Attorneys Accused of Looting Accounts

The clients included a couple whose embryos were stolen at a fertility clinic, another whose baby suffered brain damage before birth because an obstetrician left the hospital to have her hair done, and a young man who was drugged and molested by his priest.

To make up for the injustices they suffered, Orange County attorney Melanie Blum and her then-husband, Mark Roseman, went to court and won them big settlements.

But much of the money disappeared, say prosecutors -- who have charged the now-divorced couple with looting settlements that total $1.5 million in a dozen cases from 1993 to 2000, leaving clients victimized a second time. The two lawyers each face 12 felony counts of grand theft and are scheduled to return to court on May 12.

The case is especially notable because Blum, 53, gained a national reputation in the late 1990s as lead attorney in a landmark series of lawsuits against UC Irvine and its now-defunct Center for Reproductive Health. Three doctors at the fertility clinic stole eggs and embryos from fertility treatment patients and implanted them into other infertile women. In the end, the university paid nearly $20 million to 107 couples.

Deputy Dist. Atty. Doug Brannen, who is prosecuting the couple, said the case is especially difficult because the lawyers were representing people who already had been victims. “The clients don’t know the system,” he said. “They just have to completely trust the attorney to deal with them forthrightly and honestly.”

Neither Blum nor Roseman -- who also have been sued by some of their former clients -- would discuss the case, but both have hired top defense lawyers. Blum has hired John Barnett, who won a state-court acquittal for an LAPD officer in the Rodney King beating, while her former husband has retained Allan H. Stokke, who represented one of the physicians charged in the UCI fertility clinic scandal.

Each Blames the Other

Each of the defendants blames the other for misspending the clients’ money on business and personal expenses, including a bar mitzvah for their son at the Newport Marriott in 2001.

Blum “was making the money and Mark was controlling the bank account,” said Barnett, who said his client did not know that settlement money was being misspent but is now repaying the funds.

Her husband’s lawyer sees it differently. “There isn’t any question about it -- [Blum] had substantial control and knowledge as to what was going on in the office and financial control over the bank account,” Stokke said.

Three of the alleged victims were among the 36 couples Blum represented in the UCI case, which turned her into a nationally recognized spokeswoman in the unfolding fertility scandal. “For plaintiffs to be able to move on is a huge part of the healing and recovery,” she said in 1999, when many of the cases were settled.

Roseman, 54, her husband and law partner at the time, concentrated on clergy sex-abuse victims.

As the couple won settlements in the 1990s, however, their financial and personal problems were growing. By 1999 the two had separated. A year later Roseman filed for bankruptcy and in 2001 the couple divorced, with documents in the court file showing them $1.3 million in debt. Blum filed for bankruptcy late last year but did not complete the process.

Court records and testimony in the criminal and divorce cases offer conflicting theories on where the money went, with each party claiming to be ignorant of the firm’s finances.

A former friend said in a March hearing in the criminal case that Roseman spent some of the money on expensive suits and keeping the law firm afloat. But the divorce file contains an e-mail Roseman fired off just days before the bar mitzvah in 2001: “The truth is you are paying for our son’s celebration at the cost of clients’ agony that should be eating you up inside.... How do you sleep?”

Embryo Theft

Among those clients was plastic surgeon Steve Laverson and his wife, Joanne, who went to UCI for help conceiving a child. Instead, four of their embryos disappeared. With Blum’s help, they obtained a $150,000 settlement from UCI in 1999.

But after the couple endorsed the settlement check, which was deposited into a trust account to sort out costs and attorneys’ fees, Blum stopped talking to the Laversons, according to a civil lawsuit the couple filed.

Bruce J. Guttman, an attorney who represented them in the civil case, eventually won a settlement that included the full $150,000, with no money withheld to pay Blum.

The Laversons sued UCI primarily to find out what happened to the missing embryos, Guttman said. But when the money came, “she just ripped them off.”

Blum’s attorney, however, said the Laversons received more in the end than the court had awarded. “They probably got twice as much as they were entitled to because they didn’t pay costs and they didn’t pay attorneys’ fees,” Barnett said.

Another client was Dioselina Duque Sanchez, whom Blum’s office represented in a suit against an obstetrician who, in 1992, had stepped out for more than an hour to get her hair done while Sanchez was in labor. Sanchez’s liver ruptured and her baby son suffered severe brain damage from a lack of oxygen.

Two years later, Sanchez received a $515,000 settlement for her own injuries and $1 million for her deaf, blind and mentally disabled son, who required round-the-clock care before he died.

The child’s money was put into a trust, but the settlement check for the mother was sent to Blum’s office. Prosecutors allege Blum gave Sanchez only occasional “advance” checks -- totaling $65,000 through 1997 -- with the promise that the rest was coming soon.

“I tried very hard to get some of the money from her, but most of the time she was never there,” Sanchez testified at the March hearing.

Barnett says Sanchez received the money she was entitled to because there was an agreement to deduct attorney fees of more than $250,000 from the mother’s check, rather than the child’s settlement.

After figuring in costs, payments from an insurance company and checks from Blum, Sanchez was entitled to no more, he said.

Other Troubles

In late 2002, Blum got into trouble with the state bar for her handling of cases, none related to the criminal complaints she faces.

The lawyer was accused of charging clients in a medical malpractice case an illegal fee, mishandling their funds and allowing the balance in her client trust account to fall below the required amount.

After considering a harsher penalty, bar officials instead suspended Blum for a month, placing her on two months’ probation and ordered quarterly audits after she painted her husband as abusive and controlling, arguing that he ran the finances of their law practice.

But during the March hearing on the criminal charges, some witnesses testified that Blum was in charge of the office’s finances and worked in accounting before attending Loyola Law School.

Roseman resigned from the state bar in early 2000.

Though he faced no charges at the time, the state bar’s “client security fund” -- designed to compensate clients who are shortchanged by their attorneys -- paid $51,769.27 to three of his former clients.

One was a Mission Viejo man who sued his church, claiming a priest with a molestation history sexually assaulted him after slipping him drugs.

Roseman obtained a $25,000 settlement in 1999, but never paid his client and then declared bankruptcy several months later, according to the man’s testimony in the March hearing.