Businessman Gets Prison Term, Fine in ‘Diet-Patch’ Scam : Sentencing: Judge says Laguna Hills man seems unrepentant, orders stiffest punishment possible in $10-million marketing scheme.

A Laguna Hills businessman was sentenced to more than four years in federal prison and fined almost $2 million for his part in a fraudulent marketing scheme that promoted a bogus “diet-patch” product.

David D. Sterns, 57, received the stiffest sentence possible under a plea bargain he entered late last year, despite an impassioned plea for leniency.

U.S. District Judge Gary L. Taylor said Sterns’ arguments for probation rather than jail time were further evidence that although he admitted guilt in the $10-million, multilevel marketing scheme, he remained largely unrepentant.

“Mr. Sterns continues to rationalize, minimize his culpability in (the scheme),” Taylor said, just before passing sentencing in federal court in Santa Ana. “His comments are an indication of his reluctance to accept guilt.”

Sterns pleaded guilty last October to three counts of mail, securities and tax fraud in connection with a diet-patch product sold through Ultimate Business Network, which recruited more than 22,000 distributors to market the diet patch under the name Le Patch.

The diet patch, which never received Food and Drug Administration approval, purported to release appetite suppressants directly into the skin of the wearer. It never worked, prosecutors said.

Standing before a court filled with family members as well as defrauded investors and distributors, Sterns told Taylor that he was as duped as anyone else about the product and was guilty of overconfidence rather than of malice.

“There was never any intent to defraud anyone,” Sterns said during the two-hour sentencing hearing. But he added later: “I committed a lot of things that should not have been committed. I was a big boy. I should have known better. . . . I am very remorseful.”

Sterns, who was charged with securities fraud in August, 1991, by the Securities and Exchange Commission in connection with another company he started after Le Patch failed, headed several enterprises that were financed by thousands of private investors.

Those investors claimed to have lost millions of dollars in Sterns’ ventures, which also included marketing of a chemical agent that was purported to kill the AIDS virus.

He pleaded guilty to charges in connection with the diet-patch scheme last October. But as recently as January, he said he was considering withdrawing that plea, saying he did not realize the extent of the sentence he faced.

He later dropped that attempt, said his lawyer, Robert J. Huston III, who argued unsuccessfully for a lighter penalty for his client.

In addition to the four-year, nine-month prison sentence--most likely at Lompoc Federal Penitentiary--and the $1.9 million he was ordered to pay back to investors, Sterns was fined $300,000 and ordered to serve three years in “supervised release” following his prison time.

Huston said he did not know whether his client would appeal the sentencing. He has 10 days in which to file an appeal. Sterns was scheduled to surrender to authorities on March 23.

Assistant U.S. Atty. Paul L. Seave said he thought that the sentence was fair. “It was really called for, given his fraudulent acts,” he said.

La Habra resident Dayton Gillam, who said he lost $75,000 in a variety of investments, became angry and vocal as Sterns walked out of the courthouse.

“Answer me, answer my question!” Gillam shouted. “You call yourself a godly man? Where is the money?”

Shortly before the outburst, Gillam said that he was pleased that Sterns was ordered to pay restitution but that he wanted the former businessman to remain in prison “so he doesn’t dupe others.”

“He is a con artist from the word go,” Gillam said. “Just listen to what he said. It’s in his blood, you know.”