Lawyer Pleads Guilty in S.D. Court

An attorney Thursday pleaded guilty in an insurance fraud case that is likely to become one of the largest criminal prosecutions of lawyers in U.S. history.

Richard A. Banks, 42, of Los Angeles entered his plea in U. S. District Court in San Diego, becoming the third attorney and fifth person convicted in a multimillion-dollar insurance scheme involving a group of Los Angeles-area lawyers that prosecutors have called the “Alliance.”

Banks’ plea to a single mail-fraud charge was part of an agreement, sealed by U.S. District Judge Judith N. Keep, in which Banks agreed to assist the investigation by federal prosecutors and postal inspectors. Banks also agreed to surrender his license to practice law.

No date for sentencing was set on the mail fraud conviction, which carries a maximum penalty of five years imprisonment and a $250,000 fine.

Neither Banks nor his attorney would comment after their brief court appearance Thursday morning.

Assistant U.S. Atty. George D. Hardy said other guilty pleas are expected soon and that at least 10 other lawyers could be indicted in a matter of weeks.

According to several legal experts, criminal cases against large groups of lawyers are exceedingly rare, with most prosecutions involving a single lawyer accused of stealing from a client or aiding a client’s illegal acts.

“Any prosecution that involves more than four, five or six attorneys . . . is going to be extremely unusual and probably precedent-setting,” said Robert C. Fellmeth, a University of San Diego law professor and former prosecutor who monitors the state bar discipline system under an appointment by the attorney general.

“I’m not aware of any case . . . that has as many attorneys involved, and I’ve been a white-collar-crime prosecutor for 15 years,” Fellmeth said.

“I’ve never heard of anything quite like this before, in which a lot of attorneys were involved,” said Stephen Bundy, a law professor who teaches legal ethics at the University of California, Berkeley. “It is not just the fact of the number of lawyers, it’s the character of the wrongdoing that’s distinctive . . . because it involves cooperation between lawyers for different clients.”

Banks was charged in a criminal information, a document filed instead of a grand jury indictment when a defendant has agreed to plead guilty. According to the information, Banks had schemed with the other lawyers “to defraud the judicial systems of the United States and the State of California and numerous insurance companies” by systematically expanding and prolonging civil litigation.

The targets of the investigation are a group of Los Angeles-area lawyers who appeared together in complex cases involving fraud allegations, in which insurance companies had to pay their policyholders’ defense fees but could not select the lawyers or direct defense strategy.

Some claims against policyholders, such as property damage, were covered by insurance. Others, such as fraud, were not. Typically the insurers would agree to pay defense fees but not damages for fraud or other non-covered claims. That created a potential conflict of interest that allowed the policyholders to pick their own lawyers.

After gaining a foothold in such cases, the lawyers worked to secure defendants for other members of the ring, according to prosecutors and those convicted in the case. The lawyers conducted exhaustive pretrial discovery and filed cross-claims against each others’ clients, increasing their workload and insurance billings.

Some lawyers paid kickbacks from insurance billings to their clients so they would continue to let the lawyers represent them instead of settling their cases, former Studio City lawyer Marc I. Kent told the court when he pleaded guilty in October.

And, in some cases, the ring reportedly controlled both the plaintiff and defendant sides. In the Amgo and Syndico litigations in San Diego, for example, the lawyers recruited and paid plaintiffs’ lawyers to bring the suits they came in to defend, according to Kent and attorney Alan M. Hersh, a lawyer in Amgo and Syndico who pleaded guilty to mail fraud charges last month.

According to the charge filed Thursday, Banks had been employed by another target in the probe, Calabasas lawyer Lewis M. Koss. He worked for Koss in the Willow Ridge case, in which Koss and several of the other lawyers under investigation were defense counsel.

In late 1986, Kent allegedly invited Banks to set up his own law office to create an additional profit center for the lawyers. On behalf of the network of attorneys, Kent offered to furnish Banks clients and working capital, and, in return, Banks would kick back to the group a percentage of his insurance billings, the court papers said.

Banks then opened his own law office in Tarzana and was referred insured defendants in the Amgo and Syndico litigations.

The specific mail fraud charge against Banks involved a bill mailed in February, 1987, to Fireman’s Fund for defense work in the Syndico case.

Along with Banks, Kent, and Hersh, two former law office administrators have pleaded guilty during the past year. None has been sentenced. All five worked or lived in the San Fernando Valley.

James Bascue, chief trial counsel for the State Bar of California, said his office is conducting its own investigation of the lawyers. In addition, insurance companies have filed lawsuits against some of the lawyers.