The U.S. military last year recalled thousands of protective vests
sold by DHB's Point Blank Body Armor Inc. unit on quality concerns.
From Reuters, 8/17/06:
http://news.yahoo.com/s/nm/20060817/us_nm/financial_sec_armor_dc
Former executives of US body armor firm arrested
WASHINGTON (Reuters) -
U.S. authorities arrested two former top executives of a major body
armor supplier to the U.S. military and law enforcement agencies on
Thursday and charged them with criminal securities fraud and insider
trading.
Federal prosecutors alleged former Chief Financial Officer Dawn
Schlegel and former Chief Operating Officer Sandra Hatfield
manipulated DHB Industries Inc.'s books "to reap millions of dollars
of profits through insider trading."
The lawsuit was a fresh blow to DHB.
The U.S. military last year recalled thousands of protective vests
sold by DHB's Point Blank Body Armor Inc. unit on quality concerns.
The company was recently delisted from the American Stock Exchange.
Last month it placed Chief Executive David Brooks on indefinite leave
pending the outcome of investigations.
Shares in Pompano Beach, Florida,-based DHB were down 2.6 percent at
$3.00 each at midday in Pink Sheets trading.
Prosecutors on Thursday accused Schlegel and Hatfield of inflating
DHB's earnings and profit margins between 2003 and 2005 to meet Wall
Street expectations.
The two former executives also sold thousands of DHB shares "based on
inside information, netting a profit of over $8 million," prosecutors
charged.
U.S. Attorney for the Eastern District of New York Roslynn Mauskopf
said, "As a result of the fraud scheme, the investing public lost
millions of dollars while the defendants lined their own pockets with
a fortune in ill-gotten gains."
Attorneys for the two former DHB executives could not immediately be
reached for comment.
The charges in the criminal indictment carry maximum sentences of up
to 25 years in prison and a $250,000 fine.
Prosecutors said they are also seeking forfeiture of $8 million in
assets belonging to the defendants.
The Securities and Exchange Commission said it also charged the two
former executives with civil securities fraud.
The SEC said Schlegel and Hatfield "routinely overstated the value of
the company's inventory and directed the booking of numerous
fraudulent journal entries in order to reduce the company's cost of
goods sold."
"By manipulating DHB's gross profit margin, Schlegel and Hatfield knew
that investors would be given a false portrait of DHB's operating
results," said SEC Enforcement Division Director Linda Thomsen in a
statement.
The SEC said its investigation is continuing.
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