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United States v. Hatfield

May 21, 2010

UNITED STATES OF AMERICA,
v.
SANDRA HATFIELD, DAVID H. BROOKS, PATRICIA LENNEX, DEFENDANTS.



The opinion of the court was delivered by: Seybert, District Judge

MEMORANDUM AND ORDER

On May 12, 2010, the Court granted in part and denied in part the Government's motion to exclude certain aspects of Defendant Brooks' proposed expert testimony. The Government has now moved to exclude additional testimony. That motion is GRANTED IN PART, DENIED IN PART and otherwise held in abeyance.

I. Professor Christopher M. James

The Court previously admitted Professor James' proffered testimony, concerning the materiality of the charged conduct. The Government now objects to Professor James' testimony on the basis that, even if admissible, Mr. Brooks has not supplied the Government with Professor James' methodology, work papers, or notes that reveal his analysis. In response, Mr. Brooks belatedly produced this information. The Court hereby gives the Government one week to review Mr. Brooks' most recent production and raise any objections it might have to Professor James' methodology.

II. Gary Karlitz

The Government objects to Mr. Brooks' effort to have his forensic accountant expert, Gary Karlitz, testify about the "the pricing of cores purchased by or for Tactical Armor Products." According to the Government, Mr. Karlitz will testify about what TAP's costs should have been, and "[a]n expert's opinion on what those costs should be is not relevant."

Mr. Brooks responds that the Government is mistaken. According to Mr. Brooks, Mr. Karlitz will not testify about what TAP's costs should have been, but on what they actually were -- which the Government concedes is relevant in calculating TAP's gross profit margin. See Docket No. 1031 at 7; Docket No. 1023 at 3 (the Government setting forth that "the relevant facts are whether these cores actually cost TAP $216"). Specifically, Mr. Brooks proffers that Mr. Karlitz will testify "as a summary witness with respect to credit memoranda that TAP issued to Point Blank in 2003," and will set forth that the costs for the ballistic cores set forth on the bill of material submitted to FTI was accurate and not false as the government alleges." Docket No. 1031 at 8.

The Court agrees with Mr. Brooks that, as proffered, Mr. Karlitz's testimony is both relevant and admissible.*fn1

Accordingly, the Government's motion to preclude this testimony is DENIED.

III. Kenneth McGraw

Mr. Brooks also noticed Kenneth McGraw as a summary witness who would testify "as to the comparison between (1) the amounts of personal expenditures that the government alleges the Company made on Mr. Brooks' behalf; and (2) the amounts to which Mr. Brooks was entitled under the terms of the 1997 Compensation Committee Resolution and amounts that the Company contractually owed to Mr. Brooks that were not paid." The Government seeks to preclude this "offset" testimony.

The Court has reviewed the exhibits submitted in connection with Mr. McGraw's proposed testimony. After so doing, the Court believes it is best to break Mr. McGraw's proffered testimony into three parts: (1) a comparison based on the 1997 Resolution; (2) a comparison based on "offsets" of monies that DHB allegedly owed Mr. Brooks (hereafter, "Debt Offsets"); and (3) a comparison based on "offsets" of excess value that Mr. Brooks supposedly provided to DHB (hereafter, "Value Offsets"). The Court discusses each in turn.

(1) 1997 Resolution Comparison Testimony

Mr. Brooks proffers that, in part, Mr. McGraw will testify as a summary witness who will compare Mr. Brooks' personal expenses to the amount of "personal expenditures Mr. Brooks was entitled to under the terms of the 1997 Compensation Committee Resolution" ("1997 Resolution"). The Court agrees with Mr. Brooks that this testimony is relevant and admissible. At the core of the Government's so-called "looting" case is the Government's claim that the 1997 Resolution, which authorizes Mr. Brooks to spend DHB money on his personal expenses up to 10% of net profits, was a fraud. Mr. Brooks claims that the 1997 Resolution was legitimate, and that, through this Resolution, DHB authorized most or all of his personal spending. The Court has previously ruled that the 1997 Resolution's legitimacy is a question of fact for the jury. See U.S. v. Hatfield, __ F. Supp. 2d __, 2010 WL 623557 (E.D.N.Y. 2010). So Mr. Brooks is entitled to present evidence relevant to this theory, such as a comparison between his total personal expenditures and the amount of personal spending that the ...


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