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Ex-CFO says DHB cash paid for Brooks' hookers

Former DHB Industries Chief Financial Officer Dawn Schlegel

Former DHB Industries Chief Financial Officer Dawn Schlegel is escorted by the FBI to be arraigned Aug. 17, 2006 on securities fraud and insider trading. In March 2010 she is testifying for the prosecution against her former employer, David Brooks. Photo Credit: Howard Schnapp, 2006

David Brooks' former chief financial officer said Tuesday that he had his company secretly pay tens of thousands of dollars for prostitutes for himself and "a variety of people," including several company board members, some employees and several stock brokers who dealt in the business' stock.

Dawn Schlegel, the former chief executive of Brooks' Westbury-based DHB Industries, testified Tuesday at Brooks' federal trial in Central Islip that Brooks directed her to write company checks for as much as $9,000 in cash that he said was "for hookers."

When one of DHB's bankers called Brooks while she was in his office and questioned why the business was issuing the checks in such large amounts for cash, Schlegel said Brooks told the banker it was to pay for prostitutes.

Brooks is on trial charged with fraud in illegally having the company pay for his lavish lifestyle, as well as operating a stock scheme that together garnered him a total of $190 million, according to federal prosecutors.

At one point, Schlegel testified under questioning by federal prosecutor Christopher Ott that Brooks had a tent set up at a company party in Florida.

Brooks told her employees were welcome to engage in sex in the tent with prostitutes he hired, Schlegel said. She also said the payment for the prostitutes was discussed at DHB board meetings, but as the board secretary she omitted talk of the payments from the minutes.

When Schlegel said she questioned what the money was really being used for, Brooks called one of the stockbrokers, who then described his encounter with one of the prostitutes.

Schlegel also testified that Brooks had another scheme where he got $2,500 a week in cash for pocket money. She said Brooks controlled a separate Tennessee company called Tactical Armor Products, ostensibly owned by his now former wife, Terry. Brooks had the company write checks to Terry Brooks for $2,500 a week, Schlegel said. The money was supposedly repayment for a fictitious loan, Schlegel said. But Brooks had the checks cashed and the money delivered to him at his mansion in Old Westbury, Schlegel said.

At one point, Brooks was away and the $2,500 was handed to Terry Brooks, then married to Brooks, Schlegel said. David Brooks ordered employees to personally deliver future $2,500 payments to him, Schlegel said.

And in an apparent attempt to counter an expected defense that the criminal activity at DHB was masterminded by Schlegel, prosecutor Ott asked her why she had signed her name to a report to independent auditors that contained, she said, numerous falsehoods.

Schlegel said she signed her name after Brooks declined to for no particular reason. She said Brooks was "just being a pain like he normally is."

"Brooks said, 'I'm not signing it. You sign it,' " Schlegel said.

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