As bad as it was to get convicted in a massive stock fraud case, things could soon get worse for David Brooks, the former body armor chief facing many years in a federal prison.
Two separate legal developments threaten to cost Brooks, family members and the remains of his former Westbury-based company, DHB Industries, millions of dollars.
In the first one, U.S. District Judge Joanna Seybert, who presided over Brooks' months-long trial in Central Islip, denied Brooks' request to release funds that the court had restrained during the case, and she ordered a forfeiture hearing to proceed next week.
Brooks has argued in court filings that without that money he "has virtually no assets at his disposal" to pay for his ongoing defense. That defense has been elaborate - on Seybert's most recent decision more than half of the 21/2-page decision was taken up listing his six attorneys on the case.
In the decision Seybert said that even if the government is not entitled to forfeiture of all the assets currently in dispute, the court can keep them in case Seybert decides to order restitution to defrauded DHB shareholders, who lost more than $185 million.
Lead defense attorney Kenneth Ravenell, of Baltimore, declined to comment Thursday.
In the other development, the U.S. Court of Appeals for the Second Circuit in Manhattan threw out a civil settlement Thursday that Seybert had negotiated with DHB shareholders. The appellate court ruled that Seybert improperly shielded officers of the company - including Brooks, his brother Jeffrey and former chief financial officer Dawn Schlegel - from being liable to shareholders. Schlegel pleaded guilty to fraud and cooperated in the case against Brooks.
"It's a bit of an open question where this is going now," said Gary Sesser, the Manhattan attorney for D. David Cohen, a shareholder and the company's general counsel until Brooks fired him in 2002, around the time the fraud began.
"You can imagine the reason for his firing," Sesser said, but he added that Cohen sought restitution as a shareholder.
The settlement can be renegotiated or a civil trial on damages could result.
Civil attorneys for Brooks and DHB did not respond to requests for comment.