Two former top executives of the nation's leading supplier of body armor to the U.S. military accused of insider trading in an alleged $190 million scheme lied to push up the company's stock price, a federal prosecutor said at the start of their trial Monday.
"This is a case of the naked greed of two people," U.S. Assistant Attorney Richard Lunger said in his opening statement in federal court in Central Islip.
David H. Brooks, the founder and former chief executive of DHB Industries, Inc., and Sandra Hatfield, the former chief operating officer, are accused of falsely inflating the value of the inventory of the company's top product, the Interceptor vest, to help meet profit margin projections.
Prosecutors say Brooks splurged on six-figure parties and other extravagances, including a diamond encrusted belt buckle and a Bentley. Brooks also allegedly spent millions of company funds on his horse racing hobby.
Brooks' attorney Kenneth Ravanelle told jurors that all the expenditures were approved by the company's board and various agreements between Brooks and the company.
"Mr. Brooks was entitled to what he received," Ravanelle said.
Both Brooks and Hatfield have pleaded not guilty.
Brooks resigned from DHB in July 2006, about the same time the company relocated its headquarters from Westbury to Pompano Beach, Fla., where it operates as Point Blank Solutions Inc.
Hatfield left the company in November 2005.
The Interceptor vest, designed to withstand rifle fire and shrapnel, was made for the Marine Corps and other branches of the military. There are no allegations that the vests or other DHB products were unsafe.
Authorities allege the scheme propelled the company's stock from $2 a share in early 2003 to nearly $20 a share in late 2004. When the pair sold several million DHB shares at that time, Brooks made more than $185 million and Hatfield more than $5 million, according to the U.S. attorney's office.
When an employee identified only as "John Doe" confronted Hatfield in late 2004 with evidence that the inventory of vests was overvalued by up to $8 million, prosecutors say she told him the company "could not 'take a hit' of reducing the valuation to the correct amount." Brooks and Hatfield also are accused of failing to report to the IRS more than $10 million in bonus payments they and other DHB employees received.
Brooks also is accused of using DHB funds to buy or lease luxury vehicles for himself and family members, and to pay for vacations, jewelry, cosmetic surgery, country club bills and family celebrations.
Prosecutors say he threw lavish bar and bat mitzvahs for his children in which entertainers such as Tom Petty, Aerosmith and the Eagles performed.
Brooks had been freed on a $400 million bail package until earlier this month, when U.S. District Judge Joanna Seybert found he and his brother had engaged in schemes to hide assets from the government and the court.
The trial is expected to last several months.