On the lam

A convicted killer flees arrest on insurance fraud charges

The explosion of the battering ram splintering a heavy front door jarred the predawn stillness in Plano last Thursday. Seventeen SWAT officers of the Plano Police Department rushed into the fashionable two-story house in their search for the elusive homeowner, Michael Lee Davis.

With the SWAT team were Plano Detective Curtis Coburn, three Texas Department of Insurance investigators, and six warrants for Davis' arrest.

Six months of intense investigation brought charges that Davis masterminded a massive insurance-fraud scheme involving more than $1 million in coverage. He is accused of persuading clients of the AIDS Resource Center in Dallas to take out life policies by lying to insurers about their HIV-positive status. Sources close to the investigation say Davis would then buy up the policies for a fraction of their full value and resell them to investors at a hefty profit.

Michael Lee Davis, also known as Walter Walhauser Jr., in happier times
Photo Credit
Michael Lee Davis, also known as Walter Walhauser Jr., in happier times

The alleged scheme was hardly the standard insurance fraud -- and the target of this early-morning manhunt had emerged from an even more unpredictable past.

In 1980, when Michael Lee Davis was still Walter Waldhauser Jr., he confessed to being the middleman in one of Houston's most infamous multiple homicides -- killings committed to cash in on life insurance payoffs. One of the victims was a 14-month-old boy. The triggerman in the case claimed that Waldhauser held the boy's mother down as she was shot in the head.

Waldhauser received three concurrent 30-year prison sentences and was paroled after serving nine years.

Last October, the Dallas Observer and its sister paper the Houston Press tracked the new life of the convicted capital murderer (Death merchant, October 22). He had legally changed his name to Davis and become vice president of Southwest Viatical in Dallas. The viatical market deals in existing life insurance policies of people terminally ill with AIDS or HIV. Dealers such as Waldhauser/Davis pay patients pennies on the dollar for their policies, then collect full value when patients die.

The October story and several follow-up articles attracted the attention of state insurance regulators and the Texas Board of Pardons and Parole, which was interested in revelations that some of Waldhauser/Davis' associates at Southwest Viatical were also ex-cons.

Waldhauser/Davis had been on "postcard parole" -- it required merely that he report annually to authorities by mail. But last November, authorities revoked his parole for failing to make his annual reporting deadline. Four weeks later, parole officials reversed themselves and freed Waldhauser/Davis again with the proviso that his parole requirements be tightened. They fitted him with an electronic monitoring device.

After about three months, however, parole officials dropped the electronic monitoring for Waldhauser/Davis. The device was gone. And now, so is he.


Plano Police Detective Curtis Coburn is the latest law enforcement officer obsessed with putting Waldhauser/Davis behind bars. Coburn first learned that the ex-con was a Plano resident after the killer's parole was revoked last year. The cop didn't like the idea of what he describes as a piece of "human trash" living in his city.

Coburn took it upon himself to stake out Waldhauser/Davis' home occasionally and monitor his activity. He also researched county records, discovering that there was no mortgage on the home. That indicated an apparent cash purchase of the $180,000 house -- unusual for someone who claimed on his parole reports to have been unemployed for the past few years.

So Coburn didn't need much prompting when the state investigators called to ask for his help in the predawn raid to take Waldhauser/Davis into custody. And he was just as upset as they when they discovered that Waldhauser/Davis had already hit the road after learning somehow that his parole was about to be revoked.

Coburn had arrived at the location early -- 4 a.m. -- to await the arrival of SWAT and the insurance investigators. At 5:45 a.m., SWAT officers made what is called a "hard entry," using the battering ram to burst into the house.

Seconds later, Coburn heard the screams of Waldhauser/Davis' wife, Beverly. In the dark, she pleaded with the intruders not to kill her.

According to one of the raiding officers, Beverly claimed that she hadn't seen her husband since he learned -- how, she didn't say -- that parole officials had an arrest warrant issued to revoke his parole.

Indeed, parole officials in Dallas obtained that arrest warrant one week earlier. That was after Waldhauser/Davis had failed to show up for his scheduled monthly visit with his parole officer in May. The parole records also reveal that only a month before his failure to report, the Dallas parole office recommended that Waldhauser/Davis be taken off electronic monitoring. Despite Waldhauser/Davis' reputation as a con artist, two parole board members approved the request for him to remove his monitoring device.

A parole board spokesperson says the standard department procedure is to remove a parolee from the electronic device if he maintains a clean record after 60 days. Waldhauser/Davis wore the monitor for more than 90 days.

Records also show that, after Waldhauser/Davis missed his May parole appointment, a parole officer went to his home on May 27 and 28. He was not home on either date -- but no arrest warrant was issued until June 7, 10 days later.

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."

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