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November 30, 2005
"Bulletproof" Brooks's Bat Mitzvah Bash is More Than Meets the Eye
Long island businessman David H. Brooks gave his daughter Elizabeth a $10 million bat mitzvah party last weekend, featuring performances by an odd array of artists, including 50 Cent, Tom Petty, Aerosmith, Don Henley , Joe Walsh, Stevie Nicks, Kenny G.
While coverage of the event is relegated to the trivial "glamour and glitz" sections of most news organizations (see these stories: one two, three, four, five ), we at Culture Freak feel there is a more serious story here. (And, as is often the case, we have Rachel Maddow of Air America Radio to thank for alerting us to it.)
Daddy Brooks had the means to give Elizabeth this "Paris Hilton for a Day" coming-out party thanks to Bush's war in Iraq and the American taxpayer.
Brooks is the CEO of DHB Industries, which makes bulletproof vests for the U.S. armed forces.
With an annual salary of only $675,000 (plus an $87,500 bonus), a rather paltry sum compared with that of many other American CEOs, you might wonder how Brooks can afford such gaudy extravagance.
Well salary schmalary. Who needs direct cash compensation? In 2004 Brooks exercised DHB stock options worth almost $70 million and at year's end (Dec. 29, 2004), sold 5 million of his 11 million shares of common stock for a whopping $106.4 million.
I found it very curious that Brooks sold out almost half of his interest in the company just as the stock hit its all-time peak (it began to tumble in 2005, as shown in the chart below). And apparently I'm not the only one.
The Securities and Exchange Commission is investigating the matter, according to -- gulp -- FOXNews.com.
Never in my wildest imagination did I think that FOX would agree with me that there is a serious story here behind the People magazine schlock, let alone that it would actually be the news source totip me off to the SEC investigation into insider trading violations, and to the several class action lawsuits filed against DHB, including one that stems from a May 2005 recall by the Marine Corps of DHB-made 5,277 combat vests after some of them "failed a test to determine whether they could stop a bullet." (Two weeks ago, the Pentagon recalled 18,000 more.)
I'm rather taken aback, frankly, that FOX News has apparently investigated and reported much of what I planned to write here myself. If this post suddenly looks a bit disjointed, it's because I was just shocked out of my chair.
At any rate, the point I wish to stress is that Brooks's exploding wealth came thanks to DHB's 100 percent net income growth in 2004, according to Hoovers. DHB's defense contracts more than doubled each year 2001 and 2003 (the only years for which I have available figures).
(go to source)
In fact, so pervasive is DHB in the body armor industry, if you Google "body armor," the first, non-advertised site that appears is DHB's business unit, Point Blank Armor.
While the Pentagon has oft-stated that it did not have the funds to purchase enough body armor for its troops in Iraq, so much so that many soldiers had to buy their own, the CEO of the body armor contractor managed to make more than $100 million in one year, and spend ten percent of that on a party for his daughter the next.
It's just another, obscene example, of how the government-contracted private sector robs the American taxpayer and transfer our wealth to itself and ultimately, to folks as unlikely as Stevie Nicks and 50 Cent. (Another example and yet another.)
The FOX News story on Brooks is so good that I'm posting it in the continuation link below, in case the original disappears.
Rock Stars' Host Faces SEC Investigation
David H. Brooks, the man who laid out $10 million for his daughter's bat mitzvah celebration, has been under investigation by the Securities and Exchange Commission since last year.
Brooks gained notoriety in the last couple of weeks when it was revealed he had hired Aerosmith, the Eagles, Stevie Nicks, 50 Cent, Ciara, Kenny G and Tom Petty to play at a party for his 13-year-old daughter this past weekend. Brooks took over the two floors of the Rainbow Room for the event, installing hi-tech sound and light equipment.
Many of the acts are managed by Irving Azoff and Howard Kaufman's powerful Los Angeles firm. But what reports of the lavish, over-the-top and some might say completely inappropriate party was who Brooks was, or what trouble he's been in. It's a lot.
He's under a major SEC investigation, as I will report in a moment. That's not all.
His company, DHB, as reported, is a defense contractor that makes bullet-proof vests for the Army. But what published stories did not report was that DHB is now and has been the subject of several class-action suits stemming from, among other things, a government recall of those bullet-proof vests.
In May, the Marine Corps recalled 5,277 combat vests made by a DHB's subsidiary issued to troops in Iraq, Afghanistan and Djibouti because of concerns that they failed a test to determine whether they could stop a bullet.
This occurred six months after DHB announced a $100 million contract with the Defense Department on Dec. 23, 2004. The contract, Brooks said at the time, could be worth as much as $500 million.
Coincidentally, Brooks and the insiders at his company sold off about $200 million worth of DHB stock between Nov. 29 and Dec. 29, 2004. Brooks, according to publicly available filings, sold about $186 million himself, not counting another $50 million in sales that had already been planned.
This seems curious to the outsider's eye. Today, DHB sells around $4 a share on the AMEX. Recently, DHB Industries reported it lost $41.7 million in the third quarter of 2005, the result of special charges, stock compensation and research and development costs.
But things were a lot different one year ago today. In fall 2004, the stock began a sudden climb out of the $11-$12 range toward a high of $20. That's where it was on Dec. 23, the same day as the press release announcing the $100 million contract. Brooks and co. had already begun a huge sell off a few days earlier culminating in an even bigger one on Dec. 27.
That's how he was able to bring in Aerosmith and friends for his daughter's party.
Ironically, though, the SEC investigation into DHB had already commenced before that. The company acknowledges being investigated at first for "certain related party transactions between the Company and affiliates of Mr. David H. Brooks (the Company's Chief Executive Officer)."
But they acknowledge that since then, the investigation has widened to matters relating to the Company's reporting and treatment of executive compensation (primarily relating to Brooks).
The SEC investigation also comes from investors learning that Brooks purchased parts for his products made by a company owned by his wife.
Meanwhile, Brooks has also been looking to become the Denise Rich of the Republican party. A quick check of political donations this year shows that Brooks contributed $25,000 this past June to the National Republican Senate Committee.
A spokesman for Brooks, Manuel Rubio, said the company did not comment on their stock price. As for the party, Rubio told me, "I prefer country music."
Posted by MJuhre at November 30, 2005 12:24 PM