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Waldhauser Watch

Bonds views Waldhauser/Davis as a snake in the cash.
Mark Poutenis

On that October day, Michael Lee Davis initially displayed the sort of quick, big smile seen on most budding business entrepreneurs encountering a potential client.

From behind the receptionist's desk of his posh downtown Dallas office, Davis, as vice president of Southwest Viatical, greeted me as a likely customer for business. The company bought life insurance policies of the terminally ill, usually AIDS patients, for pennies on the dollar. Then it sold those policies to investors, who cashed them in for full value when the patient died.

However, Davis's work in the viatical industry was hardly the first time in his life that he had sought to profit from the deaths of others. In 1980 Davis, then named Walter Waldhauser Jr., confessed to being the middleman in an inheritance-inspired murders-for-hire scheme that left four Houstonians, including a 14-month-old boy, slain.

My visit was an effort to talk to him about that deadly past he had taken great pains to conceal in recent years. Davis's smile suddenly turned into a grimace, and he ground his jaw silently. There was an unforgettable look of restrained rage at the reminder of his sordid past, and at that moment his lucrative insurance business -- built on illness, death and alleged lies and greed -- first began to crumble.

Waldhauser/Davis succinctly explained he had no desire to speak with me. My attempt to make small talk and prolong the non-conversation was met with silence.

He went back into an inner office. But Waldhauser/Davis would find that his story, one that already stretched over two full decades, would not hardly disappear as easily as he did on that October day.


A few weeks before confronting Waldhauser/Davis, a call came in from Johnny Bonds, an honest-to-God living legend in local law enforcement and crime journalism circles. Prior to hiring on as an investigator with the Harris County District Attorney's Office, Bonds served 20 years with the Houston Police Department. He spent most of that time as a detective in HPD's homicide division.

On July 6, 1979, Bonds was assigned to a triple-death case that would forever change his life. Inside a stylish Memorial-area home were the bodies of Diana Wanstrath, her husband, John, and their adopted infant son, Kevin. Each had a gunshot wound to the head. Chief Medical Examiner Joseph Jachimczyk declared the case a double-murder and suicide. He theorized that Diana had killed her husband and son before taking her own life. But no murder weapon was found at the scene, so Bonds had a large problem with the scenario set out by the medical examiner fondly known as Dr. Joe.

Despite the murder-suicide ruling and pressure from within the police department to accept it, Bonds continued not only to work the case, but to become obsessed with it. That obsession cost him a marriage and his position in the homicide division. But thanks to an informant's tip and more than a year of detective work, Bonds proved that not only had the Wanstraths been murdered, so had Diana's mother, Trudy Zobolio, four years earlier. All four murders had been the idea of Zobolio's adopted son and Diana's adoptive brother, Markham Duff-Smith. He wanted the inheritance and insurance money to support his lavish lifestyle.

Duff-Smith and triggerman Allen Wayne Janecka were convicted of capital murder. (Duff-Smith was executed in 1993. Janecka is still on death row.) However, Waldhauser, the middleman in the killings, received three concurrent 30-year sentences and was paroled after serving only nine years in prison. He was put on "postcard parole," which requires only that a parolee stay in touch with the parole board via mail once a year.

After his release from prison, Waldhauser legally changed his named to Michael Lee Davis, but Bonds still tried to keep tabs on him. He tracked him to Arizona where the convicted killer attended law school but was prevented from receiving a law degree after state officials learned of his notorious past.

Waldhauser/Davis then dropped out of sight before surfacing in Dallas a couple of years ago. He enrolled in a night biology class at Richland College and struck up a friendship there with Garland police officer Bruce Marshall. Since they were the two oldest students in the class, Marshall and Waldhauser/Davis became lab mates and, along with their wives, even began to see each other socially.

All the while, Marshall had a sense that his new friend was not being completely straight with him about who he was or what he did for a living. When the officer ran some background checks, he was horrified to discover that the man he knew as Davis was the former Waldhauser, a confessed murderer now in the viatical business.

(In confirming that Davis was Waldhauser, Garland police reportedly used a contact in the Internal Revenue Service who found that Waldhauser/Davis allegedly had been using two Social Security numbers. Ironically, the U.S. Treasury Department subsequently launched its own investigation -- but not about how Waldhauser/Davis could have two Social Security numbers. Instead, the feds were interested only in trying to identify, and presumably punish, the IRS contact.)

After learning the truth about Waldhauser/Davis, Marshall contacted Bonds, who feared that Waldhauser/ Davis might be killing his clients to cash in on their insurance policies. Bonds contacted me about writing a story that would also appear in the Dallas Observer, the Press's sister paper, which he hoped would alert the friends or relatives of any AIDS patients who had contact with Southwest Viatical and may have died mysteriously. No one came forward after the stories. However, in November 1998, state authorities jailed Waldhauser/Davis for alleged technical violations of his parole. He was released again in January but was required to wear an electronic monitoring device.

Meanwhile, investigators from the Texas Department of Insurance (which oversees viaticals) saw the Press articles and began their own probe. In June a Dallas County grand jury returned 39 indictments of insurance fraud and money laundering against Waldhauser/Davis and 32 other defendants.

They are accused of a practice known as clean-sheeting, in which Davis allegedly recruited AIDS patients to take out life insurance policies while hiding the fact that they had a life-threatening disease. The policies were then sold to unsuspecting elderly investors who now stand to lose large portions of their retirement funds because the policies are invalid. Investigators say investor losses could run as high as $10 million but decline to reveal if any of the funds have been recovered. They also say the multimillion-dollar scheme is just one of many similar but unrelated scams now being uncovered nationally.

However, Waldhauser/Davis had one final surprise for authorities as they attempted to arrest him on the June indictments. Plano police and state investigators made a predawn raid on his Collin County home, using a battering ram to burst through the front door, only to find that their suspect was already on the run.

Even worse, investigators learned that two weeks earlier parole officials had issued an arrest warrant of their own -- but had failed to serve it. They had wanted to revoke Waldhauser's parole when he failed to report to his parole officer after he was taken off electronic monitoring.

As the search intensified, Waldhauser/ Davis was rumored to have been seen by a Plano resident in London, England. He managed to avoid capture but, inexplicably, surrendered to Dallas County authorities in September. Investigators say they have not determined where Waldhauser/ Davis was hiding during his three months as a fugitive. Meanwhile, his case has finally attracted widespread attention of the news media. There have been reports in national magazines and network news feature programs.

Waldhauser/Davis's trial on the insurance fraud and money laundering charges is set for April 10. And his old nemesis, Johnny Bonds, hopes he is called to testify -- something he has wanted to do ever since the Wanstrath murders.

"This has been a thorn in my side all these years because this guy got off too light," says Bonds. "He had absolutely no remorse about what he did."

E-mail Steve McVicker at steve.mcvicker@houstonpress.com.


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