Body Armor Maker's CEO Charged With Securities Fraud

The Securities and Exchange Commission says the former CEO of a military body armor manufacturer falsified financial records and looted millions from the company.

David H. Brooks, the former CEO and chairman of the board of government contractor DHB Industries, is facing a civil securities fraud suit in the U.S. District Court for the Southern District of Florida.

The Broward County, Fla.-based company makes body armor for the military and law enforcement agencies. It changed its name to Point Blank Solutions last month.

The SEC claims that Brooks participated in an accounting fraud scheme, engaged in illegal insider stock trading and spent company money on extravagant personal expenses.

He resigned in July 2006 as part of a settlement of shareholder class actions over alleged securities fraud.

In its complaint the agency says that between 2003 and 2005 Brooks took advantage of DHB's lack of internal accounting controls and overstated the value of company inventory.

He also falsified entries in corporate books and records in order to manipulate the company's gross profits and net income, the suit says.

The SEC claims that Brooks' conduct caused DHB to file materially false and misleading financial reports with the agency and to issue false press releases to the investing public.

The fraud artificially inflated DHB's stock price and made the company appear to be more profitable than it actually was, the SEC says.

The suit alleges that while the company's share price was artificially high in late 2004, Brooks sold his own stock for a $186 million profit.

This sale was illegal based on his possession of material, nonpublic information and constituted insider trading, according to the SEC.

Brooks also allegedly used DHB credit cards and checks to pay his personal expenses between 2003 and 2005.

The SEC says he used $4.7 million of company money to pay for luxury cars, jewelry, real estate, artwork, gifts, vacations and designer clothing.

The SEC is seeking an injunction preventing Brooks from engaging in further violations of federal securities law, an order directing him to disgorge money he obtained through the fraud and a monetary penalty.

The agency also says Brooks must reimburse DHB for the profits he made on his illegal stock sales.

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