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Ex-CEO at Army's Body Armor Maker Arrested

CNBC.com
Thursday, 25 Oct 2007 | 5:10 PM ET

Two former officers at a company that supplies body armor to the U.S. Army face charges they inflated the company's stock price and made nearly $200 million in the process.

Federal authorities Thursday charged former DHBIndustries Chief Executive Officer David H. Brooks and former Chief Operating Officer Sandra Hatfield with insider trading, fraud, obstruction of justice and tax evasion. The two stand accused of manipulating DHB's financial records to increase reported profit margins and charging millions of dollars in personal expenses to the company.

Brooks was arrested by the Federal Bureau of Investigation Thursday, U.S. attorney's spokesman Robert Nardoza told Reuters.

Brooks' lawyer could not be reached immediately for comment.

If convicted, Brooks and Hatfield face 75 years in prison and fines of nearly $400 million.

Brooks resigned from DHB in July 2006 and Hatfield left in November 2005. DHB has since changed its name to Point Blank Solutions. The company formerly traded on the American Stock Exchange, but its trading was suspended in May 2006.

The actions of Brooks, 53, and Hatfield, 54, led DHB's stock price to get pushed to nearly $20 in late 2004, when the two sold their shares, the government charged. Authorities said Brooks received more than $185 million from his stock share while Hatfield made more than $5.2 million.

They also allegedly cheated the government out of millions of dollars of tax revenue by not reporting more than $10 million on bonuses paid to themselves and other DHB employees, according to a statement from the U.S. Attorney's Office for the Eastern District of New York.

"Corporate executives who line their own pockets at the expense of their shareholders flaunt the responsibilities they owe their companies and the investing public," U.S. Attorney Berton J. Campbell said in a statement. "We are committed to ensuring that our markets operate fairly and honestly and will vigorously investigate and prosecute executives who fraudulently enrich themselves."

The government charges Brooks and Hatfield with using corporate money to buy luxury cars, finance Brooks' horse racing business and pay various other personal expenses. They are charged with inflating inventory figures to boost share prices, leading to the company to be overvalued by as much as $13 million.

Brooks and Hatfield are charged with lying to auditors and submitting false reports to the Securities and Exchange Commission.

- Reuters contributed to this report.

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