Attorney Gets 12-Year Term in Insurance Fraud Scheme : Sentencing: Lynn B. Stites was the mastermind of a secret network known as ‘the Alliance.’ The case emerged as one of the largest criminal prosecutions of lawyers in U.S. history.

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

U.S. District Judge Clarence C. Newcomer imposed a prison term of 12 years, 7 months for Stites’ October conviction on 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.

Newcomer also 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 due to his crimes.

Barring successful appeals by Stites and others who were previously convicted, 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 on Thursday 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 in West Los Angeles and Woodland Hills and lived in the Bell Canyon area of eastern Ventura County, 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 by churning 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, but has not been captured.

Until his apprehension in November, 1992, Stites spent more than 2 1/2 years in hiding, using 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 forever had he not raced through a speed trap in Southern Illinois and then aroused the suspicions 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. 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 in attendance in court. “They’ve seen their father vilified as a criminal,” he said.

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

Newcomer did grant one of Stites’ requests--saying he would recommend 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. Sometimes the lawyers were referred to as the “Ventura Boulevard boys” because several were from the San Fernando Valley.

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 purpose of reaping huge fees from insurers who were obliged to pay legal defense costs for policyholders.

During Stites’ trial, the defense portrayed him as a skilled and tenacious litigator who was targeted by insurance companies for forcing them to defend policyholders as required by insurance contracts. The refusal of insurance companies to settle claims was the main reason cases dragged on and became unduly expensive, the defense said.

Defense lawyer Jennifer L. Keller asked Newcomer to impose a sentence of no more than 33 months, arguing that Stites has been ruined already.

“He had everything a man could want,” she said. “Now he can’t decide whether to turn on a light switch or go to the bathroom in privacy.”

Assistant U.S. Atty. William Q. Hayes said he was pleased by the sentence, although he had argued for a term of up to 17 1/2 years.

Stites, Hayes had argued, not only cheated insurance companies but defrauded the judicial system by needlessly tying up the courts and limiting access by others to strained judicial resources.

The court should send a message that “people who use a suit and tie and professional degree to steal . . . are going to be punished.”