Businessman Pleads Guilty to Mail Fraud in Complex Insurance Case : Litigation: The La Jolla man admits that he received kickbacks from two Valley attorneys who defended him in lawsuits at insurance-company expense.

A seventh figure in the “Alliance” attorney fraud case pleaded guilty to mail fraud Thursday, saying he helped a ring of Los Angeles lawyers bilk insurance companies by making litigation “as complex, convoluted and extended as possible.”

Gar C. May, 49, a La Jolla optometrist and businessman, pleaded guilty to two counts of mail fraud before U.S. District Judge Judith N. Keep. No date was set for sentencing on the mail fraud counts, each punishable by up to five years imprisonment and a $250,000 fine.

In a statement he read in court, May said he got kickbacks from two San Fernando Valley lawyers who defended him in lawsuits at insurance-company expense. And, he said, he scouted the San Diego area on the lawyers’ behalf for other insured parties who could be sued and have their legal fees paid by insurers.

“In order to attract persons to become clients of the Alliance attorneys, some clients were paid to be clients, and were paid to bring individuals to the Alliance lawyers as clients,” May said.

“The Alliance” is a nickname some of the members of the group purportedly used for themselves, which federal authorities now use.

The lawyers, mainly solo practitioners or members of small firms in the San Fernando Valley, Beverly Hills and West Los Angeles, appeared together in a number of complex civil cases in Los Angeles, Orange and San Diego counties from about 1984 to 1988. Prosecutors and insurance company lawyers say they may have billed up to $200 million in the cases, but it is unknown how much may have been frivolous or fraudulent.

May, his wife, and four of his companies were key defendants in the Amgo litigation in San Diego, stemming from failed oil and gas investments the Mays had promoted. Late in 1986, May said, his Amgo attorney, Marc I. Kent of Studio City, began funneling May $3,000 per month in kickbacks, disguised as ‘consulting’ fees. The payments were later increased to as much as $6,500 per month, including money passed by Kent through May to another member of the ring.

In 1987, May said, he and Kent decided to restructure the payments as a lease-option taken by Kent on a small shopping center May owned in Georgia.

The specific mail fraud counts to which May pleaded involved two mailings to Kent of the “fictitious lease-option agreement,” according to a criminal information filed by prosecutors.

May said that at one point the payments stopped coming from Kent and were instead made by Calabasas attorney Lewis Koss, who represented one of May’s corporations in the Amgo litigation.

Kent, who pleaded guilty to mail fraud last October, billed insurance companies at least $2 million to defend May in the Amgo case, although insurers are believed to have paid only a little more than half that amount.

Koss, who has not been charged in the case, said he would not comment on May’s statement, on the advice of his attorney.

May said that in 1986, he created bogus minutes of corporate meetings to show that various associates had been elected officers or directors of his companies. He said he did this, in part, so insurers would have no choice but to pay legal fees for these people under insurance policies issued to his companies. In some cases, May said, the associates hadn’t even been notified or “asked to serve in the capacity of officer or director.”

May also said Kent gave him $20,000 and instructed him to look for other failing investment ventures over which lawsuits could be filed. May was to solicit potential defendants as clients for Alliance attorneys and purchase liability insurance policies in their name. Then they would be sued, either through the normal course of events or by an Alliance lawyer representing plaintiffs.

May said he solicited clients in two investment fraud cases known as the Water Maid and American Productivity Concepts litigations that were filed late in 1987. He did not say how many clients he signed up, but Alliance attorneys did appear in those cases on both the defense and plaintiff sides.

In a similar effort that did not come up during May’s court appearance, May allegedly tried to help the lawyers gain control of an investment fraud case known as North American Thoroughbreds.

During the summer of 1987, he and Kent offered to pay John Naslund, a San Diego County businessman and defendant in that case, a monthly fee to make Kent his lawyer and additional money for each referral of an insured person who might also be sued in the case, according to sworn testimony by Naslund in a deposition.

Unfortunately for May and Kent, Naslund was working undercover with federal authorities and secretly recorded these conversations.

According to informed sources, May described the Alliance in one of these conversations as “a mastermind group of . . . about 20 different law firms . . . . All they do is run these lawsuits round and round and round and they just clean up.” The lawsuits, he allegedly told Naslund, “are nothing but one big game, OK? . . . . The idea is to make money.”

May’s plea came a day after U.S. postal inspectors arrested Monty Mason, a Sherman Oaks attorney and alleged Alliance member indicted Tuesday on charges of lying to a grand jury.