Argued: May 19, 2017
from the United States District Court for the Eastern
District of New York. No. 6-cr-550 - Joanna Seybert, Judge.
Richard C. Klugh, Law Offices of Richard C. Klugh, (Joseph A.
DiRuzzo, III, Fuerst Ittleman David & Joseph, PL, on the
brief) Miami, FL, for Defendant-Appellant-Cross-Appellee.
Justine A. Harris, Sher Tremont LLP, (Lisa H. Bebchick,
Fried, Frank, Harris, Shriver & Jacobson LLP, on the
brief), New York, NY, for Appellant Terry Brooks.
Burstein, Judd Burstein, P.C., New York, NY, for Appellants
Andrew, Victoria, & Elizabeth Brooks.
(Michael J. Gilbert, (Andrew J. Levander, on the brief),
Dechert LLP, New York, NY, for Appellants Andrew, Victoria,
& Elizabeth Brooks.)
K. Kessler & Laura D. Mantell, Assistant United States
Attorneys (David C. James, Amy Busa, Christopher A. Ott,
Christopher C. Caffarone, Assistant United States Attorneys
on the brief) for Robert L. Capers, United States Attorney
for the Eastern District of New York, Brooklyn, NY, for
Before: Winter and Droney, Circuit Judges, and Donnelly,
District Judge. [†]
DRONEY, CIRCUIT JUDGE:
from a judgment of the United States District Court for the
Eastern District of New York (Seybert, J.) entered
following a jury verdict finding defendant David Brooks
guilty of offenses related to fraud and securities laws
violations, and Brooks's guilty plea to tax evasion.
After Brooks filed his appeal, he died while incarcerated and
his estate and members of his family moved to abate his
convictions. We conclude that Brooks's counts of
conviction resulting from the verdict abated with his death,
but not the counts resulting from his guilty plea; the bail
bond subscribed by Brooks and his family remains forfeited;
and the order of restitution related to the fraud and
securities laws counts is abated but not the order of
restitution related to the tax counts. Accordingly, the
estate-appellant's motion for abatement is GRANTED in
part and DENIED in part, Brooks's judgment of conviction
for the non-tax counts is VACATED, the motion by Brooks's
family members for abatement of the bail bond forfeiture is
DENIED, the order denying the motion to set aside bond
forfeiture is AFFIRMED, the Government's cross-appeal is
DISMISSED, and the case is REMANDED for the dismissal of the
non-tax counts of the indictment.
September 14, 2010, David H. Brooks was convicted in the
United States District Court for the Eastern District of New
York (Seybert, J.) after a jury trial on multiple
counts of offenses relating to securities fraud, mail and
wire fraud, and obstruction of justice. He was also convicted
of related tax offenses based on his guilty pleas, which
occurred after the jury's verdict. Shortly before trial,
the district court found that Brooks had violated the terms
of his release conditions and ordered the forfeiture of a
substantial cash security on the bond executed by Brooks and
members of his family as sureties.
his convictions, Brooks was sentenced to 204 months'
imprisonment, ordered to pay restitution and a fine, and
ordered to forfeit assets. He appealed his convictions based
on the jury verdict but not the tax counts. After the
verdict, Brooks's ex-wife and their children moved to set
aside the forfeited bail bond security. The district court
denied the motion and the family members appealed that
decision. Brooks died while he was incarcerated and while
these appeals were pending.
result of Brooks's death, his estate has now moved for
abatement of his convictions, the order of forfeiture, the
orders of restitution, the fine, and the special assessment
that accompanied the judgment of conviction. His estate, as
well as his ex-wife and their children, have also moved for
abatement of the bail bond forfeiture. The Government
does not oppose the abatement of Brooks's convictions on
the non-tax counts and accompanying order of forfeiture,
fine, and special assessment, but opposes the abatement of
the restitution obligations and the forfeiture of his bail
conclude that the counts of conviction based on the jury
verdict must abate as well as the orders of forfeiture, fine,
special assessment, and restitution for the offenses Brooks
contested at trial. We also hold, though, that the forfeiture
of the bail bond does not abate, nor do the convictions and
order of restitution imposed on the tax counts. Accordingly,
Brooks's motion for abatement is GRANTED in part and
DENIED in part, Brooks's judgment of conviction is
VACATED in part, the motion for abatement by the other
appellants is DENIED, the order denying the motion to set
aside the bond forfeiture is AFFIRMED, the Government's
cross-appeal is DISMISSED,  and the case is REMANDED for the
dismissal of the indictment as to counts I-XI, XV-XVII.
Brooks's Offense Conduct
Brooks was the founder, Chair of the Board of Directors, and
CEO of DHB Industries, Inc., a publicly traded company that
manufactured and sold body armor to law enforcement agencies
and the U.S. military.
October 2007, Brooks was indicted in a superseding indictment
on charges of participating in several schemes to defraud
shareholders, including overvaluing inventory of DHB and its
subsidiaries, reclassifying costs to inflate DHB's
profitability, falsely adding non-existent inventory to the
company's books, and obstructing a Securities and
Exchange Commission ("SEC") investigation.
addition to the allegations concerning manipulation of the
DHB books and false SEC disclosures, the indictment alleged
that Brooks also defrauded DHB shareholders by diverting DHB
assets for the benefit of Brooks, the Brooks family, and
other DHB executives. Brooks routinely used DHB funds to pay
expenses for his personal horse-racing business, and gave
company credit cards and checks to his family to cover their
personal expenses including clothing, home renovations,
plastic surgery, vacations and airfare, automobiles,
entertainment, and gifts. These personal expenses totaled
millions of dollars.
also sold substantial shares of DHB stock while the stock
price was artificially inflated, making hundreds of millions
of dollars in profit. Finally, the indictment alleged that
Brooks paid himself millions of dollars through DHB that were
not reported as income to the Internal Revenue Service, and
did not pay income taxes on those payments.
