manufacturers of body armor for the U.S. military were convicted of fraud,
insider trading and obstruction of justice following an eight-month jury trial.
U.S. v. Brooks (E.D.N.Y.). David H. Brooks and Sandra Hatfield were,
respectively, the former CEO and COO of DHB Industries, Inc., now known as
Point Blank Solutions, Inc.
The indictment charged Mr. Brooks and Ms. Hatfield with
essentially looting the body armor manufacturer for their personal benefit.
According to the government, the defendants enriched themselves and their
families, using corporate funds to finance a lavish lifestyle, including the
purchase of travel, personal jewelry, cosmetic surgery, country club bills and
other items.
Fraudulent actions by Mr. Brooks and Ms. Hatfield
included:
- Related party transaction: A concealed related
party scheme in which a company supposedly independent of DHB and with which it
did business was actually owed by defendant Brooks' wife and financed with
corporate money. Profits from the venture were used to pay for more than $16
million in Mr. Brooks' personal horse racing business and for other personal
items.
- Accounting fraud: The defendants used a variety
of fraudulent accounting methods to boost the net income and profits of DHB.
These included adding non-existent inventory to the company's books and records
and reclassifying expenses.
- Obstruction of SEC: Both defendants attempted to
cover up their schemes by obstructing an SEC investigation of DHB's executive
compensation and related party transactions. Mr. Brooks also lied to the
outside auditors.
- Insider trading: In November 2004, after false
filings were made with the SEC, the defendants sold more than $72 million of
their DHB stock. The next month they sold about $118 million of company stock.
The sales, made when the share price was over $20 per share, netted Mr. Brooks
about $185 million and Ms. Hatfield over $5 million. Later, the stock price
fell to a few cents per share and was delisted.
The SEC also filed actions against Mr. Brooks and Ms.
Hatfield. SEC v. Brooks, Civil Action No. 07-61526 (S.D. Fla. Filed Oct.
25, 2007); SEC v. Schlegel & Hatfield, Civil Action No. 06-61251
(S.D. Fla. Filed Aug. 17, 2006). The Commission's complaints are based on
essentially the same conduct as the criminal charges.
Add. Note:
Postings For SEC Enforcement Positions
Chief Counsel. Details are listed here.
Associate Director
- Office of Whistleblower Coordinator
The person selected for this role will be responsible for building and managing
the new Whistleblower Office and overseeing the implementation of policies and
procedures to ensure that the SEC is in compliance with the Whistleblower provisions
of the "Dodd-Frank Wall Street Reform and Consumer Protection Act."
The posting is open until September 22, 2010. Details are listed here.
Associate Director
The person selected for this position will lead a staff engaged in
investigations involving matters in many of the enforcement program's priority
areas including insider trading, market manipulation, financial reporting and
accounting fraud, violative conduct by broker-dealers, investment advisers and
investment companies and offering frauds. The posting for Associate Director,
Division of Enforcement is listed on USA Jobs, Announcement # 10-380443-WG. The
posting will close on 09/17/10. Here's the link.
For more news involving securities issues, visit SEC Actions, a blog by Thomas
Gorman.