Ex-Lawyer Gets 12-Year Prison Term in Insurance Scam : Fraud: Lynn Stites was the mastermind of a ring of attorneys that used the court system to bilk companies.

Former fugitive attorney Lynn B. Stites was sentenced Thursday to more than 12 years in prison for his role as mastermind of “the Alliance” insurance fraud and legal corruption scheme.

Stites was convicted in October of racketeering and mail fraud charges stemming from his involvement with a secret network of Los Angeles area lawyers. Even with credit for 14 months in custody, Stites must serve at least 10 years in prison under federal sentencing guidelines that limit time off for good behavior.

In addition to imposing the prison term of 12 years and seven months, U.S. District Judge Clarence C. Newcomer confirmed a forfeiture verdict allowing the federal government to seize Stites’ assets or future earnings of up to $50 million--the amount insurers supposedly lost because of his crimes.

Barring successful appeals by Stites and others convicted in the scheme, Thursday’s sentencing may be the final act in a case that emerged as one of the largest criminal prosecutions of lawyers in U.S. history. Prosecutors described it as the largest fraud scheme ever that “involved the use of the United States legal system as a means to defraud insurance companies.”

Stites, who formerly practiced law on the Westside and in Woodland Hills, was described as the scheme’s organizer and main beneficiary. Prosecutors said that a ring of attorneys under his direction had bilked insurance companies of tens of millions of dollars in legal fees with complex litigations in Los Angeles, Orange and San Diego counties.

A dozen other lawyers previously received sentences ranging from probation and fines to 46 months in prison. Five law firm employees and clients also entered guilty pleas. The one remaining defendant--Stites’ former bookkeeper Roberto Rufino--vanished with Stites when they were indicted in 1990 and has not been caught.

Until his capture in November, 1992, Stites spent more than 2 1/2 years in hiding under several assumed names--frequenting the ski slopes of Colorado and renting a bay-view condominium in Miami Beach, where he also purchased a string of hurricane-damaged boats to refurbish and sell.

Despite extensive contacts with family members, he might have remained at large had he not raced through a speed trap in southern Illinois and then aroused the suspicion of a state trooper--who spotted a pile of cash in Stites’ sports car, obtained a search warrant and found Stites’ real name among false identity papers.

Appearing pale and gaunt Thursday in a green prison jumpsuit, Stites addressed the court for more than 10 minutes--breaking a five-year public silence that had endured throughout the investigation and trial.

“I got too much involved in my own ego--the money, the power,” he told Newcomer before sentence was pronounced.

“If there is any man who is truly broken . . . it’s me,” he said. “I’ve made a lot of mistakes, and I’m certain . . . I’ll pay for that.”

Struggling to steady his voice, Stites said he most regretted the damage he had done to friends and family, including his children. “They’ve seen their father vilified as a criminal,” he said.

But in pronouncing sentence, Newcomer invoked the harm to families of Stites’ colleagues who were “drawn into the web which he created.”

Newcomer did grant one of Stites’ requests--recommending that Stites be imprisoned “where his educational background and his skills might be utilized as fully as possible in an education program for other inmates.”

Stites and his cohorts, who carried out the scheme between 1984 and 1988, became known as “the Alliance” after a client of one of the lawyers used the term in a conversation secretly taped by a government informant.

Unlike traditional insurance scams involving staged traffic accidents or false medical claims, Stites and his associates were involved in genuine legal disputes. According to prosecutors, what made the scam ingenious was their use of standard legal procedures--such as legal discovery and the filing of cross claims--to prolong and expand cases for the sole purpose of reaping huge legal fees from insurers obliged to pay legal defense costs for policyholders.