Legal Aide Pleads Guilty in Probe of Insurance Fraud

A former office administrator for a Woodland Hills law firm pleaded guilty Friday to mail fraud and agreed to cooperate with federal authorities investigating a group of Los Angeles-area lawyers suspected of defrauding insurance companies of millions of dollars in legal fees.

Kathleen M. Monahan, 45, became the third target of the federal probe to agree to assist the government. She was accused of mailing an inflated bill from the office of attorney Alan Arnold to an insurance company in November, 1985. U.S. District Judge John Rhoades set an Aug. 21 sentencing date for Monahan, who pleaded guilty to a single count of mail fraud.

Lawyers Investigated

The Times reported last January that federal authorities are investigating at least a dozen lawyers from the San Fernando Valley, the Westside of Los Angeles and Beverly Hills who have appeared together repeatedly in cases in which insurers were obliged to pay their fees.

Federal investigators and insurers contend that the lawyers conspired to prolong litigation and fatten their fees through various legal maneuvers, including filing spurious claims against each other’s clients. Some of this litigation is still pending, including cases in San Diego, Orange and Los Angeles counties.

According to the charge against Monahan, she was part of a scheme “to defraud the judicial systems of the United States and the state of California and numerous insurance companies.”

‘Network of Attorneys’

The fraud on the courts stemmed from the lawyers representing themselves as “independent attorneys, free from any conflict of interest,” when in fact they were part of “a network of attorneys with interlocking financial and professional interests,” according to the charge.

Assistant U.S. Atty. George D. Hardy declined to say when more charges will be filed. He confirmed that Monahan’s plea bargain, sealed by court order, requires her to assist the investigation.

Last February, Suzanne Rubin, former operator of a Reseda-based court reporting service, pleaded guilty to one mail fraud count and agreed to cooperate in the probe.

Agreed to Guilty Plea

A third target, Studio City lawyer Marc I. Kent, has not been formally charged, but has agreed to plead guilty to two counts of mail fraud, Kent’s lawyer and prosecutors said.

No charges have been filed against the alleged mastermind of the scheme, attorney Lynn B. Stites, who divides his time between homes in Bell Canyon in Ventura County and Gstaad, Switzerland.

In court papers, prosecutors have referred to Stites as “the organizing attorney,” saying he had “a secret financial connection” with other lawyers in the group. Stites has refused interview requests.