Trial to Open for Eight Lawyers Facing Racketeering, Insurance Fraud Charges

A trial described as one of the largest criminal prosecutions of attorneys in U.S. history is scheduled to begin Monday when a fraud and legal corruption case is brought against a group of lawyers who cost insurers as much as $50 million, according to prosecutors.

Eight attorneys will go on trial on charges of fraud and racketeering. Fourteen people, including eight Los Angeles-area lawyers, have pleaded guilty in the case.

Prosecutors claim the lawyers, known as “the Alliance,” cheated insurance companies and undermined the judicial system by prolonging litigation and secretly maintaining close financial ties while posing as independent lawyers.

The lawyers are accused of taking part in an elaborate scheme to prolong and expand civil damage suits to make them as expensive as possible. From 1984 to 1988, the government says, the lawyers initiated or infiltrated at least 10 litigations in Los Angeles, Orange and San Diego counties in which insurance companies had to pay defense fees for policyholders who had been sued.

The lawyers allegedly resisted settlements and “churned” the cases by conducting needless depositions and filing cross-claims for damages against each other’s clients. Some clients allegedly were paid kickbacks by the lawyers so they would be content to remain defendants rather than settle.

In some litigations, Alliance members allegedly served as lawyers for both plaintiffs and defendants. According to the government, the plaintiff attorneys were paid by defense lawyers to file unnecessary motions and discovery requests in order to justify huge defense bills. In one instance, the group is said to have punished a wayward member by having his client dismissed from a lawsuit, denying the lawyer defense fees.

In court papers and interviews, the defendants contend they did nothing wrong and are being punished for standing up to the insurers.

Defendants also say much of the evidence against them is unreliable, having come from former associates who plea-bargained with the government and now will say anything to get a lenient sentence.