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Schlegel admits fudging tax filing on $500G

Former DHB chief financial officer Dawn Schlegel leaves

Former DHB chief financial officer Dawn Schlegel leaves federal court in Central Islip earlier this month. As a witness for the prosecution, she is under fire from the defense team of her former DHB boss David Brooks who is charged with looting the body armor company. (March 17, 2010) Photo Credit: Ed Betz

The key government witness in the fraud trial of body-armor magnate David Brooks admitted Wednesday in her first day under cross-examination that she initially failed to tell government investigators about a $500,000 bonus her former boss awarded her and that she improperly listed it on her tax returns.

Dawn Schlegel, onetime chief financial officer of former Westbury-based DHB Industries, testified she listed bonus money as income from an outside tax preparation business and then falsely deducted almost $400,000 in business-related expenses to minimize taxes owed.

Schlegel, who, according to court records, works as comptroller and human resources director for Emil Norsic & Son, a Southampton garbage collection company, also acknowledged she failed to list on a tax return a $40,000 bonus that a friend and DHB co-worker had received.

Schlegel, who has pleaded guilty to conspiracy to commit securities fraud and tax fraud, is cooperating with the government in hopes of receiving a lenient sentence, made the admissions under questioning by Brooks' lead defense counsel, Kenneth Ravenell.

Ravenell is attempting to show jurors hearing the trial in U.S. District Court in Central Islip that if Schlegel misled the government early on, her previous and lengthy testimony backing the government's case against Brooks can't be believed.

While admitting the omissions, Schlegel said she told the government about numerous other crimes she had committed and eventually told prosecutors about not properly reporting the bonus as well as other discrepancies in her outside work as an income tax preparer.

Brooks is charged with conspiracy and fraud; prosecutors say he illegally had DHB and its subsidiaries pay for almost $5 million in personal expenses and made $185 million in a scheme involving DHB stock.

Schlegel has testified that in addition to facing up to 10 years in prison, she also had to forfeit to the government $2.9 million from the alleged stock scheme and will also have to pay back taxes.

Before her cross-examination, Schlegel testified that as independent auditors began to suspect the company was engaged in criminal fraud, Brooks asked her: "Won't you [go] to jail for me?"

She then told federal prosecutor Christopher Ott that she told Brooks: "Absolutely not."

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