Just when you think you've seen it all and covered this stuff to death, another (alleged) greedy sociopath comes along with even more creative ways of defrauding investors.
David Brooks, former CEO of body-armor manufacturer DHB Industries, has been indicted by the feds on a laundry list of charges that include conspiracy, securities fraud, insider trading, tax evasion, and obstruction of justice.
The company's former COO, Sandra Hatfield, and CFO, Dawn Schlegel, were also indicted on similar charges.
Brooks and his cronies allegedly (it's always allegedly) used false accounting entries to inflate profit margins, filed misleading SEC reports, pumped up the company's stock ten-fold, and cashed out to the tune of $200 million.
The scandal also includes millions in unreported bonus payments and Brooks' use of company funds for all the usual personal excesses: luxury cars, vacations, jewelry, lavish parties, and to fund other family-owned businesses. But there are excesses I've never seen before: cosmetic surgery and the purchase of an armored vehicle for the family's use.
I've got to ask, what exactly does a family need an armored vehicle for?
Brooks also hired 50 Cent, Aerosmith and Don Henley to play at his daughter's $10 million bat Mitzvah at the Rainbow Room in New York.
DHB Industries, which recently changed its name to Point Blank Solutions to distance itself from the scandal, is the largest supplier of body armor to the U.S. military, having shipped more than 1.3 million Interceptor vests since 1999. However, the product suffered test failures in 2005, prompting the Marine Corps to switch to a different supplier earlier this year.
It would certainly be unfair and premature to suggest that such upstanding executives may have sold inferior body armor to protect our troops. Still, would you be surprised if that turns out to be the case?
You know, we've covered this kind of thing before in What motivates rich, powerful CEOs to commit corporate fraud? and The seven deadly sins of corporate dysfunctionality. If Brooks is convicted, we can add his name to that surprisingly long and growing list of wealthy CEOs of public companies that turn out to be dysfunctional, greedy sociopaths.
I always ask the question: where was the company's board of directors while all this was going on?
Then there's an even scarier question: who's next?