2nd Lawyer Pleads Guilty to Fraud in Insurance Case

A lawyer from Van Nuys pleaded guilty Tuesday to criminal charges in a continuing federal investigation of Los Angeles-area lawyers purportedly involved in a multimillion-dollar insurance fraud.

Alan M. Hersh, whose practice is in Beverly Hills, entered guilty pleas to two counts of mail fraud, becoming the fourth person and second attorney convicted among a group of lawyers whom prosecutors have called the “Alliance.”

The pleas were entered as part of a plea-bargain arrangement, sealed by U.S. District Judge Judith N. Keep, in which Hersh agreed to assist the probe by the U.S. attorney’s office, postal inspectors and IRS agents.

Each mail fraud count carries a maximum penalty of five years imprisonment and a $250,000 fine. A sentencing date was not set.

The “Alliance” case has targeted about 30 lawyers, mostly from the San Fernando Valley, Beverly Hills and West Los Angeles. In court papers, prosecutors have accused the group of conspiring “to defraud the judicial systems of the United States and the state of California and numerous insurance companies” by deliberately prolonging litigation and filing groundless claims.

According to court papers and statements by Hersh and his attorney, Hersh was recruited for the scheme by Studio City lawyer Marc I. Kent, who pleaded guilty in October to mail fraud. Hersh’s role was to file lawsuits that other lawyers in the ring would defend at insurance company expense.

In 1986, Kent arranged for Hersh to represent plaintiffs in two San Diego class action suits, known as Amgo and Syndico, in which Kent and others in the group represented defendants.

Amgo and Syndico were attempts by scores of mostly small investors to recover losses from failed business deals. Amgo involved investments in oil and gas wells in Oklahoma. Syndico involved a real estate project in San Marcos in northern San Diego County.

In both cases, defense bills to insurers far exceeded the amounts investors had lost.

By controlling the plaintiffs’ attorney, the lawyers made certain the suits were worded in such a way that insurers would have to pay defense costs.

Kent, who represented insured defendants in Amgo and Syndico, actually provided Hersh with the complaint “which, in essence, was utilized in these litigations,” Stuart Goldfarb, Hersh’s attorney, told the court.

In addition, Kent provided a $50,000 loan to finance Hersh’s involvement. Under their agreement, Kent was to steer Hersh an insured defendant in another case controlled by the group, and Hersh was to pay Kent a percentage of his settlement fees in Syndico and Amgo.

Hersh also implicated Woodland Hills attorney Donald E. Sternberg, who he said helped disguise the source of his $50,000.

Goldfarb said Kent instructed Hersh to bill Sternberg for “purported legal services that were never done, and Mr. Sternberg in fact paid the monies to Mr. Hersh, which were used to finance the Amgo and Syndico cases.”

The mail fraud charges were based on phony invoices mailed by Hersh to Sternberg on two occasions in May and in July, 1986.

Sternberg, who has not been charged, referred a reporter to his lawyer, who declined comment.

Hersh, who declined comment after his brief court appearance, withdrew from Amgo and Syndico after 1986 for reasons that were not disclosed.

A lawyer who took over for Hersh in Amgo and Syndico--Monty G. Mason II of Sherman Oaks--has been identified by prosecutors as a target in the case. Mason denied any wrongdoing in an interview with The Times last year.

According to court papers in a related civil case, Kent’s law office alone billed insurers more than $2 million in Amgo to defend a single investment promoter--although insurers later sued Kent over the bills.