Fugitive’s Ex-Wife Shows Up at ‘Alliance’ Trial in a New Chapter to Mystery : Court: The woman says she is working on a book. Her former husband is the alleged mastermind of the fraud scheme.

As “the Alliance” insurance fraud and legal corruption trial slogged through its seventh week in U.S. District Court, a secretive, middle-aged woman in dark glasses sat in the back of the wood-paneled courtroom filling legal pads with notes, as she has since the trial began.

She has refused to give her name, saying only that she’s an author gathering material for a book.

If so, it could be the inside scoop--the woman is Erma Lee Miller of Moorpark, also known as Erma Lee Stites, ex-wife of fugitive attorney Lynn B. Stites, the alleged mastermind and chief beneficiary of the Alliance scheme.

Lynn Stites, who formerly practiced law in Woodland Hills and West Los Angeles, dropped out of sight shortly before his indictment last year on fraud and racketeering charges.

Despite his absence, Stites has cast a deep shadow over the trial of eight other attorneys--including five from the San Fernando Valley--accused of helping Stites defraud insurance companies of tens of millions of dollars in legal fees through frivolous litigation.

At times, the trial has seemed like a long-play record recounting Stites’ deception of insurers and even associates--some of whom he allegedly recruited for the scheme through intermediaries to keep his involvement secret.

What his 50-year old ex-wife is doing at the trial, apart from book research, is something she wouldn’t discuss Thursday when a reporter called her by name.

“I’m not talking to you. I’m writing a book. . . . Leave me alone!” she shouted.

Whether Miller is in touch with the fugitive Stites, or what her attitude toward him is now, is unknown. A possibility is that Miller hopes to be of some help to the defendants whom, like her, Stites left holding the bag.

Another theory was that she hoped to discover what her former spouse was up to. “I’m sure she would have a natural curiosity to find out what was going on,” said Steven Ruben, a Los Angeles lawyer who formerly represented Lynn Stites.

Erma Stites, Ruben said, was “absolutely kept in the dark . . . and probably can’t believe what she’s hearing.”

Apparently most participants and observers at the trial do not know who Miller is. Two who do are defendant Lewis Koss of Woodland Hills and his defense lawyer, Bradley Brunon. After the trial recessed late Wednesday, Koss and Brunon were seen talking to Miller next to her car a few blocks from the courthouse.

Department of Motor Vehicles records showed that car is registered to a Lee Miller of Moorpark. The same car was stopped last year in Utah and a speeding ticket issued to Erma Lee Stites, also known as Erma Lee Miller, according to license information obtained from the Department of Motor Vehicles.

Koss and Brunon would not discuss Miller’s presence at the trial. Prosecutors refused to say if they knew of her attendance, saying they wouldn’t discuss any aspect of the trial.

Fourteen people--eight of them Los Angeles-area lawyers--earlier pleaded guilty in the Alliance case, which is among the largest criminal prosecutions of lawyers in U.S. history.

The eight attorneys on trial are the remainder of 18 defendants indicted by a federal grand jury in April, 1990.

From about 1984-88, the lawyers allegedly infiltrated or initiated and then “churned” at least 10 civil litigations in San Diego, Orange and Los Angeles counties in which insurance companies were obliged to pay defense fees for policyholders who had been sued.

The lawyers are accused of resisting settlements and creating work for each other by conducting needless depositions and filing cross claims for damages against each others’ clients. Some allegedly paid kickbacks to their clients so the clients would be content to remain defendants, rather than settle claims against them.

According to the government, most of the lawyers also paid Stites huge sums from their insurance billings, in return for being assigned insured defendants in the various cases. Some of the alleged payments were in cash, but they also took the form of precious metals, office equipment, and tuition for Stites’ children at Swiss schools, the government maintains.

The defendants have professed their innocence, saying that the Alliance was limited to Stites and members of his inner circle who have entered guilty pleas.

Two defendants late Thursday announced they would rest their cases without presenting any evidence in their defense.

Lawyers for Donald E. Sternberg and Steven D. Waisbren, both of Woodland Hills, told Judge Clarence Newcomer that the government had failed to meet its burden of proving any wrongdoing by them.

Earlier Thursday, defendant Richard B. Noyer of Calabasas finished his third day on the witness stand, testifying in painstaking detail about his motives and tactics in the suspect litigations.

Noyer testified that he never filed pleadings simply to expand cases or generate attorney fees. He said he never paid Stites or took instructions on legal strategy from Stites or Stites’ lieutenants.

Noyer also said he never paid kickbacks to clients as the government alleged--and as several of those who pleaded guilty admitted doing.

During his cross-examination, Assistant U.S. Atty. William Q. Hayes tried to show that Noyer had purchased gold coins and fax machines as a way of funneling payments to Stites--pointing out that Noyer’s expenses for these items appeared to match entries on ledgers kept by bookkeepers for Stites recording payments to him.

But Noyer insisted that he made the purchases for himself, not to pay Stites.

Closing arguments in the trial may be heard next week.