Former Point Blank seeks litigation stay to await news on distribution

By Caroline Salls

Pittsburgh, April 2 - SS Body Armor I, Inc., formerly Point Blank Solutions Inc., asked the U.S. Bankruptcy Court for the District of Delaware to stay several litigation matters until Oct. 31, 2014 while it waits to find out how much it will receive from a distribution of $165 million in restrained assets, according to an April 1 court filing.

SS Body Armor said it entered into a term sheet to resolve the litigation matters in December 2011 and received approval of the stay of those matters with the consent of several class plaintiffs, law firm defendants, Point Blank's official committee of unsecured creditors, Point Blank founder David H. Brooks, the Jeffrey R. Brooks Individual Retirement Account and stockholder Jeffrey R. Brooks.

This stay was designed to give the parties enough time to prepare final documentation of the settlement and seek any necessary approvals from the bankruptcy court, the United States government and the U.S. District Court for the Eastern District of New York, which is presiding over the restitution proceedings following David Brooks' criminal conviction and subsequent sentencing to 17 years in prison.

David Brooks was convicted of conspiracy to commit securities fraud, securities fraud, conspiracy to commit mail and wire fraud, mail fraud, wire fraud, six counts of insider trading, conspiracy to obstruct justice, obstruction of justice and material misstatements to auditors in September 2010.

SS Body Armor said the settlement called for under the term sheet was never completed, and David Brooks no longer intends to participate in that settlement.

Distribution amount key

While the company continues to engage in ongoing settlement discussions with the class plaintiffs and the law firm defendants, it said the restitution proceedings "have become the fulcrum point" because the district court will determine through those proceedings the distribution of roughly $165 million of assets restrained by the United States government in connection with David Brooks' criminal indictment and conviction.

The company said the district court has acknowledged that both SS Body Armor and the class plaintiffs are victims of David Brooks' criminal conduct, but it has not yet decided what portion of the restrained assets will be awarded to the company, the class plaintiffs and other victims.

According to the motion, the outcome of the restitution proceedings, particularly the amount of the restrained assets awarded to SS Body Armor, will have a significant effect on the company's Chapter 11 case and would give it a possible alternative to pursuing the litigation matters. For instance, if it receives a substantial award through the restitution proceedings, SS Body Armor said it would be in a position to quickly file a Chapter 11 plan.

However, the company said the restitution proceedings have taken much longer than expected and have been indefinitely adjourned pending resolution of a recusal motion.

Given the effect the restitution proceedings will have on its Chapter 11 case, SS Body Armor said it is in the best interests of its bankruptcy estate and its creditors to stay the litigation matters until the district court determines the portion of the restrained assets that it will receive.

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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