second superseding indictment (the "indictment")
was returned in July 2009, with the same charges directed at
district court entered a pre-trial restraining order on
fourteen bank and investment accounts held by Brooks and his
family that the court found would be subject to forfeiture in
the event of a conviction.
pled not guilty to all of the charges. The court later
granted Brooks's motion to sever the tax counts. Brooks
proceeded to trial on the non-tax counts in January
Brooks's Forfeiture of Bail Bond
Brooks's arrest in October 2007, the Government sought to
have Brooks detained or his release be subject to a
substantial bond and the full disclosure of his financial
holdings, and on Brooks returning all of his assets from
overseas back to the United States. The district court held a
hearing and determined that Brooks was a flight risk on the
basis of his considerable wealth and the potential for access
to foreign accounts if he fled the country. The district
court was also concerned that undisclosed and unmonitored
accounts could be used to facilitate witness tampering. The
district court issued a Bail Release Order (the
"Order") on January 3, 2008, granting Brooks's
motion for pre-trial release. The Order included such
restrictions as home detention monitored by a private
security firm, monitored conversations, independent auditing
of bank accounts and assets, and a prohibition on liquid
assets being held overseas without the approval of the U.S.
and his family sureties also provided $48 million in cash as
security for the $400 million bond the court
ordered. The Order provided that if Brooks
concealed assets, that conduct would be grounds for
revocation of Brooks's bail and for the forfeiture of the
$48 million cash security.
district court reviewed the terms of the Order with Brooks
and the family sureties prior to its approval at a December
21, 2007, hearing. In particular, the district court asked at
the hearing about "failure to disclose assets" and
Brooks's counsel confirmed that any such failure
"subjects him to immediate remand, and it subjects him
to the loss of the . . . [security]." J.A.
481. The district court canvassed Terry
Brooks (Brooks's wife), Jeffrey Brooks (Brooks's
brother), Victoria Brooks (Brooks's 23-year-old
daughter), and Andrew Brooks (Brooks's 19-year-old son),
who executed the bond along with Brooks. The court later
modified the Order upon subsequent motions by Brooks, but
these modifications did not affect the asset disclosure terms
or the restriction on maintaining funds overseas.
January 2010, shortly before trial, the Government moved to
revoke Brooks's bail on the basis that Brooks and his
family had hidden substantial assets in violation of the
terms of the Order. The Government sought forfeiture of the
entire $400 million bond. The district court revoked
Brooks's bail and ordered his detention, but ordered
forfeiture of only the cash security of $48 million.
district court did not hold an evidentiary hearing for the
forfeiture, over the objections of defense counsel, and
proceeded by Government proffer. The district court
credited the extensive affidavit (with numerous exhibits) of
FBI Special Agent Angela Jett, which described the results of
her investigation into Brooks's concealment of assets
to the affidavit, prior to the entry of the bail bond Order,
a confidential source had met with David and Jeffrey Brooks
as well as other family members to create various
corporations and bank accounts around the world to conceal
millions of dollars in assets. The source set up a scheme
called "Czerny Kot" (Polish for "black
cat") using the passports of Jeffrey Brooks, Elizabeth
Brooks, Andrew Brooks, and Victoria Brooks to open nominee
accounts. Special Agent Jett also pointed to Grand Jury
testimony of Brooks's personal pilot to show that Brooks,
Jeffrey, and other family members (including Terry Brooks and
the children) flew to Switzerland in a private plane to
deposit assets in Swiss safe deposit boxes.
principally on Special Agent Jett's affidavit, the
district court found that David and Jeffrey Brooks violated
the conditions of Brooks's release by clear and
convincing evidence. Specifically, the court found that (1)
the two Brooks brothers conspired to hide assets through the
Czerny Kot scheme in the Republic of San Marino,
(2) that Jeffrey Brooks had concealed over $3 million in
currency in a London safe deposit box, and (3) that David
Brooks secretly transported an unknown amount of currency to
that these actions constituted a violation of the Order, the
district court ordered the forfeiture of the cash security.
The amount of cash remaining as security on that bond (after
the prior withdrawals, as permitted by the court) totaled
approximately $22.5 million, of which Terry Brooks and the
children claimed ownership of $17.7 million and Brooks
claimed $1.8 million (the remaining $3 million went to legal
fees, as permitted by the court). Brooks filed an emergency
motion with this Court to reverse the district court's
revocation of bond, which this Court denied.
Convictions and Post-Trial Events
September 14, 2010, after an eight-month trial, a jury
returned a guilty verdict against Brooks on all counts.
Brooks subsequently pled guilty to one count of conspiracy to
defraud the IRS and two counts of tax evasion in August 2011.
Brooks also agreed, in his plea agreement regarding the tax
counts, to pay $2.8 million in restitution to the IRS and
waived his appeal rights as to the tax convictions and the
sentence for them.
August 22, 2013, judgment was entered against Brooks, and he
was sentenced to 204 months' imprisonment for all his
counts of conviction. The August 2013 judgment also reflected
the imposition of a special assessment of $1, 700, a fine of
$8.7 million, restitution of $2.8 million on the tax counts,
and also made final a preliminary order of forfeiture.
Restitution on the fraud and securities laws counts of
conviction was to be subsequently determined by the district
Restitution Order on Fraud and Securities Laws
March 2015, the district court issued an extensive opinion
and accompanying final order of restitution, pursuant to the
Mandatory Victim's Restitution Act ("MVRA"),
for the non-tax counts. The amended judgment that followed
reflected the imposition of $53.9 million in restitution to
Point Blank Solutions (the then-successor to DHB, Inc.), plus
$37.6 million to individual victims identified ...