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SEC Charges Former CEO of Military Body Armor Supplier With Financial Fraud and Insider Trading


Washington, D.C., Oct. 25, 2007 - The Securities and Exchange Commission today filed securities fraud charges against David H. Brooks, the former Chief Executive Officer and Chairman of the Board at DHB Industries, Inc., a major supplier of body armor to the U.S. military and law enforcement agencies.

The SEC's complaint, filed in U.S. District Court for the Southern District of Florida, alleges that Brooks engaged in a pervasive accounting fraud at DHB between 2003 and 2005, violated insider trading laws in 2004, and used millions of dollars in corporate funds to pay personal expenses.

"This case shows that the SEC will not tolerate the improper use of corporate funds to pay personal expenses," said Linda Chatman Thomsen, Director of the SEC's Enforcement Division.

David Nelson, the SEC Regional Director in Miami, added, "This case involves egregious conduct by a company CEO. As always, we aggressively pursue and prosecute company executives who betray the trust of public shareholders in order to line their own pockets."

The SEC's complaint alleges that Brooks, with the assistance of DHB's former chief financial officer and chief operating officer, manipulated the company's gross profit margin and net income by overstating inventory values, falsifying journal entries, and failing to include appropriate charges for obsolete inventory.

According to the SEC's complaint, Brooks also funneled millions of dollars out of DHB through fraudulent transactions with a related entity he controlled. The complaint further alleges that Brooks used company credit cards and checks to pay millions of dollars in personal expenses, including luxury cars, jewelry, art, real estate, extravagant vacations, personal aircraft usage, and horse training. As a result of the misconduct by Brooks, DHB filed false and misleading financial documents with the SEC and made false statements in company press releases.

The complaint also alleges that Brooks sold his personal DHB stock for proceeds of about $186 million at the end of 2004 at the height of DHB's stock price, and did so while in possession of material, non-public information - a violation of insider trading laws.

The complaint charges Brooks with violating the antifraud, insider trading, reporting, books and records, and other provisions of the federal securities laws. The SEC is seeking injunctive relief, disgorgement of ill-gotten gains, monetary penalties, and an officer and director bar. In addition, the complaint seeks reimbursement by Brooks to DHB of bonuses and profits from stock sales pursuant to Section 304 of the Sarbanes-Oxley Act.

At the time of the alleged conduct, Brooks was subject to an SEC injunction entered by a federal court in December 1992 against future violations of the antifraud provisions. In addition, in December 1992, the Commission, in an administrative proceeding, barred Brooks from association with any broker or dealer for a period of five years.

The U.S. Attorney's Office for the Eastern District of New York conducted a parallel investigation of this matter. Simultaneous with the SEC's announcement, the U.S. Attorney's Office announced the filing of charges against Brooks for securities fraud, conspiracy to commit securities fraud, insider trading, and obstructing the SEC's investigation, among other charges.

The SEC's investigation is continuing.

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For more information, contact:

Glenn Gordon
Associate Regional Director
SEC's Miami Regional Office

Chedly C. Dumornay
Assistant Regional Director
SEC's Miami Regional Office

  Additional materials: Litigation Release No. LR-20345



Modified: 10/25/2007