RIVERSIDE, Calif. (AP) – Hundreds of senior citizens lost their life savings this spring when authorities closed a Southern California investment firm that investigators said sold fraudulent, high-risk securities.

Many of them don’t understand why the state hadn’t closed D.W. Heath & Associates years earlier.

In 1998, the state Department of Corporations concluded Heath was selling unregistered securities without a license and ordered it to stop.

Investors, however, didn’t learn of the order and kept pumping money into what authorities said amounted to a $178 million Ponzi scheme, in which new investments were used to fund old ones.

“It seems to me, the Department of Corporations let us down,” said Marjorie McIntosh, a real estate agent from the desert city of Hemet who invested $40,000 with the firm.

By the time local prosecutors and the federal government got involved this year, Heath had collected money from at least 1,000 people in 25 states.

Michael Silverman, a prosecutor in the Riverside County District Attorney’s Office, would not say why charges weren’t filed until this year or what finally prompted them.

Officials of the state Department of Corporations wouldn’t detail the agency’s role, saying it might jeopardize criminal prosecution of company officials or a parallel civil action by the Securities and Exchange Commission.

But a June 29 letter from the agency’s top official claims authorities referred a complaint from one elderly investor to prosecutors in 2000, but the statute of limitations had expired.

“We scrimped and saved for our entire lives, and now we feel very violated,” said Elinor Morris, 71, a retired teacher in Brea. She and her husband lost about $500,000.

Heath’s founders and employees have denied any wrongdoing. The firm’s president, Daniel W. Heath, 47, a Canadian citizen living in Chino Hills, pleaded innocent Wednesday to 233 charges that include fraudulent sale of securities, grand theft and elder abuse.

His attorney, David Fields, said Heath is a legitimate businessman who never intended to defraud anyone.

McIntosh has helped organize an informal network of investors, and has heard of seniors who have been forced to sell their homes, leave assisted-living facilities or go on food stamps because of their losses.

“Had we known that the Department of Corporations had told them to stop doing business in California, we would have never invested or we would have pulled out our money,” said Dotty Schultz, a Fullerton homemaker in her 80s.

Investors are waiting to hear how much money, if any, they will get back.

Authorities said potential investors were told about funds that offered returns of as much as 10 percent for what were billed as secured loans to businesses.

The businesses turned out to be speculative and unprofitable ventures, said Silverman.

The Department of Corporations issued its desist order six years ago after a division of Riverside County’s adult protective services division complained that an elderly woman was having difficulty withdrawing money from Heath.

Daniel Heath denied the allegations.

The state referred the case to Riverside County authorities in 2000 but the statute of limitations involving the initial investments had expired and it was too late to prosecute, according to a June 2004 letter to state Sen. Bob Margett from Department of Corporations Commissioner William P. Wood.

Some investors had learned of the desist order by March 2003, prompting Daniel Heath to respond with a letter saying he had reached a settlement with the Department of Corporations – which the agency denies.

Department spokesman Shad Balch said the agency has made consumer fraud more of a priority since Jan. 1, even though it lost all 13 of its investigators to budget cuts.

“Our action is much quicker, much more responsive and much more proactive,” he said.

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