4 Appear in Court in ‘Lunch’ Fraud Case

Four men alleged to have carried out a securities scam that defrauded possibly 2,000 senior citizens of more than $140 million appeared together in Riverside County Superior Court for the first time Thursday.

Daniel William Heath, 47, of Chino Hills; his father, John William Heath, 77, of Covina; and business partners Denis Timothy O’Brien, 50, of Yorba Linda and Larre Jaye Schlarmann, 48, of Carlsbad were told by a judge that they would be arraigned July 21. Each is being held on $144-million bail.

The men were arrested last week in connection with free-lunch workshops held by D.W. Heath and Associates at Marie Callender’s restaurants and hotels in Brea, Hemet, Murrieta, Pasadena and Temecula. They are charged with 233 counts, including selling false securities, money laundering, conspiracy to commit grand theft, and stealing and embezzling from the elderly.

“One of the first things I’ll be telling jurors about this case in my opening statement is that there’s no such thing as a free lunch,” said Mike Silverman, the deputy district attorney who is prosecuting the four.

Court records allege that since the mid-1990s, Daniel Heath orchestrated the illegal sale of so-called secured notes guaranteeing an annual return of 5.5% to 8%. John Heath and O’Brien served as salesmen at the lunches, private meetings and on telemarketing calls, and Schlarmann handled the investments, according to records.

Prosecutors allege the company was selling securities without a license, and that the notes sold were not secure, safe or liquid, as the company had represented. Additionally, the company violated a 1998 order by the California Department of Corporations to stop selling unregistered securities as unregistered brokers, prosecutors allege.

Individual investors lost as much as $1.6 million -- in the case of a Riverside County woman -- and often entire retirement accounts, Silverman said. The defendants were using some of the cash to buy land and property in Big Bear and to operate a sandwich-shop chain in San Diego County, he said.

Court records show that John Heath was charged with felony burglary because he entered a dying Cypress woman’s house and, according to a witness, tried to sell her life insurance, ultimately leaving the woman’s bedside a check for $4,500.

Silverman said that “horror stories” continue to be told by an increasing number of victims, with “reactions running the gamut from ‘Get me all my money back!’ to resignation that all of it has been lost.”

The Securities and Exchange Commission has frozen the company’s assets, and a receiver has been appointed to manage them. Silverman said it is undetermined how much of the investors’ money remains in the company’s holdings.

Daniel Heath’s attorney, Stephen A. Mansfield, said his client “is innocent of these charges, and we will vigorously contest these allegations. He looks forward to his day in court.”

Riverside County is assisting those who invested in the company. Investors can call (800) 476-7506 for information.