3 Ex-Insurance Consultants Convicted of Embezzlement : Fraud: Newport Beach firm worked with small companies offering coverage to their employees.

A federal jury in Los Angeles has convicted three former insurance consultants of conspiracy and fraud in a scheme that a U.S. senator once cited as an example of how some in the industry preyed on small-business owners.

The three men, who ran Rubell Helm Insurance Services in Newport Beach, were accused of embezzling $3.4 million from insurance premiums they collected from thousands of employees at small companies in three states.

The men--James B. Helm, 44, formerly of Laguna Niguel; Scott K. Clawson, 37, of San Juan Capistrano, and Douglas L. Taylor, 35, formerly of Mission Viejo--face more than 40 years in prison each. They are scheduled to be sentenced Dec. 12.

The companies and a union local had formed five trusts they funded themselves to cover the health insurance needs of their employees. Premiums were sent to Rubell Helm, which was supposed to hold the money to pay claims and purchase backup insurance. The company failed to do either job well.

Testimony at the four-week trial showed that, in addition to the conspiracy and embezzlement, Rubell Helm executives failed to pay as much as $7.8 million in health care claims submitted by employees, according to Assistant U.S. Atty. George S. Cardona, who disclosed the jury verdict Thursday.

Taylor’s attorney, Bernard Rosen of Santa Monica, said he was “still in shellshock” because he believes there was no evidence showing that his client did anything illegal or gained any money illicitly.

He said he will ask the judge to set aside the verdict and either acquit Taylor or give him a new trial. The other defendants and their attorneys could not be reached for comment Thursday.

Prosecutors alleged that the trio, along with four others who pleaded guilty to charges, used embezzled money and illegal kickbacks to finance lavish lifestyles that included Hawaiian vacations, ski trips and extravagant purchases of clothes and jewelry.

Helm, who was Rubell Helm’s president and now lives in Jackson, Wyo., was convicted late Wednesday of mail fraud, conspiracy to commit mail fraud, embezzlement, filing false income tax returns and paying kickbacks. Clawson and Taylor, now of Clarkston, Wash., were convicted of conspiracy and mail fraud, and Clawson was also convicted of embezzlement.

Rubell Helm Insurance, which once promoted itself as a leader in group insurance, came under suspicion in early 1989 and was soon being investigated by a U.S. Senate Governmental Affairs subcommittee, which held hearings on insurance fraud in May, 1990.

At the time, Sen. Sam Nunn (D-Ga.) called the company’s operations a scam and used it as an example of a nationwide insurance scheme that preyed on owners of small businesses seeking inexpensive group insurance for their employees. The company closed its doors in 1989 after five years of operation, during which it collected $12 million in premiums.

The company’s chairman, Michael A. Rubell, 54, pleaded guilty three years ago to mail fraud, embezzlement and tax evasion. He also agreed to testify against others. The following year, three others pleaded guilty to fraud charges, including Kathleen Helm, 42, a former Rubell Helm executive vice president and Helm’s former wife.