Bad business

Death merchant Michael Lee Davis, sent once again to prison, is now worth more dead than alive

Convicted contract killer and insurance swindler Michael Lee Davis has a gift for making money from other people's mortality. Now someone finally might make some from his death.

Davis, who was called Walter Waldhauser Jr. when he took part in a triple murder in Houston 21 years ago, was sentenced in Dallas last week to six concurrent 60-year sentences for his role in a scheme to bilk life insurance companies and investors of millions of dollars. In addition to prison time for his conviction on five counts of third-degree money laundering and one count of securing documents by deception, state District Judge Harold Entz ordered Davis to pay $10,000 fines on each count and more than $5.5 million in restitution to his victims.

The fines and restitution are aimed at the heart of Davis' criminal motive--cash.

Michael Lee Davis faces a 60-year prison sentence for scamming insurance companies and others.
Michael Lee Davis faces a 60-year prison sentence for scamming insurance companies and others.

"The only time his veneer was ever cracked was when we found his money," says Assistant District Attorney Brian Flood, who brought the case to trial. "He was agitated when he saw that we spread-sheeted his money. I don't think he believed that would ever happen."

Even faced with a chance of leniency from Judge Entz if he returned some of the loot he made through fraudulently obtaining life insurance for terminally ill patients, Davis "made no effort" to return any cash to his victims, Flood says.

Davis' attorney Kevin Clancy says Davis is not hoarding the amount of money claimed by the district attorney, since much of it was sitting in the hands of other participants in Davis' company who Clancy says received immunity.

"The $5.6 million figure is puffed. It's not accurate," Clancy says, refusing to go into further details. "They're blaming every bit of it on him."

Those Davis swindled must wait until his death to receive their restitution, which is stashed in several foreign accounts in places such as the Bahamas and Switzerland. International law makes it impossible for U.S. authorities to seize the money, but upon Davis' death his victims can file claims against his estate.

"It's ironic," Flood says. "Abstracted, it is as if they have an insurance policy on his life."

In 1979, the business of Michael Lee Davis, then Walter Waldhauser Jr., also came with a human price tag.

Police found the bodies of John and Diana Wanstrath and their adopted infant son Kevin in July 1979, shot to death in their home. Initially ruled a murder-suicide, the crime would have likely remained unsolved if not for a relentless cop.

Houston homicide detective Johnny Bonds didn't accept the initial finding, in part because no weapon was found at the scene. His obsession led to many things--a demotion, a ruined marriage, and eventually the arrest and conviction of the guilty parties.

In 1981 he cracked the case, watching as Davis confessed to being the middleman who put Diana Wanstrath's adoptive brother, Markham Duff-Smith, in touch with hit man Allen Wayne Janecka in a bid to collect life insurance payments. The contract killer also had slain Duff-Smith's adoptive mother four years earlier.

For Bonds, the news of Davis' latest sentence came quickly and happily. A friend at Thursday's proceedings called him moments after the sentence was handed down, just before the prosecutor's office called him.

"I'm a happy man. Probably for the rest of my life he'll be behind bars," Bonds says. "Now it's up to the Board of Pardons and Paroles. He caused them a lot of embarrassment, and I hope they remember that."

Waldhauser/Davis, after violating parole agreements by failing to make his annual reporting deadlines, was fitted with an electronic monitoring device. After about three months, however, parole officials dropped the electronic monitoring stipulation, opening up an opportunity for him to flee when police were seeking to arrest him on charges of money laundering. A SWAT team raid on his home in Plano came up empty, but he turned himself in three months later. Prosecutors are uncertain why he surrendered, but overconfidence is high on the list of possible motives.

"Look at his history. Every time he fights, he wins," Flood says. "He's got this air that he's better than everyone, and it sticks."

Davis made a deal with prosecutors that earned him three concurrent 30-year prison sentences for the Houston murders. He was paroled after serving nine years. The state executed Duff-Smith in 1993. Janecka remains on death row.

After relocating to the Dallas area, Davis became a viatical broker, one who buys life insurance policies of the terminally ill for a fraction of their full values. Then he sold the policies to investors, who collected the full policy amount when the insured died.

In most cases, such deals are legal. However, Davis enlisted clients of the AIDS Resource Center in Dallas to take out life policies by lying to insurers about their HIV-positive status. Davis would then buy the policies and resell them to investors at a hefty profit. The elderly investors who bought the policies from Davis found themselves holding an empty bag.

It took the cumulative resources of the district attorney, Texas Department of Insurance, and the Texas Securities Board to nail Davis. The scope of his operation provided many witnesses for the prosecution.

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