The founder and former head of a company that manufactures body armor for soldiers in Iraq and Afghanistan was arrested this morning by federal agents on Long Island, N.Y and charged with using company money to supplement his lavish lifestyle and netting $186,000,000 while riding his company's stock down.
David Brooks, founder of DHB Industries Inc., made headlines in November 2005 when he splurged almost $10 million on a bat mitzvah for his daughter, which included a bi-floor party at the exclusive Rainbow Room and performances by Aerosmith, 50 Cent, Tom Petty and DJ-AM.
Other splurges included $200,000 on a Bentley Flying Spur, $190,000 on an armored Ford Expedition, $227,000 for private jet service and $307,000 to a company that owned Brooks' Florida home, according to an SEC filing.
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Federal prosecutors charged Brooks in an indictment with securities fraud, insider trading, obstruction of justice and tax evasion for allegedly supplementing his income illegally in two ways: by having the company both secretly underwrite his expenses and by artificially inflating the value of his DHB stock. The company is now headquartered in Florida.
The indictment said Brooks got the company to conceal payments to him for millions of dollars in expenses. In addition, in a variant on a pump-and-dump scheme, Brooks allegedly made $186 million by selling shares in the company shortly after he said he had no intention of selling the stock and shortly before the stock plunged because of reports about the quality of its body armor, the indictment said.
DHB is a major supplier of body armor to police forces as well as to U.S. soldiers.
The company is cooperating with a Justice Department probe into whether a relatively new chemical, Zylon, used in some armor is not up to standards.
According to an SEC filing, David Brooks or his family received cash or perks from the company including:
-DHB paid $40,000 to a Tennessee company owned by Brooks' wife, Terry, called Tactical Armor Products. The company "also owned and raced horses, although the extent of the equestrian operation is unknown."-DHB paid for two cars for Brooks: a Bentley Flying Spur, valued at $200,000, and an armored Ford Expedition valued at $190,000.-DHB paid $307,000 to a company that owned Brooks' Florida residence (Brooks owned the company).-DHB paid $227,000 for private jet service for Brooks (the company's silent owner). -DHB paid $62,000 to a Boca Raton, Fla., condo association where Brooks' brother, Jeffrey, lived. The brother was not an employee of DHB. -DHB paid $20,000 for gift certificates from a restaurant that Jeffrey Brooks owned. -DHB paid $11,000 for automobile lease payments for David Brooks' son.
Brooks' attorney, Paul Shechtman, was not immediately available for comment. ABC News left messages and e-mails with his law partners seeking comment.
"Mr. Brooks was placed on administrative leave by the Board of Directors in July 2006 and shortly thereafter, removed from all positions. Since that time, he has held no posts with DHB (now Point Blank Solutions Inc.) or any of its subsidiaries," Glenn Wiener, a company spokesperson, said. "Additionally, we'd like to add that since Mr. Brooks' removal, the Company has revamped its board of directors, which now consists of 6 outside and independent directors, (and) there is a new management team in place, led by Larry Ellis, President and CEO. As Mr. Brooks is no longer employed by the Company, we cannot provide additional commentary."
This post has been updated.