Former Point Blank settlement draws appeal from imprisoned ex-CEO

By Kali Hays

New York, July 22 – SS Body Armor I, Inc., formerly Point Blank Solutions, Inc., is facing an appeal of a court order approving a lawsuit settlement providing the company with a $20 million loan to fund a Chapter 11 plan. The appeal was filed by the company’s former chairman and CEO, David H. Brooks, according to a Wednesday notice with the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, the settlement, which was initially proposed in November 2014, resolves a securities class action lawsuit, as well as a consolidated derivative lawsuit.

After a delay of a Dec. 16, 2014 hearing to consider the settlement, the company’s official committee of equity security holders objected to the proposal, claiming that any possible recovery for the equity creditors was being handed over as part of the agreement.

SS Body Armor said that the $20 million in plan funding will be in the form of an interest-free, non-recourse loan from escrowed funds, which are currently the subject of multiple litigation issues.

The settlement will also aid in the resolution of competing claims to roughly $180 million of funds restrained or forfeited in connection with a criminal action against Brooks.

According to the motion, the U.S. District Court for the Eastern District of New York ruled that Point Blank and the class plaintiffs were victims of Brooks’ criminal conduct and are entitled to restitution.

As reported, SS Body Armor filed bankruptcy in 2010 due to “the massive financial harm” inflicted by. Brooks, former chief operating officer Sandra Hatfield and former chief financial officer Dawn M. Schlegel.

Investigations by the Securities and Exchange Commission and the Department of Justice found the three officers guilty of fraud, insider trading and “other misconduct,” including the use of company funds to pay for “millions of dollars of personal expenses” and re-routing company funds into Brooks’ privately owned company and other private business interests, according to the company’s disclosure statement.

In 2011, the company estimated the total funds lost due to Brooks’ actions exceeded $97 million, and in 2013 Brooks was sentenced to 17 years in prison by the District Court for the Eastern District of New York.

The debtors have asserted a restitution claim in excess of $117 million, while the class plaintiffs have asserted a restitution claim of about $186 million.

A 50/50 allocation of the restitution and forfeiture awards is called for in the approved settlement, with the interest-free loan to be repaid from the debtors’ portion of the shared recovery.

Point Blank is a Pompano Beach, Fla., producer of body armor systems for law enforcement and the military. The company filed for bankruptcy on April 14, 2010. Its Chapter 11 case number is 10-11255.

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