I've seen a few of the 401's not functioning out of the box... Make sure the gyro is working... Move the tail rapidly and see if the rudder servo compensates. Check your setup, when you move the rudder stick to the left, the slider should move to the right, when looking at the heli from tail to the nose... Once you have that straightened out... move the heli's tail to the left, a right input should be seen at the servo to compensate for the unwanted movement. If all this is tested on the ground, it should work in the air.

I'd also remove all delay from the gyro, make it 0. Make sure the sensetivity is up there, if you have it too low, it might not want to hold. Some people I know need to start the heli, while the TX is in HH mode. Then swtich back to normal mode and start the heli up. Don't know if you're radio is setup this way too... The light should be off in normal mode and on during HH, if it's blinking, it wasn't initialized correctly....

Let me know if any one of the suggestions helped