Charges for ex-DHB execs

Aug. 17--Two former top executives of DHB Industries, the controversial and troubled company that manufactured much of the body armor for the U.S. military, are scheduled to be arrested and arraigned today on charges of securities fraud and insider trading, according to a lawyer for one of the two and several sources familiar with the federal investigation into the firm.

The two are former chief financial officer Dawn Schlegel and former chief operations officer Sandra Hatfield.

Hatfield also was the head of Point Blank Body Armor, the Florida subsidiary of DHB, that manufactured the body armor that also was used by many police departments, including New York City's.

Hatfield's attorney, Roland Riopelle of Manhattan's Sercarz and Riopelle, said Hatfield and Schlegel plan to plead not guilty today in U.S. District Court in Central Islip. He declined to comment further. Schlegel's attorney late yesterday did not immediately return calls for comment. The hearing is scheduled before U.S. Magistrate William Wall.

Robert Nardoza, the spokesman for U.S. Attorney Roslynn Mauskopf, whose office has been investigating DHB, declined to comment.

Until they left DHB in a shakeup in the past year, Schlegel and Hatfield were among the highest-paid women executives on Long Island. Schlegel was the highest paid, making $1.5 million in 2005; Hatfield, the fourth highest, making $975,000.

DHB was headquartered in Westbury until recently, when it moved to Florida, where almost all of its manufacturing is done. The firm was the main producer of the Interceptor Outer Tactical Vest, the body armor widely used by soldiers in Iraq and Afghanistan.

The only person higher then Schlegel and Hatfield in DHB's executive ranks was David Brooks, the chairman and chief executive. Brooks, who also left DHB a few months back, has not been charged, although the investigation into his activities is continuing, the sources said.

Congress, the FBI and the Pentagon's Defense Criminal Investigative Service also are probing how DHB obtained the contracts to produce the body armor.

Much of the attention on DHB has focused on Brooks' extraordinary compensation and lavish lifestyle. Brooks made $192 million at the end of 2004 when he sold a portion of his stock. Last year, the bat mitzvah of Brooks' daughter Elizabeth at the Rainbow Room in Manhattan reportedly cost several million dollars and the entertainers included Fifty Cent and Steven Tyler of Aerosmith.

The alleged insider-trading by Schlegel and Hatfield earned them a total of $8 million on their sales of DHB stock.

The illegal trading allegedly occurred at the end of 2004, the same time Brooks made a profit of $192 million by also selling a large block of his DHB stock.

The securities charges against Schlegel and Hatfield involve the alleged doctoring of DHB's books in a series of complicated schemes to make it appear as if the company was more profitable than it was, in an attempt to keep the company's stock artificially high, according to the sources.

DHB got into the body armor business in 1995 when it bought Point Blank, which was in Amityville, for $3 million at a bankruptcy auction.

Dawn Schlegel

1991 graduate of Hofstra University. Worked for accounting firms before joining DHB Capital Group Inc. in 1996.

Promoted to chief financial officer in 1999. Annual salary

was $200,000. Miscellaneous compensation was $500,000.

Estimated value of her stock options was $683,162.

Total pay: $1,383,162. Left company earlier this year.

Sources: DHB Industries, Newsday Executive Pay section, 2006

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Copyright (c) 2006, Newsday, Melville, N.Y.

Distributed by McClatchy-Tribune Business News.

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