Good Morning
Good Morning

SEC accuses ex-DHB board members of fraud

David Brooks, one of three former DHB Industries

David Brooks, one of three former DHB Industries Inc. executives who have been ordered to pay a total of $53.9 million in restitution. Brooks is escorted to arraignment on Oct. 25, 2007, to face charges of looting his Long Island company. Credit: Howard Schnapp

David Brooks, the jailed former chief executive of DHB Industries, didn't blow millions of company dollars on prostitutes, a jewel-encrusted belt buckle and lavish parties for his children all by himself, the federal Securities and Exchange Commission said Monday as it accused three former company directors of fraud for deliberately disregarding what was going on.

Brooks ran the Westbury body-armor company until it changed its name to Point Blank Solutions, moved to Florida and went bankrupt. He was arrested in 2007 and convicted last September of defrauding the company and stockholders of about $190 million and is awaiting sentencing.

Monday, the SEC's Miami office filed suit against Jerome Krantz, 55; Cary Chasin, 62, and Gary Nadelman, 58, all of Old Westbury, three former members of DHB's board of directors. They served on the board's audit committee and "were willfully blind to numerous red flags signaling accounting fraud, reporting violations and misappropriation at DHB," the complaint said. "Instead, as the fraud swirled around them, they ignored the obvious and merely rubber-stamped the decisions of DHB's senior management while making substantial sums from sales of DHB's securities."

Attorneys for the three men did not directly address the accusations in the complaint but said the SEC is overreaching.

"Mr. Nadelman is a good and decent man who did not knowingly or willfully do anything to justify today's SEC action," said his lawyer, Robert Gottlieb of Manhattan.

Chasin's attorney, Amy Millard of Manhattan, said he "faithfully carried out his role as an outside director of DHB" and "looks forward to a resolution of this matter."

Gerald Russello of Manhattan, Krantz's lawyer, said his client was innocent.

The complaint said the three men acted out of self-interest and loyalty to Brooks.

"They were Brooks' longtime friends and neighbors, with personal relationships with Brooks that spanned decades," the complaint said.

They all benefitted financially from their relationship with Brooks, the complaint said. Krantz, who runs a financial advising company in Woodbury, served as insurance agent for Brooks and DHB, the complaint said. Chasin was employed by DHB. Nadelman invested in one of Brooks' private companies, the complaint said.

The numerous frauds for which Brooks was convicted were facilitated by the three men failing to respond to concerns raised by the company's controller, auditors and labor union, the complaint said.

The suit, filed in federal court in Miami, seeks any ill-gotten gains, unspecified civil penalties and to bar the men from acting as officers or directors of public companies.

More news