Second Chance has been the target of numerous lawsuits and civil actions since it emerged that the Zylon fibres used to make its lightweight bullet-proof vests could break down over time, rendering the garments useless.

Now The Times has learnt that the Department of Justice is close to filing criminal proceedings against the company alleging that it knowingly endangered the lives of thousands of customers from the President of the United states to police officers on the beat and soldiers on the streets of Iraq.

Second Chance vests were among the most popular in the world because they are lightweight and easy to conceal beneath clothing.

The vests were routinely supplied to central command in Iraq and Afghanistan and to almost all police departments across the United States. The Secret Service and the US Department of Defence also used the vests. The company has a UK subsidiary that was in the process of supplying the vests in question to the British Armed Forces and the police.

However, the company hit trouble in 2001 when Aaron Westrick, its head of research, learnt that the Zylon fibres could break down, rendering the vests no more protective against gunfire than a piece of heavy cloth. He urged his superiors to remove the garment from the market and to offer an immediate refund to all customers while he and Toyobo, the Japanese company that invented Zylon, devised a plan to stop degradation of the fibres.

“Lives and our credibility are at stake,” Mr Westrick wrote in a memo to Richard Davis, who was then president of Second Chance, on December 18, 2001. “We will only prevail if we do the right things and not hesitate. This issue should not be hidden for obvious safety issues and because of future litigation.”

Mr Westrick urged Mr Davis to “immediately notify our customers of the degradation problems”, while cancelling pending orders. He also suggested that executive bonuses should be axed, and the money used to pay for a replacement scheme, the memo shows.

But Second Chance customers were not told about the problem for a further two years, after a California police officer was shot dead wearing the vest and a Pennsylvania officer was seriously wounded.

Mr Westrick gave evidence to Department of Justice officials building the criminal case just ten days ago, a source told The Times. During his deposition, he revealed that in 2002 the company supplied vests to be used by President and Mrs Bush. The vests were supplied to the US Secret Service for a total cost of $53,000 (£30,000), according to documents seen by The Times.

“This could cost them hundreds of millions of dollars,” Stephen Kohn, a lawyer acting for Mr Westrick said. “But the truth is it has cost lives. This company was purely motivated by greed in the worst sense of the word.”

Second Chance, which declined to comment when contacted last night, has admitted that some 100,000 vests could have been defective. The American Government bought at least 40,000 of them, it has been claimed. The criminal action is expected to be launched within the next month.

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