War brings out the worst in some people. Check out this story in today’s New York Times, which details a jury’s decision Tuesday to find David H. Brooks guilty of fraudulently enriching himself at the expense of his company’s shareholders. He owned and ran Point Blank body armor, a company that raked in the cash following 9/11 when the Pentagon found its troops lacking the kind of bulletproof vests they needed for the wars in Afghanistan and Iraq. We investigated the company five years ago and even wrote a piece about it, but the vagaries of journalism kept it from seeing the light of day. Until now:
It’s 6,000 miles from the bullet-scarred alleys of Baghdad to the glittering Rainbow Room high over Manhattan. But it’s the armored vests U.S. soldiers are wearing in the war zone that helped pay for the ritzy bat mitzvah that David H. Brooks threw for his 13-year old daughter in the swank restaurant November 26 . Gotham tabloids reported that rocker Tom Petty, rapper 50 Cent, and saxophonist Kenny G — along with key members of Aerosmith, the Eagles, and Fleetwood Mac — all were on hand for the multi-million-dollar bash. The stars, used to performing in huge arenas, this time played only for Brooks, his daughter Elizabeth, and their 300 guests (split between adults, who grooved to their musical icons, and their kids — who seemed more interested in the goodie bags crammed with video iPods and digital cameras).
Brooks, 51, is chairman and chief executive officer of DHB Industries, Inc., a publicly-traded Westbury, New York, company that bears his initials. DHB’s Point Blank subsidiary is the Pentagon’s primary supplier of bulletproof vests. While the Iraq war has cost U.S. taxpayers more than $200 billion, and U.S. families more than 2,100 loved ones, it has made Brooks a wealthy man. A behind-the-scenes player who favors raceshorses and private jets, Brooks’ lavish bash has raised eyebrows among those closer to the front lines. “When a soldier on patrol in Ramadi learns that the guy who made his body armor is paying for a party with 50 Cent on top of a skyscraper, it doesn’t sit well with him,” says Paul Rieckhoff, founder of Operation Truth, a non-profit group of U.S. military veterans of the Iraq war. “It really illuminates how detached some people are from the sacrifices of this war.”
The U.S. military, unprepared for the violence following Saddam Hussein’s ouster, has poured about a half-billion dollars into Brooks’ company since the war began. U.S. troops generally praise the tough but light body armor produced by the Florida-based Point Blank. But investors and those that counsel them contend that Brooks is using the company as his “personal piggy bank” at their expense. A co-founder of the Motley Fool investment advice web site doesn’t think much of Brooks or his company. “They will brilliantly milk the company for their benefit — and not give a damn about you,” Tom Gardner recently wrote. In fact, the federal Securities and Exchange Commission has been investigating Brooks’ compensation for nearly two years.
Brooks pocketed $70 million last year  in pay, bonuses and exercised stock options (along with $87,500 for “foregone vacation time.”) But that was small change alongside the $186 million he realized when he sold DHB stock in late 2004 as the company’s value peaked at more than $22 a share. The stock crested as the company issued a series of press releases boasting of its huge Pentagon contracts (and one where Brooks said he had not sold any stock, contrary to Wall Street “rumors and incorrect statements.”) But in the last two months of 2004 he flooded the market with more than 10 million shares — about 20 percent of the company’s stock — helping drive the stock price down (it’s now around $4 a share).
Associates of Brooks (who declined to be interviewed by Time) describe him as driven and voluble businessman who kept DHB afloat out of his own pocket before 9/11. Now that the company has grown, they concede there’s “messiness” involved as Brooks and DHB strive to untangle their commingled financial dealings. “The only thing that’s important is the continued focus of the highly dedicated people at Point Blank and DHB to produce body armor that protects our men and women in the armed forces,” Brooks said in a statement to Time. “This is our sole focus, and we do it well and we’re proud of what we do.”
But with a tiny board of Brooks’ hand-picked allies, it is difficult to see where Brooks’ financial interests end and those of the company begin. While the board paid Brooks a salary of $675,000 last year, it also:
— Allowed him to extend his five-year employment contract in July for another five years. Unlike most companies, where the boss decides if the employee should be kept on, in this case the company’s contract with Brooks allowed him to make that decision unilaterally. Re-upping immediately gave him 1.5 million shares of stock at $1 a share; each July through 2010 he’ll get an additional 750,000 shares at $1 each.
— The company pays Brooks $25,000 a month for use of his Florida home for business purposes (he also has a home in New York). It also pays for a car and driver for Brooks at the company’s plants in New York, Florida, Belgium and Tennessee. And, the board says in a recent SEC filing, “because Mr. Brooks is expected to utilize his residences to conduct business for us, we are required to pay certain expenses of Mr. Brooks’s residences including without limitation telephone, information services, delivery services and certain entertainment expenses.” Such profligate treatment is actually an improvement: From 1997 to 2004, Brooks was entitled to spend up to 10 percent of the company’s net income on his “business and personal expenses.”
— DHB paid a company owned by Brooks’ three children nearly $1 million last year for the use of the family’s private jet. It also approved the use of the jet by the company’s directors for business purposes — yet none of them bothered to attend the 2004 annual meeting. The company also secretly rented space and bought vest components from companies owned by Brooks’ wife, Terry, which is a second target of SEC interest.
— From 1997 to 2003, Brooks charged $2 million to company credit cards “for personal expenses and other expenses that could not be clearly characterized as business expenses,” the company has told the SEC. While that might land most executives in hot water, the board made the problem evaporate by noting that over the same period Brooks had spent $2.3 million on his homes and plane for which the company never reimbursed him, as well as “unpaid salary” totaling $498,000. “Netting these totals against one another yields a net balance due to Mr. Brooks,” the company told the SEC in March. But, it added, Brooks “has waived any claims for accrued or unpaid amounts that could still be due to him.”
— The board awarded Brooks a $2 million 2004 bonus “in recognition of our performance and accomplishments in exceeding all forecasts and increasing revenues and profits.”
But Brooks’ good times may be coming to an end. Beyond the SEC probe, there are other cracks spreading through his domain. Over the last five years, DHB’s books have been audited by four different firms. Two of them bolted because of concerns they had over the company’s books, with the company telling the SEC that one quit after complaining about “understaffing in our accounting and financial department.” Says one former DHB auditor: “The auditors feel that whatever money they make off this firm is outweighed by the risks of working for them.”
In May , in hopes of restoring investor confidence, Brooks hired retired four-star Army general Larry Ellis as DHB’s president. That same month, the military began recalling the first of 22,000 Point Blank vests that had failed ballistics tests but been accepted by the military anyway (they represent only a fraction of the roughly 1 million military vests made by Point Blank, but have generated a wave of unfavorable publicity). Last month, for the first time since 1999, DHB announced it had lost money — $41.7 million — during the third quarter of the year. Topping the list of reasons for the loss was the $11.2 million in vested stock warrants the company gave to Brook when he extended his employment contract back in July. Last week, DHB directed press calls to Bruce Rubin, a Miami PR professional whose website boasts that he is “one of the country’s top crisis communication practitioners, specializing in crisis, emergency and litigation public relations.”