A Beverly Hills lawyer who tried to defraud an ACE-owned insurance company over a sunken yacht has been fined $2.8 million.

Rex K. DeGeorge was also jailed for seven and a half years for filing a fraudulent claim with Cigna Property and Casualty Insurance Company.

DeGeorge, a 65-year-old lawyer, was found guilty by a federal jury in Los Angeles in March after a two and a half week trial that included less than two days of deliberations.

The jury determined that DeGeorge was guilty of conspiracy, three counts of mail fraud, seven counts of wire fraud and five counts of lying to a court hearing a civil lawsuit related to the sinking of the yacht.

DeGeorge was convicted on federal charges related to an elaborate insurance fraud scheme in which he purchased a $1.9 million yacht, engaged in a series of sham transactions to drive up the paper "value" of the vessel to more than $3.6 million, and then sunk the vessel to collect on an inflated insurance policy.

DeGeorge was the third defendant convicted in the scheme that led to the sinking of the Principe di. Pictor.

Previously in the case, Paul A. Ebeling, 62, of St. Louis, pleaded guilty to conspiracy, mail fraud, wire fraud and perjury and Gabriel Falco, 36, of Amagansett, New York, pleaded guilty to misprision of a felony.

The evidence presented at trial showed that DeGeorge bought a 76ft motor yacht from Italy's Azimut S.p.A for $1.9 million in 1992.

Because DeGeorge was previously involved in the loss of three other vessels - which made it likely insurance companies would not issue a policy on a boat he owned - and because he wanted to artificially inflate the value of the yacht, DeGeorge and Ebeling engaged in a series of sham transactions to "sell" the boat for ever-increasing prices. The ultimate owner of the boat was Polaris Pictures Corporation, a film company controlled by DeGeorge and Ebeling. After being told the final "value" of the boat was $3.675 million, the Cigna Property and Casualty Insurance Company - owned by the ACE group of companies - agreed to insure the boat for $3.5 million.

On November 7, 1992, DeGeorge, Ebeling and Falco took the boat on its maiden voyage. Off the coast of Naples, Italy, the men used power tools to cut holes in the hull of the boat, causing it to sink.

When the three men were found by the Italian Coast Guard floating in lifeboats, they told Italian authorities that the boat was taken over by drug runners, including "Captain Andrea Libovich," who damaged the boat and fled in a speedboat.

DeGeorge and Ebeling caused claims to be filed with Cigna, but the insurance company refused to pay after it determined the two men made false statements in relation to the policy. During the course of ensuing litigation, DeGeorge and Ebeling allegedly gave false testimony and caused false documents to be filed in United States District Court in Los Angeles.

Prior to the sinking of the Principe di. Pictor, DeGeorge collected insurance money on three other boats that he claimed were accidentally lost at sea.

According to court documents, DeGeorge in 1970 reported that his 43ft yacht, the Tutania, was stolen by Peruvian coffee merchants who were on the boat after claiming they were interested in purchasing the boat. An insurance company paid $43,000 to settle DeGeorge's claim. With the proceeds of this first insurance settlement, DeGeorge purchased a 57ft racing yacht called the Epinicia, court documents show. In 1976, DeGeorge and Ebeling were on the yacht off the coast of Italy when it sunk. The two men used a dinghy to motor ashore, and the lost boat was never reported to the Police or naval authorities.

The insurer of the Epinicia, Lloyd's of London, initially declined to pay DeGeorge's claim, but the insurance later paid $194,000 after DeGeorge filed a $5 million bad faith lawsuit.

The third yacht lost was a 43ft Gulfstar that sunk off the coast of Los Angeles in 1983 after what DeGeorge said were a series of suspicious explosions.

He did not report this loss to maritime authorities, but he did make a claim with an insurance company that paid $255,000 after DeGeorge again threatened legal action against the insurer that was not inclined to pay the claim.