Heath sentenced for Ponzi Scheme
ocregister.com | 2/25/08 | Andrew Galvin
CORONA John Heath, one of three men convicted in a $187 million investment fraud that preyed on senior citizens, including many who live in Orange County, was sentenced Friday to 28 years and four months in state prison.
Heath, 81, was found guilty last month alongside his son, Daniel W. Heath, 51, and a former associate, Denis T. O'Brien, 53. The four-month trial and Friday's sentencing took place in Riverside County Superior Court in Corona.
Judge Ronald L. Taylor said John Heath had "ruined the lives of hundreds and hundreds and hundreds of people." "You've taken away all of their assets and their money and now they live in poverty and are unable to get by on Social Security. You've given them a life sentence in poverty," Taylor said.
Three of Heath's five adult children spoke on behalf of their father before he was sentenced. They pleaded for leniency and asked the judge to let their father, who has terminal cancer, die at home with his family. Instead, Taylor imposed the maximum possible term. "I intend that it be a life sentence," Taylor said.
John Heath worked for his son at Daniel W. Heath & Associates , an investment firm that had offices in Brea and Hemet. Daniel Heath "masterminded" the fraud, Taylor said. Daniel Heath's sentencing is tentatively scheduled for March 22, although it could be delayed. O'Brien's sentencing, set for Feb. 29, also could be pushed back.
Prosecutors portrayed the Heath firm as an illegal Ponzi scheme in which money from newer investors was used to make payments to earlier ones, giving the impression that the firm's investments were profitable.
In fact, the firm's investments in real estate development, fast food restaurants and other businesses were losing money. The defendants weren't licensed to act as investment brokers, and the securities they sold weren't qualified by regulators.
Investors were recruited through free lunch seminars at local restaurants such as Marie Callender's. Seniors were then urged to attend a personal consultation at the firm's well-appointed offices. Over a 10-year period, the Heath firm took in about $187 million from about 1,600 investors, many of them Orange County residents. Some of that money was paid back in the form of interest. The net loss to investors was about $117 million, prosecutors said.
Investors were told their money would be used for loans to established companies with assets that could be used as collateral. Instead, less than half the investors' money was invested by Heath, and that went to startup companies.
The firm's offices were raided and shut down by investigators on April 29, 2004.