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(Updates with comment from Nadelman’s defense lawyer in seventh paragraph.)
June 21 (Bloomberg) -- Three Point Blank Solutions Inc. directors accused of standing by while the body-armor maker’s former top executive looted the firm have offered to settle claims against them, court papers show.
Lawyers for the U.S. Securities and Exchange Commission have asked a federal judge in Florida to put the agency’s lawsuit against Jerome Krantz, Cary Chasin and Gary Nadelman on hold while regulators “consider offers of settlement,” according to a June 17 court filing.
The accords “would fully resolve this case” if they are accepted by the SEC, Christopher Martin, one of the agency’s Miami-based lawyers, said in the filing. Terms of the settlement offers weren’t made public in the filing.
SEC officials accused Krantz, Chasin and Nadelman, who served as Point Blank’s independent directors, of aiding a $185 million fraud committed by David H. Brooks, the company’s ex- chief executive officer. A New York jury convicted Brooks in September of fraud and obstruction of justice charges over the accounting-fraud scheme.
The government alleged Brooks misappropriated millions from Pompano Beach, Florida-based Point Blank to fund his lavish lifestyle, which included luxury cars such as a Bentley and a Ferrari, vacations, art, payments for prostitutes and fees for his purebred trotting horses. U.S. District Judge Joanna Seybert hasn’t set Brooks’s sentencing date.
Regulators allege Krantz, Chasin and Nadelman intentionally turned a blind eye to Brooks’s actions and allowed him to manipulate the company’s earnings reports as part of the scheme. All three directors were old friends and Long Island neighbors of Brooks, the New York Times said in March.
“We have been involved in very serious settlement discussions,” Robert Gottlieb, Nadelman’s attorney, said in a telephone interview today. “We have cooperated fully with the SEC and are hoping this settlement will be finalized expeditiously.”
Gerald Russello, one of Krantz’s lawyers, couldn’t immediately comment on the settlement offers and Paul Hugel, one of Chasin’s lawyers, declined to comment.
The SEC filed suit in February in federal court in Miami to recover ill-gotten profits, impose fines and bar the three directors from again serving on boards.
Prosecutors contend Brooks and other company insiders lied about the value of the firm’s inventory of combat vests and used other financial manipulations to artificially inflate the value of the company and divert funds, according to court filings.
Krantz, Nadelman and Chasin ignored repeated warnings from auditors that the company’s inventory figures were questionable and employees’ complaints about Brooks’s use of a company run by his wife as one of the firm’s vendors, regulators said in the 41-page complaint.
They noted a decision by Point Blank’s auditors at Grant Thornton LLP to step down over questions about inventory figures didn’t prompt any action by the trio, who served on the board’s audit committee.
The bullet-proof vest maker, whose customers include the U.S. military and police agencies, settled the SEC claims against the firm. Point Blank, which formerly was DHB Industries Inc., sought bankruptcy protection in April 2010.
Point Blank listed assets of $63.9 million and debt of $68.5 million in its Chapter 11 filing in U.S. Bankruptcy Court in Delaware. The company is negotiating with a committee of its creditors over a proposed restructuring plan.
The SEC case is SEC v. Krantz, 11-CV-60432-WPD, U.S. District Court, Southern District of Miami (Florida). The bankruptcy case is In re Point Blank Solutions Inc., 10-11255, U.S. Bankruptcy Court, District of Delaware (Wilmington).
--With assistance from Joshua Gallu in Washington, Michael Bathon in Wilmington, Delaware, and Thom Weidlich in New York. Editors: Glenn Holdcraft, Andrew Dunn
To contact the reporter on this story: Jef Feeley in Wilmington, Delaware, at email@example.com.
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