[Unlike my other "Heads I Win, Tails You Lose" stories the names of the people involved have not been changed. This story is, however, evidence that even when insurers win a case of fraud perpetrated against them, the insurers continue to lose. This is the story of an insurance criminal involved in one of the most extensive insurance fraud schemes of the last four decades. A person who used a license to practice law as a weapon to steal from insurers. He was arrested, convicted and sentenced for the crimes of insurance fraud and mail fraud. He spent time in jail. He claims he is now rehabilitated and wants his license back. A man who now makes almost $175,000 a year as a paralegal, after abusing his license to practice law, wants it back. A man who, in my opinion, will use it to steal again just as a rehabilitated drug addict, if given a needle and heroin, will use it again.

On December 12, 2000, I appeared as an expert witness at the request of the State Bar of California. I testified in the State Bar Court before a State Bar judge who was hearing the application of disbarred attorney G. Bodell to be reinstated.

The Crime
Mr. Bodell was a key member of an insurance fraud ring of dishonest lawyers known as the Alliance. He was one of the first contacted by the FBI and decided to turn on his co-conspirators. As a result, although he was convicted on multiple counts of mail fraud and other federal crimes, he was only required to make partial restitution and spend six months in a half-way house.

The leader of the Alliance, Lynn Boyd Stites, is serving a 14-year sentence in the federal penitentiary in San Diego, California. He should be out of jail in about four years. Bodell, while his mentor and boss languishes in the federal penitentiary, has earned a good living as a "paralegal" doing everything a lawyer does except appear in court.

The crime of the Alliance was simple, yet brilliant. It took advantage of a decision of the California Courts of Appeal known as the "Cumis" case. The case required that insurers who were faced with a case that might not be covered for indemnity but for which they must pay for a defense under a reservation of rights to refuse to pay indemnity, the insurer was required to pay for an independent attorney of the insured's choice. The "Cumis" case left insurers helpless in the face of unscrupulous independent attorneys. They had no control over what the independent lawyer did and no means to question their conduct or billing.
In times when insurance company lawyers were billing at $50 and $75 an hour the Alliance charged $250 per hour. charged $100 an hour for "word processing." The Alliance ran up enormous bills. Insurers, with no defense, paid.

Lynn Boyd Stites, and Mr. Bodell, took on work as independent counsel and "churned" the bills. They would take useless depositions all over the world (often paying $20 an hour contract lawyers to sit in on the depositions in their place) for the sole purpose of billing insurers. Often they would just bill for services never performed. The ease with which they collected millions from innocent and defenseless insurers amazed them.

The Crime Progresses
Stites, Bodell and the other members of the Alliance decided that relying on chance to be appointed "Cumis" counsel was not sufficiently lucrative. They decided to create lawsuits. They would pay a business person $50,000 to be a plaintiff in a lawsuit drafted by members of the Alliance. That suit would be drafted in such a way that the insurer was required to defend under a reservation of rights. For example, they would sue claiming both negligence and intentional torts. The intentional torts are not covered while there is coverage for the negligence. An Alliance member would answer on behalf of the Defendant (also in the pay of the Alliance) and cross-complain against the plaintiff with a mixture of intentional and negligent torts claimed. The original Alliance member would defend the cross-complaint and both plaintiff and defendant, cross-complainant and cross-defendant would be represented by Alliance members paid for by the insurers.

Since work done is less profitable than work billed the Alliance made most of the litigation a sham. They would bill for depositions that were not taken, legal research that was not performed, and discovery and pleadings that were never created. The Alliance was careful. No insurer client was ever billed more than eight hours a day. The insurers would receive the billings knowing they had no defense, would pay and pay.
The insurers knew they were being taken advantage of by the Alliance. They believed a scheme was being used to defraud them. They did not know how it was being done or how much money was being stolen.

Eight of the insurers gathered, three or four years after the Alliance began its multimillion dollar fraud, in a law office conference room. They brought with them the computer generated billing of independent counsel who seemed to show up regularly in "Cumis" counsel cases. The bills for the month were put on the table and compared. The fraud was immediately obvious.

Although the Alliance never billed an insurer for more than eight hours in any day, when the billing was compared it became obvious that some lawyers, like Mr. Bodell or Mr. Stites, were miracle workers. They took depositions in Los Angeles, Boston, New York City, London, Paris, Honolulu, New Orleans and Dallas on the same day. A single lawyer billed, on the average, 50 to 74 hours in a single day!

Investigations were then begun in earnest. The case was presented, through the Fraud Division of the State of California Department of Insurance to the Los Angeles District Attorneys Office ­ it was rejected. It was then taken to the U.S. Attorney in Los Angeles ­ it was rejected. Since jurisdiction existed in most of the state, it was next presented to the U.S. Attorney in San Diego. He prosecuted the case and the entire ring was arrested and convicted. At the time of the arrests the Alliance had stolen many millions in fraudulent attorneys fee bills.

