Bad business

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

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.

"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.

They testified that Davis recruited HIV-positive individuals and sent them to Sammy Squyres II, an insurance agent who helped them apply to several life insurance companies he represented. Squyres was sentenced to 10 years' probation after pleading guilty to charges of forgery and securing the execution of a document by deception.

More than 20 others involved in Davis' scheme already had pleaded guilty to the same charges. Several testified in Davis' trial, telling the court details of Davis' role at the head of the operation.

Davis' most recent crimes were uncovered by public investigators following a series of articles in the Dallas Observer and its sister paper, the Houston Press. Flood says Davis shifted more than a million dollars to one offshore account the day after an interview with Houston Press reporter Steve McVicker. (See "Death merchant," October 22, 1998)

Bonds says his pursuit of Davis is not yet over.

"I'll find out what unit he's in and talk to the warden about who he is," Bonds says. "I've kept up with him before. As long as he draws breath, I'll know where he is and what he's up to."

Bonds and others involved in prosecution of the Houston murders testified at Davis' most recent sentencing hearing. On the stand, Bonds walked the court through the 1979 homicide, adding that Davis would likely have gotten the death penalty if he hadn't ducked behind a plea bargain. He made no effort to hide his calm but penetrating revulsion for his quarry.

"The testimony they gave was devastating," Flood says. "They were able to put a real face on the defendant, probably one they [the defense] did not want to be seen."

For those who view Davis as a mercenary criminal whose motive is naked greed, punishing him by taking his money away from him is fitting. Bonds uses an anecdote from Davis' nine-year prison term to illustrate the point.

"I know a TBC [Texas Bureau of Corrections] lieutenant who told me he overheard him [Davis] talking to another inmate who asked him, 'What are you doing in here?' He said it was a business deal gone bad," Bonds said. "The guy's just cold-blooded. If he has to kill babies, he will...That's really what he is. He's a businessman."

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