For a company that held a lot of promise, DHB Industries quickly became the personification of greed and corporate excess. Perhaps only because CEO David Brooks helmed a small-cap stock did he avoid achieving the notoriety of Dennis Kozlowski at Tyco (NYSE:TYC) or Richard Scrushy at HealthSouth. Yet his willingness to dip his hand into the shareholder well certainly earns him a place in their infamous lineup.

I am no great fan of most shareholder lawsuits. I believe that investors often try to recoup in the courtroom what they couldn't win in the marketplace, and they solely enrich the trial-lawyer lobby in the process. But sometimes, such lawsuits are not only necessary but also effective.

DHB, which makes body armor, just settled the class action lawsuits that charged the company with making misleading statements about its finances in an effort to inflate its stock, thereby allowing Brooks and other insiders to sell their shares for millions of dollars. Although that sounds like the verbiage in most class action cases, it apparently was pretty close to the truth in DHB's case. Not only is the company forced to adopt good corporate governance practices as part of the settlement, but Brooks is also being given the heave-ho and will be required to pay part of the $34 million settlement himself. It doesn't even begin to tap into the vast wealth he took out of the company at shareholders' expense, but it is significant nonetheless, and it's noteworthy, too, because it is rare that CEOs are ever required to pay up.

Brooks was put on paid administrative leave last month, as DHB continued to miss SEC filing deadlines for its financial statements. The company was subsequently delisted from the American Stock Exchange, and its stock, which at one time had traded as high as $22 a share, now trades on the Pink Sheets in penny-stock land. It's a big fall from grace for a company that had once been chosen as a Watch List stock for Motley Fool Hidden Gems, but it quickly lost favor as ever-new revelations of greed and excess came to light.

As was the case for body-armor manufacturers Ceradyne (NASDAQ:CRDN) and Armor Holdings (NYSE:AH), the Sept. 11, 2001, terrorist attacks gave new impetus to DHB's operations. The U.S. Army gave DHB millions of dollars in government contracts to supply troops with body armor, and the stock grew apace. However, questions began to surface about the efficacy of its Zylon material, since it apparently degrades over time and with wear. It no longer has the government's imprimatur. Yet Brooks continued to tout the soundness of the company, even as he was unloading some $185 million worth of shares on the market.

In addition to Brooks' resignation, several family members are also barred from working for the company, and several unnamed members on the board of directors are being forced to leave within the year. The board was oftentimes complicit in giving Brooks what can only be termed excessive compensation. As fellow Fool contributor Richard Gibbons noted, Brooks received 10% of profits for seven years and made $73 million in 2004 -- almost half of the company's profits -- mostly from the exercise of generous stock options that the board continuously granted to him.

Chartered jets, lavish balls for his daughter, and excessive pay and benefits were all a part of Brooks' lavish lifestyle while shareholders saw their investments turn worthless. While it will hardly make them whole, the lawsuit settlement will return more than $34 million to shareholders and give them more than 3 million shares in the company. Onlookers can only hope that a new CFO can file the delinquent financial statements and gain compliance for the company again.

New management, new directors, and new corporate governance policies are ingredients for achieving a turnaround. A new corporate name would probably be welcome as well, to finally put to rest this dark chapter in the company's history. It's still too early to say whether any of this will materialize at DHB, but the end to the excess should certainly be a welcome reprieve for shell-shocked investors, even if it is small recompense for their losses.

Related Foolishness:

Competent, honest management is a hallmark of companies recommended in the pages of Motley Fool Hidden Gems. A30-day guest passgives you full access to all of the quality picks that are currently beating the market by 14 percentage points.

Tyco is a Motley Fool Inside Value recommendation.

Fool contributor Rich Duprey has used DHB's Point Blank body armor but does not own any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.