1st Charge Filed in Lawyers’ Alleged Insurance Fraud

Federal authorities Friday filed their first criminal charge in an investigation of a purported scheme by Los Angeles lawyers to bilk insurance companies out of millions of dollars in legal fees.

Suzanne Rubin, 29, former operator of a court reporting business in Reseda, was charged in federal court with a single count of mail fraud. She pleaded not guilty at her arraignment, but prosecutors said she is expected to enter a guilty plea next week as part of a plea agreement.

Rubin and her lawyer declined comment. Prosecutors refused to say if Rubin will assist them in their investigation, which has focused on about 15 Los Angeles-area lawyers.

Assistant U.S. Atty. William Q. Hayes said only that he “anticipated that more (people) will be charged.”

The Times reported last month that federal authorities were investigating whether the lawyers, paid by insurers to defend policyholders, had schemed to prolong litigation and fatten their fees through various maneuvers, including the filing of spurious claims against each other’s clients.

Although details were sketchy, the charge filed against Rubin was the government’s first public statement on the nature of the case. It said “Rubin and others” had schemed “to defraud the judicial systems of the United States and the state of California and numerous insurance companies and to obtain money by means of false and fraudulent pretenses.”

According to the document, from 1983 to 1988, Rubin and the others fraudulently represented that litigants in various lawsuits “were represented by independent attorneys,” when in fact those attorneys worked together as part of “a network . . . with interlocking financial and professional interests.” The cases were in Los Angeles, San Diego and Orange counties, and the investigation was conducted by federal authorities here.

Rubin was charged in a criminal information, usually filed in lieu of an indictment when a defendant plans to enter a plea.

According to the four-page information, Rubin’s former court reporting service, International Court Reporters, was kept busy taking depositions for the lawyers, including one the document called merely “the organizing attorney.” The reference was to West Los Angeles lawyer Lynn Boyd Stites, according to well-placed sources. Stites could not be reached for comment Friday.

The document said that at the request of the organizing attorney, Rubin began supervising “the operations and billing practices” of two other law firms that had “a secret financial connection with the organizing attorney.”

The mail fraud count involved a bill purportedly mailed by Rubin to an insurance company on behalf of Lewis Koss, a Calabasas lawyer, in March, 1985.

Koss could not be reached for comment.

The lawyers being investigated have concentrated on an arcane area of insurance law. They work as defense lawyers in a type of case in which insurance companies must pay them to defend policyholders but lose the right to pick the lawyers or direct defense strategy.

The situation arises when an insurer and policyholder disagree on whether legal claims against the policyholder are all covered by insurance.

The federal investigation has paralleled civil fraud suits filed by insurance companies against some of the lawyers.

Rubin’s deposition was taken in December in one of the cases filed by USF&G; against Stites. Lawyers for USF&G; asked Rubin if any of the lawyers had a financial interest in her court reporting business. She refused to answer the question and many others, citing her 5th Amendment protection against self-incrimination.