Fraud probe of DHB Industries begins

By Robert E. Kessler

WESTBURY Federal officials have opened a criminal investigation into possible fraud and insider trading at DHB Industries, the often-controversial Westbury-based manufacturer of body armor for the U.S. military, according to several sources.

FBI agents and criminal investigators from the Defense Department have been issuing grand jury subpoenas this week for the company's records and that of many of its present and former top executives, the sources said.

The joint investigation by the Justice Department and the Pentagon is the first involving DHB executives that could possibly lead to jail sentences if wrongdoing is found. But it is not the first legal action that the company has faced recently.

The Securities and Exchange Commission and Congress are already probing DHB, and several stockholder suits alleging wrongdoing have been filed in civil courts.

David Brooks, 51, of Old Westbury, the chairman and chief executive of DHB, is among those whose records have been subpoenaed, according to the sources.

George Canellos of Manhattan, Brooks' attorney, declined to comment. Larry Ellis, a retired four-star Army general who is president of DHB, did not return calls for comment, nor did a number of attorneys for other executives and the company. The company has denied any wrongdoing.

Robert Nardoza, a spokesman for U.S. Attorney Roslynn Mauskopf, whose office is heading the criminal investigation, declined comment, along with FBI spokesman James Margolin.

The newly launched criminal investigation is not the only up-to-the-minute potentially bad news for the company. The Army announced yesterday it would hold an open design competition for the next generation of body armor, intended to replace DHB's Interceptor armor.

The Interceptor is used by U.S. troops in Iraq and Afghanistan and by a number of police departments, including New York City's.

Congressional investigators have said they plan to undertake in the next few months a comprehensive probe of the adequacy of DHB's and other firms' armor protection, amid complaints that DHB equipment is not sufficient.

The company has denied that there is anything wrong with its armor products.

Civil suits filed by stockholders allege that Brooks and other top executives made fortunes by selling off blocks of stock after knowingly making false claims about the financial health of the company. Brooks alone was said to have made $185 million in 2004 by these sales, according to the suits.

Some stockholders have been said to be especially infuriated over a multimillion-dollar bat mitzvah that Brooks held for his daughter last year.  
Copyright 2007 Newsday, Inc.

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