Trial on Fraud Charges Opens for 8 Lawyers : Law: The lawyers, called the alliance, allegedly bilked insurance firms in a scheme that ran up the cost of rigged lawsuits.

Testimony began Tuesday in San Diego in “the Alliance” fraud and racketeering trial of eight attorneys whom a federal prosecutor accused of manipulating the legal system “to defraud insurance companies of literally tens of millions of dollars” in fees for needless litigation.

In his opening statement to the jury in U.S. District Court, Assistant U.S. Atty. William Q. Hayes said the lawyers, charged with mail fraud and racketeering, secretly worked together to prolong and expand litigation in order to reap huge fees from insurers paying their legal bills.

Hayes said the idea was, “ ‘You make work for me, I’ll make work for you.’ ” But the lawyers “went to great lengths to conceal” their alliance from insurance companies and “from the legal system itself,” Hayes said.

But Bradley W. Brunon, defense lawyer for Lewis M. Koss of Woodland Hills, told jurors that the main issue in the case is the “political and financial power of large insurance companies and how they have brought that power to bear on an attorney that . . . fought them too hard and cost them too much.”

“Mr. Koss, the evidence will show, didn’t cheat” and did nothing “that was not in the interest” of clients, Brunon said.

One of the eight defendants is La Jolla lawyer Leonardo T. Radomile. All the others are from the Los Angeles area. Fourteen persons, including eight Los Angeles lawyers, earlier pleaded guilty in the case, which has emerged as one of the largest criminal prosecutions of attorneys in U.S. history.

With a list of 200 prospective witnesses and voluminous bank records and other exhibits to be introduced, the trial is expected to last up to four months. And with 20 attorneys appearing as defendants, defense counsel or prosecutors and many other lawyers on hand to observe, the trial has attracted more attorneys than live in some towns.

From about 1984 to 1988, the lawyers allegedly infiltrated or initiated at least 10 civil litigations in San Diego, Orange and Los Angeles counties in which insurance companies had to pay defense fees for policyholders who had been sued.

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

In some litigation, the Alliance allegedly recruited and furnished money to opposing attorneys to sue the Alliance’s clients and bury them in motions and discovery requests, in order to justify huge defense bills.

“Paying clients and paying the other side were just two of the ways” the lawyers manipulated cases, Hayes said.

But defense attorneys told jurors that the real guilty parties were either fugitives or had cut questionable deals with the government.

They were referring to attorney Lynn Boyd Stites, the alleged mastermind and chief beneficiary of the scheme, who dropped out of sight along with his bookkeeper, Roberto Rufino, before they were indicted last April along with 16 others.

And Stites’ chief lieutenants and confidants--including lawyers Marc I. Kent of Granada Hills and Greg Bodell, and Suzanne L. Rubin, a former court reporter who was Stites’ mistress--have pleaded guilty and become prosecution witnesses.

The leaders of “the Alliance . . . are the government’s own witnesses,” defense attorney Ezekiel Cortez told the jury, adding that his client--Sherman Oaks lawyer Monty G. Mason II-- was “set up” and unwittingly drawn into the suspicious litigations.

Radomile, Koss, Mason, Donald E. Sternberg of Woodland Hills, Richard Noyer of Calabasas, Douglas Caiafa of West Los Angeles, and B. George Dezes, now living in Maryland, are charged with at least fourteen counts each of mail fraud and racketeering. Mason is also charged with perjury for allegedly lying to the grand jury probing the case. Steven D. Waisbren of Woodland Hills is charged only with mail fraud.

According to the government, some of the Alliance lawyers were actually Stites employees who received a salary and funneled him essentially all of their insurance billings. Others paid Stites as much as 60% of their insurance profits, sometimes in the form of gold, other precious metals or payments of tuition for Stites’ children in private Swiss schools.

The government’s first witness, Los Angeles attorney Fred Rucker, acknowledged that he was testifying under a grant of immunity.

Rucker, formerly employed by Stites’ law firm and before that by Finley, Kumble, Wagner--another firm whose attorneys appeared in several of the suspect litigations--testified that large sums of money owed him by Stites were paid to him by two other ostensibly separate law firms. Rucker said that when Stites offered him a $10,000 “signing bonus” to join his firm in 1986, he was surprised to receive the money in a check from the firm of Dezes and Caiafa, two of the defendants.

And Rucker said his $25,000 bonus at the end of that year was paid by the law office of Kathleen Phipps, who has pleaded guilty in the case.

Rucker also said he was present when Stites gave a prospective new employee this advice on keeping track of billable time: Make a note of time worked, put it aside for two days and then double it, “set it aside again, then double it again, and then you ought to hand it in.”

The trial began Monday with selection of a jury of nine women and three men.