David Brooks, the former body-armor magnate convicted of multiple frauds committed to pay for a luxurious lifestyle, won a major financial victory Thursday when a federal judge ruled he did not have to forfeit any of the millions of dollars that prosecutors said he made in insider trading.
The government has said that Brooks should forfeit between $58 million and $186 million of the money he made on the sale of his company's stock, then DHB Industries of Westbury, because it is criminal proceeds. And even a defense expert for Brooks had conceded in hearings that the former DHB head may have to forfeit up to $2.9 million to the government.
But in a ruling Thursday, U.S. District Judge Joanna Seybert in Central Islip said the government failed to meet the standard establishing the actual amount made on insider trading that was subject to forfeiture.
In her decision, Seybert was particularly scathing in criticizing the testimony of the government's expert witness in the case, Lawrence Harris, a former chief economist for the Securities and Exchange Commission, and a professor at the University of Southern California.
Seybert said his analysis "makes assumptions and adjustments . . . outside the limited discretion granted to him by the court;" citing his use of "subjective opinions" and " 'gut-based' assumptions not based on any objective analysis."
Robert Nardoza, a spokesman for the Eastern District, said, "We are going to review Judge Seybert's decision and consider our options." The government can appeal the decision.
Harris declined to comment.
Brooks' attorney, Judd Burstein, who had hammered away during cross-examination at what he said were problems with Harris' method, said, "We're very gratified by the judge's decision."
But Brooks' legal and financial troubles are far from over. Brooks still faces sentencing on his conviction last September on 17 felony counts, including insider trading, conspiracy, fraud and obstruction. On each of several counts, Brooks faces up to 25 years in prison.
Also, Brooks could still have to pay up to hundreds of millions of dollars in restitution to DHB stockholders as part of his sentencing, and to the government in a separate civil action pending against him.