Guilty Plea to Fraud Entered by Kit Maker

A Ventura man has pleaded guilty to eight felony charges of consumer fraud for selling marketing kits for a heat pump that he claimed could extract “free electricity” from the air.

Dennis M. Lee, 44, will face up to four years in state prison under the plea agreement reached Thursday with the Ventura County district attorney’s office.

Lee, who remains free on $20,000 bail, is scheduled for sentencing July 13 by Superior Court Judge Robert J. Soares.

As part of the agreement, Lee will remain free on bail until he has exhausted his appeals. His attorney has vowed to challenge the conviction, which Lee contends was obtained under a state law that violates his constitutional rights.

More than two years ago, the Ventura County Sheriff’s Department launched an investigation into Lee’s heat pump company, CONSERVE Financial Services, after receiving complaints from dissatisfied customers, Deputy Dist. Atty. Rebecca Riley said.

Lee had violated California consumer protection laws by claiming in his marketing kits that his heat pump, called the “Alternative,” would run on “free electricity extracted from the air,” Riley said.

“The claim was that it would produce enough energy to run itself and some more,” she said. Lee also sold videotapes, blueprints and other documents describing the Alternative heat pump--all offering investors a chance to buy into the manufacture and marketing of the device, she said.

But those marketing and manufacturing kits misrepresented that the heat pump was approved by Underwriters Laboratory, a safety testing firm, and that Lee’s guarantee to buy back any equipment was backed by a bond placed with Merrill Lynch, she said.

On Thursday, Lee pleaded guilty to eight of the original 38 charges of violating a state consumer protection law known as the Seller Assisted Marketing Plan Act of 1978. Soares accepted the plea agreement, which includes a penalty of no more than four years in state prison.

Lee agreed to plead guilty after Soares turned down his motion to dismiss the criminal charges because of misconduct by the Sheriff’s Department and district attorney’s office. The hearing on Lee’s pretrial motion lasted seven days.

Lee has also filed a lawsuit in U.S. District Court in Los Angeles alleging that sheriff’s deputies searched his Ventura office on Jan. 14, 1988, without a warrant and denied his right to free speech by arresting him just before he was to host a marketing meeting at a hotel near the Los Angeles International Airport.

The lawsuit, filed in April, also says that Lee was jailed for nine months on unconstitutionally excessive bail of $1 million after his arrest, an amount later reduced.

Lee’s lawyer, Thomas A. Cohan, said his client will continue to press his federal suit against county officials. In addition, he said, Lee will appeal his conviction in state courts under what he considers an obscure consumer law.

Cohan said he plans to appeal the conviction on the legal theory that an obscure law without warning provisions violates his client’s constitutional right to due process under law.