Lawyer Pleads Guilty in Massive Federal Insurance Fraud Case

A Studio City lawyer Tuesday pleaded guilty to two counts of mail fraud and agreed to surrender his license to practice law, becoming the third defendant and first attorney convicted in a massive federal probe of lawyers purportedly involved in a multimillion-dollar insurance fraud.

Marc I. Kent, 40, a Granada Hills resident, entered his plea before U.S. District Judge Judith N. Keep, who sealed the agreement in which Kent promised to assist federal authorities in the case.

Assistant U.S. Atty. George D. Hardy, who is conducting the investigation along with postal inspectors and the Internal Revenue Service, said that “in the range of 30 lawyers,” mostly from the Los Angeles area but including some from San Diego, now are targets in the case.

He said indictments will be issued soon but declined to be more specific.

The investigation, which began in Los Angeles in 1987 and shifted to San Diego last year, has focused mainly on lawyers from the San Fernando Valley, West Los Angeles and Beverly Hills who appeared together frequently in a certain type of case, in which insurers had to pay legal fees. Prosecutors have estimated that insurance companies may have been bilked of between $50 million and $200 million.

The cases were in Los Angeles, Orange and San Diego counties.

Under questioning by the judge, Kent and Kent’s lawyer said the lawyers schemed to prolong litigation and fatten their fees through various legal maneuvers, such as filing spurious suits against each others’ clients to increase defense fees and paying kickbacks to their own clients for the right to conduct their insurance-paid defense.

“The clients didn’t pay the lawyers, the lawyers paid the clients,” Michael Lipman, Kent’s lawyer, told the judge.

Prosecutors and Kent described a Machiavellian web of intrigue they said was spun by the alleged mastermind of the scheme, Lynn Boyd Stites, a 44-year-old attorney with homes in Bell Canyon in eastern Ventura County and Gstaad, Switzerland. Stites has declined repeated requests for interviews and could not be reached Tuesday for comment.

Lipman said Kent had a modest general law practice before Stites befriended him in 1984 and proposed that Kent “get involved in a series of complex litigations,” including the massive Willow Ridge investment fraud case in Los Angeles.

Under the deal they struck, Stites advanced Kent money and arranged for him to defend a series of clients who had insurance, in return for 60% of the after-expense receipts from Kent’s insurance company billings, according to Lipman.

He said Stites also helped other attorneys set up their own law offices and get clients, in return for kickbacks from their insurance billings.

According to court papers, Kent and other lawyers also utilized court reporting firms “partially owned by” Stites to conduct hundreds of depositions, and also hired a bookkeeper to keep track of insurance company payments to the lawyers, and the amount they owed to Stites.

Lipman said that “Mr. Kent, along with other attorneys and associates of Mr. Stites, met on a periodic basis” to map litigation strategy--despite the fact that in some cases they had cross-claims against each others’ clients.

“The idea was that lawyers would receive clients and sue other friendly lawyers’ clients,” Kent explained. Clients were paid so they “would want the litigation to continue, not terminate,” Kent said.

Lipman said Kent on some occasions “actively assisted in the preparation and drafting of complaints” that were to be filed against his clients.

The specific counts to which Kent pleaded involved checks mailed on two occasions in 1986 and 1987 to Gar May, a San Diego-area businessman he was defending. Kent said the money was purportedly for consulting services, but in reality “was payment for him to remain as my client.” Kent billed insurance companies at least $2 million to defend May.

In an article on the investigation last January, The Times reported that Kent also paid May $100,000 for an option on commercial property in Georgia, but then did not exercise the option, leaving May $100,000 richer. May defended the transaction as “100% arm’s-length.”

Kent declined to be interviewed Tuesday, but his attorney, Lipman, said, “He is sorry for what he did. . . . He realizes that his conduct really is inexcusable . . . that he made some terrible mistakes in judgment and that he would like to go forward and get his life together again as best he can.”

Each mail fraud count carries a maximum penalty of five years imprisonment and a $250,000 fine. The judge set sentencing for Dec. 18.

Mail fraud pleas were entered earlier this year by two employees of targeted law firms. Suzanne Levine Rubin, who ran a court reporting service allegedly partly owned by Stites and supervised billing for two law firms, pleaded guilty in February to a single count of mail fraud. She admitted mailing an inflated bill to an insurance company in 1985 from Calabasas lawyer Lewis Koss.

Kathleen M. Monahan, former office administrator for Woodland Hills attorney Alan Arnold, pleaded guilty in May to mail fraud for mailing a false bill from Arnold to an insurance company in 1985.

Both agreed to cooperate with federal authorities and neither has been sentenced.