By Kara Scannell
Two years before bullets pierced the bulletproof vests of two police officers, the vests' manufacturer withheld test results that cast doubt on the vests' effectiveness because executives feared bad news might hurt plans for an initial public stock offering, the company's former research director said in a sworn statement.
The allegation, in a deposition for a lawsuit in a state court in Oklahoma, is the latest twist in a controversy over Second Chance Body Armor Inc.'s handling of the 2001 test results. The company in September 2003 announced it would upgrade and replace 130,000 potentially defective vests, about three months after two vests were pierced in shootings that killed one California policeman and wounded another in Pennsylvania.
The incidents prompted suits against Second Chance by the slain officer's widow, the wounded officer, various police departments and organizations and some state attorneys general. The furor also has attracted attention from the Justice Department, which launched an inquiry and has had lawyers sitting in on witness depositions in the suits, which were filed in several courts around the country.
Current and former Second Chance executives testified in recent weeks in state court in Oklahoma, offering an inside peek at the company's handling of the matter. The Wall Street Journal reviewed transcripts of several depositions.
Aaron J. Westrick, the company's former research director, blames his former employer for downplaying safety concerns. Second Chance, based in Central Lake, Mich., blames Toyobo /zigman2/quotes/205340851/delayed JP:3101 +1.31% Co., the Japanese company that makes the vests' lightweight protective material, a gold-colored fiber called Zylon. Toyobo, another defendant in the lawsuits, says it stands behind its product, which it continues to sell.
Mr. Westrick, in a September deposition, said test results in 2001 showed that the strength of some Zylon vests deteriorated much more quickly than their five-year warranty. He said he was told to keep the results quiet because company executives stood to lose as much as $20 million if the company didn't launch an IPO.
"They didn't want to mess up this idea of going public," he said.
Asked about the company's IPO aspirations, Richard Davis, the company's founder, said in his deposition, "Once in a while we talked about it but never got serious." Larry McCraney, another executive and a key investor in the company, denied in his deposition that there was ever any talk of going public.
Second Chance, whose customers include big police departments around the country, filed for bankruptcy in October under Chapter 11 of the U.S. Bankruptcy Code, citing the costs of replacing vests and legal fees. Last month, it replaced its president with Mr. Davis and laid off some employees, including Mr. Westrick, in what it called a cost-cutting move. Mr. Westrick's lawyer, Stephen Kohn of the nonprofit National Whistleblower Center, says his dismissal was "retaliatory" and illegal.
Second Chance says its vests have saved 940 people, including 38 who were wearing Zylon vests, which it began selling in 1999 under the names Ultima, Ultimax and TriFlex.
Mr. Westrick said he warned senior managers multiple times, starting in 2001, that the vests weren't safe.
Mr. Westrick's concerns were prompted by test results from Toyobo in July 2001 showing that the Zylon fiber's resilience weakened when exposed to very high temperatures and humidity. Second Chance executives said in a deposition that Toyobo's tests didn't match real-world conditions.
Next, Second Chance collected some used Zylon vests to test how well they resisted bullets. The test results indicated the vests weakened faster than expected -- a 3.7%-a-year decrease in the ability of vests 24 to 30 months old to withstand gunfire. At that rate, the vests' bullet resistance could be unacceptably low before their five-year warranty expired, company executives said. Another Toyobo report in November 2001 was even more troubling, showing a sharp decrease in Zylon's effectiveness over time.
Mr. Westrick said that during this time, he pressed the company to notify customers the vests were losing their protective strength.
In a meeting with Toyobo officials in December 2001, Mr. Davis proposed having the two companies share the cost of upgrading vests then in use. A spokesman for Toyobo said the company initially refused to extend an existing rebate to Second Chance because it believed the responsibility belonged to the vest maker. Toyobo gave Second Chance an additional rebate for Zylon in February to finance additional Zylon panels for use in used vests.
Around that same time, Mr. Westrick said, Second Chance received frequent visits from investment bankers. He said Mr. Davis told him the company hoped to complete an IPO in 2002. Mr. Davis denied that. In his deposition, Mr. Davis accused Mr. Westrick of offering to help him fight the lawsuits by lying after lobbying him for an ownership stake in the company.
In his deposition, Mr. Westrick also said that over lunch one day Second Chance Chief Financial Officer Brian Brenneman told him he was working on a footnote to address the Zylon problem in the company's IPO prospectus. In an interview, Mr. Brenneman says he recalls no such conversation.
In early 2002, Toyobo told Second Chance the November data that showed a sharp decline in Zylon's strength was unreliable. Mr. Davis said that reassured him that the problem wasn't dire. By March 2002, however, Mr. Davis was convinced it was serious enough to warrant warning customers and a recall, he said in his deposition. Mr. Davis said he told the board's executive committee, of which he was a member, that "there didn't seem to be an immediate danger, but that we had to start figuring out a way to start recalling all these vests" and to warn customers. Mr. Davis said he was overruled by the board.
Several other committee members disputed Mr. Davis's version, saying that a consensus was reached that there was no immediate need for a recall or a warning. "At the end of the discussion...everyone felt at that point there was no officer-safety issue," Mr. McCraney said.
Mr. Davis described even more urgent warnings in July 2002. He told the executive committee the company had two options, according to talking points he dictated at the time. The first was to do nothing "until a customer is injured or killed" or until somebody else discovers the problem and "be forced to make excuses as to why we didn't recognize and correct the problem," his memo said. The second solution was to notify customers and stop selling the Ultima vests, which were 100% Zylon.
Mr. Davis says he told the committee he couldn't guarantee the vests would be effective. He said the committee decided to finance another round of testing but to continue selling Zylon vests. Other committee members testified that Mr. Davis concurred.
Shortly after that, Mr. Westrick said in his deposition, Mr. Davis told him the talking-points memo "had to be destroyed" because executive committee members "very strongly objected [to it] and they were very upset about it." Mr. Westrick said he later saw executives putting documents into a shredder. Mr. Westrick kept a copy. Mr. Davis denied having the document destroyed.
By August 2003, Mr. Davis said, a second round of tests had produced "scattered" results, with some vests faring "much worse" than those tested in 2001. Those results, not the officer shootings, prompted Second Chance one month later to recall the vests, he said.
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