By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
State insurance investigators decline to comment. But they are described as furious that parole officials did not alert them that they had obtained an arrest warrant of their own. Insurance investigators believe the parole department knew of the insurance probe into Waldhauser/Davis, although Dallas parole officials say they were unaware of it.
Police found the bodies of John and Diana Wanstrath and their adopted infant son Kevin in July 1979. All had been shot to death in their home. After two years, investigator Johnny Bonds, then a Houston homicide detective, proved that the deaths were a murder for hire. Markham Duff-Smith had arranged the deaths of not only his adoptive sister Diana and her family, but had also had his adoptive mother, Trudy Zobolio, killed four years earlier.
In 1981, a Harris County jury convicted Duff-Smith of murdering his mother and sentenced him to death. He was executed in 1993. The triggerman, Allen Wayne Janecka, is on death row.
Waldhauser/Davis put Duff-Smith and Janecka together in the murder scheme and was an active participant in the Wanstrath killings. He avoided the death penalty by pleading guilty to three counts of capital murder in exchange for his three concurrent 30-year sentences. He was released from prison in 1990 and placed on parole until the year 2010.
Almost immediately after his release, he legally changed his name to Michael Lee Davis, and in early 1997, Waldhauser/Davis surfaced in Dallas.
The arrest warrants obtained by investigators from the Department of Insurance provide little detail about the allegations against Waldhauser/Davis. He is accused of insurance fraud -- committing a first-degree felony by using deception to secure execution of a document valued at more than $200,000. Five more charges allege first-degree money laundering, each involving more than $100,000.
However, a source close to the investigation says that the actual amount of insurance fraud by Waldhauser and several other suspects totals more than $1 million and that the scam involves accounts in several off-shore bank accounts.
About the time the agents from the Department of Insurance began their investigation, the Houston Press was contacted by an HIV-positive Dallas attorney who says he was one of those approached by Waldhauser/Davis through contacts at the AIDS Resource Center of Dallas. The attorney, who asked that his name not be used, says that he refused to participate in the scam, but that several of his HIV-positive friends did not.
According to the attorney, his friends would pass themselves off to insurers as being HIV-negative, then obtain life insurance coverage of $100,000 or more. After taking out the policies, Waldhauser/Davis would make the monthly premium payments for them until he could find a buyer for the policies.
The attorney says some of the policies were sold to elderly investors who did not realize that people are no longer dying from AIDS as fast as they once were. The buyer of the policies has to pay for the premiums until the insured dies, so some viatical investors found the business to be a losing proposition.
A Dallas County grand jury is expected to begin hearing evidence in the fraud case this week, as the search for Waldhauser/Davis expands.
Andy Kahan, director of victims assistance for the city of Houston, deplores the way the criminal-justice system has dealt with the confessed capital murderer.
"Since Waldhauser's release [from prison] there has been one illogical event after another, so why would I expect a simple arrest on a warrant and law violations to be any different?" Kahan says. "The fact that he was apparently tipped off, and that life was about to change as he knew it, adds to the absurdity of his whole criminal career."
Kahan points out that Waldhauser/Davis has used multiple Social Security numbers over the past several years, a fact that will add to the difficulty of tracking him down. He says that task would be easier for officers if the Board of Pardons and Paroles had granted Kahan's request for them to require Waldhauser/Davis to use his original name.
Ellen Davidson, who was best friends with the late Diana Wanstrath, also was troubled that Waldhauser/Davis eluded the law. Like Kahan, Davidson says that -- given his track record -- she's not surprised that he has once again outsmarted authorities.
"For [the Board of Pardons and Parole] to remove him [from electronic monitoring] knowing that this guy had to be up to something is just unconscionable," Davidson says. "It's not like this guy was on parole for stealing hubcabs."