Nice New York Times story today on David H. Brooks. Ah, memories. Here’s my story from November 30, 2005. Everything old is new again!
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.”