Lawyer Held on 3 Counts of Perjury : Inquiry: A Sherman Oaks attorney is indicted by a grand jury investigating an alleged conspiracy to defraud insurance companies.

A Sherman Oaks attorney was arrested at his home Wednesday and charged with lying to a federal grand jury in San Diego that is probing allegations of insurance fraud by a ring of lawyers known as “the Alliance.”

Monty Mason, 54, accused of three counts of perjury in a sealed indictment Tuesday, was taken into custody early Wednesday by U.S. Postal Inspectors and brought to San Diego, Assistant U.S. Atty. George D. Hardy said.

Mason pleaded not guilty at his arraignment before U.S. Magistrate Irma Gonzalez, and was expected to be released Wednesday night after posting a $100,000 bond.

The three perjury charges stemmed from Mason’s grand jury testimony on Nov. 22, 1988. Each count carries a maximum penalty of five years imprisonment and a $250,000 fine.

Mason could not be reached for comment Wednesday but his attorney said he was very disappointed that Mason had been arrested at his home.

“This is an attorney that was expecting to be indicted, and was waiting to be warned so he could come down to San Diego voluntarily and surrender,” said Mason’s lawyer, Ezekiel Cortez. Instead, Mason was “pulled from the house in front of his daughter at 6:40 in the morning,” Cortez said.

“I think the government is acting rashly, and we can’t wait to get the truth out of this mess,” Cortez said. Hardy declined to comment on Cortez’s complaint.

Mason is the seventh person to be charged in the Alliance case, which involves an alleged conspiracy by lawyers to defraud insurance companies by manipulating and prolonging civil litigation in Los Angeles, Orange and San Diego counties.

Four attorneys and two law firm employees have already pleaded guilty to mail fraud charges but have not been sentenced. Mason and the other six all lived or worked at law offices in the San Fernando Valley.

Mason represented plaintiffs in two big San Diego cases in which other lawyers in the group appeared as insurance-paid defense counsel. In those cases, known as the Amgo and Syndico litigations, Mason took over as the plaintiffs’ lawyer from attorney Alan M. Hersh, who pleaded guilty to mail fraud in December.

Hersh told the court that he was recruited in 1986 by Alliance member Marc I. Kent, Hersh’s former law school classmate, to file complaints in the Amgo and Syndico litigations, which the other lawyers in the group defended. Hersh’s lawyer told the court that Kent, who had pleaded guilty last October, actually provided Hersh with the complaint that “in essence, was used in these litigations” against the clients of Kent and the others.

By deciding the precise wording of complaints, the group could assure that insurance companies would have to pay legal costs of the Amgo and Syndico defendants, who were accused of investment fraud.

Although Hersh did not mention Mason when he pleaded guilty, Mason replaced Hersh in both the Syndico and Amgo cases. According to informed sources, an alleged Alliance member stated in a secretly recorded conversation that the group was paying Mason $30,000 a month to prosecute the cases.

In an interview on Nov. 16, 1988, Mason denied any wrongdoing but declined to discuss the source of funds he used in the cases. “My private affairs are my own affairs,” he told The Times.

According to the indictment, Mason testified on the same subject before the grand jury six days later.

The indictment said Mason gave false answers to the grand jury on three issues: the source of his income to pursue the cases, the identity of people who assisted him in his law practice, and the identity of those with whom he discussed settlement strategy.

According to the indictment, Mason received funds for the Syndico and Amgo litigations from Alan Arnold, a Woodland Hills lawyer authorities have identified as a target but who has not been charged in the case. In interviews, Arnold has denied any wrongdoing.

The indictment said Mason testified before the grand jury that he had received money from Arnold, but that it was for legal research. The indictment alleged that Mason knew this was false, and that he “rather received money from attorney Alan Arnold as a method of funneling funds from the Alliance” to him.

Prosecutors have said 10 to 15 more lawyers could be charged in the case, which experts say is emerging as one of the biggest criminal prosecutions of attorneys in U.S. history.