Former County Chief Sentenced in Bribery Case

James Hlawek, San Bernardino County’s former chief administrative officer, was sentenced this week to three years’ probation and community service for accepting thousands of dollars in bribes in a corruption scandal that roiled the county in the mid-1990s.

Hlawek, who pleaded guilty in 1999 to one count of conspiracy to commit bribery, could have received up to five years in prison. However, prosecutors sought leniency because of Hlawek’s assistance with other cases stemming from the scandal.

He opened the door that let us in. Because of him, we were able to get inside of the corrupt dealings,” said Assistant U.S. Atty. Edward Moreton Jr.

County officials expressed disappointment with the sentence by U.S. District Judge Christina A. Snyder, which also included 300 hours of community service.

County spokesman David Wert said Hlawek was a central figure in the corruption scandal and that supervisors hoped he would be punished with jail time.

Every time this is brought up, it casts suspicion on the county,” Wert said.

San Bernardino County has only recently begun to recover from a bribes and kickbacks-for-contracts scheme in the mid-1990s that sullied its reputation.

Hlawek’s predecessor, Harry Mays, was sentenced to two years in prison, and landfill executive Kenneth James Walsh was sentenced to 18 months, as the result of a wide-ranging probe.

In May, the county won $10.6 million in a civil lawsuit against figures in the case, including Mays, Walsh and Hlawek, the county’s chief administrative officer from 1994 to 1998.

Hlawek testified last year that he became involved in the scheme after Mays approached him in the county government center’s cafeteria and said they could receive large bribes by getting a landfill contract for Walsh’s company, Norcal Solid Waste Systems.

Hlawek learned he was under investigation when he was told that the FBI was searching his trash, according to a motion filed by the U.S. attorney’s office. Hlawek later agreed to cooperate with investigators, submitting to “maybe hundreds” of interviews, the document said. He also recorded meetings and conversations with other alleged participants, once traveling to North Carolina to do so.

Officials told the judge Hlawek was twice threatened by people he identified during the investigation.

If not for defendant’s cooperation, much corruption in San Bernardino County likely would have remained concealed,” the motion said.

Hlawek did not return calls seeking comment. His attorney, John Vandevelde, said his client’s sentence was just.

If he had gone to jail,” Vandevelde said, “the people who stonewalled and obstructed the case would be laughing, saying that it shows that it’s foolish to come forward.”


Guilty plea in county's largest fraud case

RIVERSIDE ---- One of the developers of the Menifee Lakes Country Club golf course pleaded guilty Wednesday to 10 felony counts, including money laundering and elder abuse, for his part in Riverside County's largest-ever fraud case.

Larre Jaye Schlarmann, 50, of Carlsbad, entered into a plea agreement with prosecutors and received a sentence of 15 years in state prison.

Schlarmann is considered by authorities one of the lesser participants in the Heath & Associates investment fraud scheme that targeted primarily elderly victims.

In July 2004, prosecutors filed a criminal case against Daniel Heath; his father, John Heath; Denis O'Brien; and Schlarmann. The district attorney's office alleges that from the early 1990s until the company was shut down in April 2004, that Heath & Associates defrauded more than 1,400 people out of an estimated $191 million.

Many of the victims invested ---- and lost ---- entire life savings, prosecutors say. Authorities estimate that any money victims may be able to get back will probably be in the neighborhood of 15 cents on the dollar.

The Heaths and O'Brien are scheduled to appear before Judge Gordon Burkhart in Riverside this morning to begin a preliminary hearing that is expected to take about two weeks. Burkhart will then decide whether there is enough evidence against the three to try them.

They are charged with numerous felonies, including selling unqualified securities, abusing elders, violating a court order to stop selling securities, selling securities by misrepresentation, grand theft, burglary and money laundering.

Prosecutors say that Schlarmann was not directly involved in Heath & Associates and did not personally solicit money obtained through the alleged fraud scheme.

He was, however, a partner with Daniel Heath in real estate and other ventures into which Daniel Heath funneled much of the money fraudulently taken from elderly victims, prosecutors say.

Schlarmann's attorney, Michael Lipman, said after Wednesday's hearing that the best way to describe what his client did was money-laundering. "He got money for Heath," Lipman said.

"I don't believe my client put it together in his head that this was nothing more than a Ponzi scheme," Lipman said.

Also known as pyramid schemes, Ponzi schemes are when participants try to make money simply by recruiting others into some sort of investment program. There are typically promises of high returns in a short amount of time just for handing over money and asking the same of others. Initial investors are typically repaid not with actual investments, but with money from new investors.

Deputy District Attorney Michael Quesnel said the lengthy sentence received by Schlarmann sends a message that people involved in fraudulent investment schemes will go to state prison, even if they only aid others who directly defraud victims.

Quesnel said prosecutors spoke to some of the victims of the alleged Heath & Associates scheme when it began to look like Schlarmann would be pleading guilty.

"They were very happy to see him going to state prison," Quesnel said. "Even though he's not the one who looked them in the eyes and lied to them."

As part of his guilty plea at the Hall of Justice in Riverside on Wednesday, Schlarmann gave up all of his personal assets, estimated by prosecutors at $1.2 million, for restitution to the victims.

"This is a good start to getting the victims back some of their money," said Deputy District Attorney Michael Silverman, who is prosecuting the case with Quesnel.

Among the assets seized from Schlarmann were two homes, a couple of Rolex watches and his ownership in dozens of Quizno's restaurants, Silverman said.

The vast majority of his seized assets came from those businesses, which Silverman estimated to be about 40 in the Inland Empire and San Diego County.

Also included in Schlarmann's plea agreement was an order to be part of the joint restitution of $117 million along with any other defendant who is convicted in the case.

Silverman said it is highly unlikely much of that amount will be recovered for the victims, at least as it pertains to Schlarmann's involvement.

"We took everything he had already," the prosecutor said.

During Wednesday's hearing, the judge ordered Schlarmann to swear under oath that he has no material net worth or material assets and that no assets have been hidden or transferred to his family or any third party.

Schlarmann, wearing orange jail clothing and shackled, stood during the hearing and admitted he was guilty to 10 counts. Burkhart carefully went over each of the counts with Schlarmann, who looked over documents, to make sure he understood his guilty pleas.

After that, Silverman told the judge that all remaining counts ---- which surpassed 300 ---- would be dismissed.

By law, Schlarmann must serve half of his 15-year sentence before he can be paroled. He has credit for 745 days in custody.

The Heaths and O'Brien remain in custody, held in lieu of $144 million bail each ---- the largest bail amount ever set for individuals in Riverside County. The amount stems from the initial total loss alleged by prosecutors when the men were arrested.

Contact staff writer John Hall at (951) 676-4315, Ext. 2628, or jhall@californian.com.