Head of 2 Diet Patch Firms Settles Claims

David D. Sterns and two firms he headed have agreed to pay $60,000 to settle claims by the California Attorney General’s Office that they made misrepresentations about a diet patch, allegedly sold through an illegal pyramid scheme.

Sterns, 55, agreed to the settlement with the state earlier this week in San Diego Superior Court without admitting any wrongdoing. The two firms involved, OmniSource and New Source Ltd. in Laguna Hills, filed for bankruptcy last year.

Sterns, an Irvine resident who now runs a Torrance company, faces other legal problems. Court documents indicate that federal authorities are probing Sterns and several of his relatives for alleged stock fraud surrounding several publicly traded companies he supervised, known collectively as the Ultimate Business Network.

William Stocker, Sterns’ attorney, said Thursday that his client agreed to settle the state’s complaint only because he didn’t want to incur large legal bills fighting it.

“They (state officials) enter into face-saving consent decrees when they can’t prove their case,” said Stocker. “They don’t have any evidence. We have better things to do than fight with them.”

OmniSource and New Source marketed Le Patch--a Band-Aid-like device that was applied to the skin and supposedly reduced the wearer’s appetite by releasing a chemical that would seep into the bloodstream. A month’s supply cost about $50.

But state authorities filed a complaint against Sterns in 1988 that charged there was no proof that the diet patch worked and the companies made false claims about it in advertisements.

“Defendants claim that Le Patch provides an effortless way to lose weight--a ‘dramatic breakthrough in weight control technology,”’ Deputy Atty. Gen. Al Shelden said in the original complaint. Le Patch “has never been tested to show that it is helpful for weight loss, and defendants have no reasonable basis upon which to base this claim.”

New Source, according to Shelden, was a pyramid scheme because the company “paid commissions to distributors who brought new distributors into the marketing chain.”