Laguna Hills Business Owner Backpedals on Pleas : Charges: David Sterns of Ultimate Business Network had pleaded guilty to fraud and tax evasion, but now says he didn’t understand the ramifications. Sentencing is delayed.

Facing up to 15 years in jail and heavy fines for masterminding a $10-million penny stock fraud, Laguna Hills businessman David D. Sterns on Monday won a sentencing delay after telling a federal judge that he was considering withdrawing his earlier guilty pleas.

Sterns, 55, pleaded guilty last October to charges of mail fraud, securities fraud and tax evasion in connection with the marketing of a “diet patch” product sold through his Laguna Hills-based Ultimate Business Network.

Thousands of people nationwide, including Olympic swimming champion Mark Spitz, claim to have lost millions by investing in companies operated by the former Arthur Andersen & Co. accountant. One company’s product was a chemical agent that was supposed to kill the AIDS virus.

On Monday, however, Sterns contended that those guilty pleas were made involuntarily. He said his attorney at the time did not adequately explain that he faced up to 15 years in jail and $750,000 in fines.

“Our preliminary investigation convinces us the plea was involuntary in that the client, Mr. Sterns, did not understand fully what the ramifications were of his plea of guilty,” said James Riddet, a Santa Ana criminal lawyer now representing Sterns.

Federal probation officials have recommended that Sterns receive the maximum prison term available, but U.S. District Judge Gary Taylor agreed to postpone sentencing until Feb. 13.

Several of Sterns’ alleged victims who were in court Monday expressed surprise at his decision.

“I don’t see how the man could do it,” said Cora Gillam. “There is too much evidence against him.” The La Habra retiree and her husband, Dayton, lost $75,000 investing in Sterns’ enterprises.

Despite Sterns’ change of heart, Taylor sentenced three former Ultimate Network employees, including Sterns’ two nephews, for their role in the complex scheme that involved numerous public and private companies.

J. Marcus Ryan, 34, of Lake Forest was placed on three years’ probation. The former president of a Sterns entity was also ordered to pay a $2,500 fine and serve 600 hours of community service.

Jonathan Sterns, 31, of Clearwater, Fla., and Mark Sterns, 35, of Fort Worth, Tex., each were sentenced to three years’ probation and 600 hours of community service. Jonathan Sterns received a $10,000 fine; Mark Sterns was ordered to pay a $5,000 fine.

Jonathan and Mark Sterns, who are brothers, pleaded guilty last year to mail fraud and conspiracy. Prosecutors claimed they fabricated documents in an effort to help their uncle circumvent federal securities laws.

Both men are past student body presidents of Oral Roberts University.

“Since childhood, both of the defendants, Jonathan and Mark, have admired and respected their uncle David,” said defense attorney Jack Rudy. “David Sterns was a guru-like figure who, in turn, exploited the familial relationship and trust of his nephews.”

Though Rudy described the Sternses as a “close-knit religious family,” David Sterns did not sit with his nephews in the courtroom, and he left before their sentencing.

“They are forever away from their uncle’s influence,” Rudy said. “They have learned a bitter, bitter lesson.”

Judge Taylor said both of the Sterns brothers were more than just “minor participants” in the scam but agreed to place them on probation because they had cooperated with prosecutors in the case against their uncle.

“This is really a most unusual case,” Taylor said.

Taylor did not order either man to pay restitution to victims because they were both salaried employees. Neither is believed to have profited from the schemes at Ultimate Business Network.