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While 2005 profits have continued to be good for DHB and Point Blank -- on July 28 the company announced its 22nd consecutive quarter of increased earnings -- the year has been plagued by nagging quality concerns.
On January 3, 2005, the Southern States Police Benevolent Association (SSPBA) filed a class-action lawsuit against Point Blank in Broward Circuit Court, alleging that the company knew its body armor was potentially defective. The models of body armor in question all used Zylon, a synthetic fiber developed in Japan. Because of Zylon's ability to provide similar protection at less weight than Kevlar, the body armor industry in the late '90s embraced the new material. But in 2002, Toyobo, Zylon's developer, discovered that the material degraded in strength over time and particularly fast when exposed to heat. SSPBA alleged that Point Blank failed to notify customers that "under normal expected operating conditions, the vests would not meet the National Institute of Justice standards."
Point Blank body armor made with Zylon would degrade over time to such a point that lives could be endangered, Carter K. Lord, a ballistics expert in Sedalia, Colorado, claimed in an affidavit submitted as part of the lawsuit. "Law enforcement officers will be (and are) wearing vests which no longer can protect them from threat rounds being fired at them," Lord said.
In April, Point Blank settled the class-action lawsuit, agreeing to replace an estimated 2,609 pieces of body armor sold to law-enforcement agencies nationwide. As part of the settlement, which is worth an estimated $1.6 million, Point Blank did not admit wrongdoing and has since discontinued the use of Zylon.
"Did Point Blank know it was shipping unsafe body armor?" asks Grady Dukes, legal counsel for the SSPBA. "I think if you look at the settlement agreement, none of that is acknowledged. But that was certainly among our allegations in the initial complaint."
Calling the information classified, Point Blank VP Power would not say whether the company's military body armor, the Interceptor OTV, uses Zylon. But the body armor used by troops overseas does appear to have safety problems.
As early as July 19, 2004, according to memos originally obtained by the Army Times newspaper, the Marine Corps found "major quality assurance deficiencies within Point Blank." One month later, on August 24, 2004, the military rejected two orders from Point Blank after tests revealed that the vests did not meet safety requirements.
But at the time, the military faced a severe shortage of body armor. Under pressure to equip troops, Lt. Col. Gabriel Patricio in November 2004 requested that nine Point Blank orders that did not meet safety requirements be sent to troops overseas. "I understand and accept the increased risk posed by accepting the reduced protection," Patricio wrote in a memo to the military's head of contracting.
Point Blank's Power told New Times that the U.S. government has never informed the company of quality concerns. But a memo signed by Point Blank's president contradicts that claim. On November 30, 2004, Hatfield signed a waiver that allowed the release of body armor that the company knew had not met government safety standards.
On May 4, 2005, the U.S. Marine Corps recalled 5,277 Interceptor vests manufactured by Point Blank Body Armor. In a statement provided by Point Blank, Lt. Col. Patricio, who has since retired, said the vests in question later passed independent tests and were not substandard or defective. "I would personally take any vest and plates in the inventory and deploy to Iraq today," Patricio said in his statement.
Perhaps to stave off potential investor fallout, on the day before the recall, DHB Industries promoted Point Blank's Hatfield to DHB chief operating officer and named her successor: retired four-star Army Gen. Larry Ellis, a 35-year veteran who previously led a command of more than 500,000 soldiers.
But the former military man has been unable to prevent DHB's falling stock price. On May 4, DHB closed at $8.33 per share. It's since slid to roughly $3.75 per share. And on September 16, California lawyer David R. Scott filed a class-action lawsuit against DHB, alleging, among other things, insider trading and investor fraud because "the company falsely represented the quality and safety of its body armor products."
At a recent investor conference call, Ellis reiterated that quality is the primary goal at DHB's Point Blank: "DHB has the best body armor product in the industry. This point is dear to my heart and to the values of DHB. We place enormous efforts on product innovations and ensuring that our customers are our top priority. DHB wants to ensure that the men and women who protect this nation, both military and law enforcement, are confident that the protective gear they wear will do what it's meant to do when it's put to the test -- that is, save their lives."
But David Goldenberg, Rep. Hasting's legislative director, still has significant concerns about the quality of the armor strapped to young troops overseas.
"It's beyond irresponsible that troops went into the war with an inadequate amount of body armor and the possibility that the body armor they're wearing is flawed," he said. "Part of what we need to do is guarantee the quality of Point Blank's body armor. But the onus also falls to the military. If the military knowingly accepted defective body armor solely to cover up the fact that it was irresponsible and did a horrible job planning for this war, then those are questions that the president has to answer."