Mr. Bodell, because he testified against his co-defendants, was convicted and allowed to resign his license to practice law. He spent only six months in a half-way house with robbers, rapists, and killers. He spent no time in jail. He was forced to sell his house and buy a smaller house.

Since his first job as a lawyer was part of the criminal enterprise he knew no honest trade or profession. He hired himself out to lawyers as a "paralegal" and earned a much more modest living than he earned while working as an integral part of the Alliance. He moved his family into a smaller home, joined a church, and gave speeches about the hazards of criminal activity.

He is presently employed as a paralegal for a Los Angeles law firm that pays him $175,000 a year (more than most lawyers in private practice earn). The law firm where he works as a Paralegal has offered Mr. Bodell a partnership, if he can get his license back.

Bodell claims he has been rehabilitated. However, only three years ago he pursued to the Ninth Circuit Court of Appeals a suit against Walbrook Insurance Company (his legal malpractice insurer when he was arrested) demanding that they pay the legal fees he incurred when he was defending the criminal charges. The trial court refused claiming that an insurer that promises to indemnify its insured for tort damages can never, especially considering the public policy of the state of California to not help criminals or criminal activity, be required to pay for the defense of a criminal prosecution. The Ninth Circuit, finding an ambiguity in the Walbrook policy wording compelled Walbrook to pay for Bodell's criminal defense. 

One justice dissented. He said about Mr. Bodell: "Appellant, a lawyer, was once convicted for helping bilk insurance companies out of attorney's fees. This time he gets away with it. My colleagues find there is coverage for attorney's fees incurred in criminal proceedings based on a clause in the policy where the insurance company promises to defend 'any proceeding . . . brought by any governmental regulatory agency seeking non-pecuniary relief.' This clause covers defense costs when regulatory agencies, like the Securities and Exchange Commission, the Federal Trade Commission or the state bar, seek civil relief, such as an injunction, suspension of a license or disbarment. The proceedings the insurers were asked to defend ­ a grand jury investigation and subsequent criminal prosecution ­ were manifestly not 'brought' by a 'regulatory agency.'

They were brought by a federal grand jury and by the Attorney General acting through the United States Attorney. Not even appellant claims that the grand jury or the United States Attorney is a regulatory agency." [Gregory S. Boodle v, Warble Insurance Company, et al., 119 F.3d 1411, 1420 (9th Cir. 1997).] (Italics added]

This successful theft, with the aid of the Ninth Circuit, came only three years before Bodell applied to have his license reinstated. Bodell brought the action to the Ninth Circuit over the heading of the law firm where he is employed as a "paralegal." Bodell, in his application for reinstatement, brags he ghostwrote all of the briefs.

Expert Testimony
I testified in Mr. Bodell's case as both an insurance fraud expert and as a California lawyer urging the State Bar Court to refuse to reinstate Mr. Bodell's license. He actively participated in the second most effective and expensive insurance fraud scheme to strike the insurance industry of the state of California. He perpetrated the crime, consistently, from his first day as a member of the bar until he resigned his license approximately eight years later. He lived a life of luxury while committing the crime and seemed only to regret the loss of an excessive life style when caught rather than remorse at his crime.

I tried to explain to the judge that the crime of insurance fraud is relatively simple. That insurance fraud criminals, when caught, suffer little punishment, and the temptation to return to the crime is great. Mr. Bodell, a criminal, turned on his coconspirators. He only spent six months in a halfway house. He only made partial restitution. By devious legal work he convinced the Ninth Circuit to force an insurer to pay the costs expended to defend the charge of stealing from other insurers. He continued, in my opinion, his criminal activity after his conviction. He couched the activity in a correct form ­ as did the Alliance ­ and even if he fooled two of three justices on the Ninth Circuit, he was still a criminal.

I told the court that giving Mr. Bodell his license to practice law again and asking him to be honest and not commit insurance fraud again was the same as giving a heroin addict a supply of heroin and needles and asking the addict not to use the drug.

If totally rehabilitated, as he claims, both Bodell or the addict would live an honest life. However once the stress of life or legal practice got to them the addict would take the drug and Mr. Bodell would revert to some form of insurance fraud.

In my opinion as a lawyer, any lawyer who uses his license as the weapon in a fraud scheme as massive as that conducted by the Alliance should never receive his license back. Conviction of insurance fraud, by statute, requires automatic disbarment. It is a crime of moral turpitude that cannot be forgiven. Lawyers make mistakes that cause them to be disbarred. They can cure those errors and become useful lawyers again.

A lawyer who uses his license as a weapon to steal should never get it back any more than an armed robber should be allowed a license to carry a weapon after he has served his term. If rehabilitated, he can be a useful part of society by teaching young lawyers the punishment that is meted out to those who use the license to steal. If he is given his license back it will dishonor the State Bar of California, the State Bar Court and every lawyer who works hard to earn an honest living while serving their clients.

I don't know the result yet. I will report the decision of the State Bar Court in a future issue.