Lawyer in ‘Alliance’ Fraud Case Held in Illinois

Fugitive attorney Lynn B. Stites, the central figure in the “Alliance” insurance fraud and legal corruption case, was arrested in Illinois for a routine traffic violation and will be brought to San Diego to stand trial on federal racketeering and mail fraud charges, authorities said Monday.

Stites, 47, who formerly lived in Ventura County, dropped out of sight shortly before his April, 1990, indictment in the Alliance case--which emerged as one of the largest prosecutions of attorneys in U.S. history.

Twelve lawyers and six law firm employees and clients were convicted in the case, and received sentences ranging from probation and fines to 46 months in prison.

“We’re pleased that he’s going to be returned . . . to answer to the charges in the indictment,” said William Q. Hayes, assistant U.S. attorney in San Diego.

Stites faces one charge of racketeering--which carries a maximum term of 20 years--and numerous mail fraud counts, each punishable by up to five years in prison. His trial is not expected to begin until next year.

Stites was stopped early Saturday in rural southern Illinois, just north of Paducah, Ky., after a state trooper clocked him traveling at 80 m.p.h. in a Dodge Stealth sports car, according to Illinois State Police Sgt. Robert Baker.

As the trooper approached Stites’ car, which had luggage and a briefcase in the back seat, he also noticed an open box with a large pile of cash, Baker said.

Stites produced a driver’s license with the name Gary Davis. But the trooper, whose suspicions were aroused by the cash and Stites’ evasive answers, detained him until another trooper arrived with a search warrant, Baker said.

A search of the car turned up $33,000 in cash and two other sets of identification, one fake and one real. All three sets were run through police computers and Stites’ name brought up the federal warrant.

“Apparently he’s wanted out there big time, isn’t he?” Baker said.

Stites’ disappearance had sparked speculation on his whereabouts, which may continue even after his capture. Although arrested in Illinois, he was driving a car with Oregon plates, and other evidence in the car placed him at times in Florida and in Switzerland, sources said.

Stites could not be reached by phone Monday at the Franklin County Jail in Benton, Ill., where he was awaiting transfer to San Diego.

Thomas A. Mesereau Jr., a Century City lawyer who formerly represented Stites, declined comment other than to say that “it has not been determined which attorney will represent Mr. Stites.”

With Stites’ arrest, the only Alliance figure who remains at large is Stites’ former bookkeeper, Bert Rufino.

“The Alliance” was a name used by prosecutors for a ring of Los Angeles-area lawyers who bilked insurance companies of millions of dollars in legal fees in Los Angeles, Orange and San Diego counties.

Stites is alleged to have been the organizer and chief beneficiary of the scheme, in which lawyers worked together to resist settlements and manufacture new legal controversies so cases would grow in size and cost.

David Bocan, an attorney for Allstate Insurance, one of the firms allegedly defrauded by Stites, said he is “looking forward to seeing Mr. Stites brought to justice.”