Rico Complaint in Koenig v USAA

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Rico Complaint in Koenig v USAA Powered By Docstoc
					The Honorable Joanna Seybert
Courtroom 1030
                Plaintiff             )
      against                         )
AND RICHARD J. FROESE;                )
                                      )    Civil Action No.
AND                                   )
                                      )    COMPLAINT
ARE ALSO 18 USC 1962(C) PERSONS       )    Jury Trial is demanded
                Defendants            )
AND                                   )
ASSOCIATION, A 18 USC 1962(C)         )
VICTIM                                )
                Third Party

                        I.      The Parties

1.     Plaintiff all times hereinafter mentioned was a

       resident of New York and Vermont, and alleges he

       is a 18 USC 1962(c) victim;        which is the

       principal statutory jurisdictional basis for this

       civil action.

2.     Plaintiff alleges the existence of a 18 USC

       1962(c) “association-in-fact” enterprise.

3.     Plaintiff alleges the defendants are 18 USC

       1962(c) “persons” in this action;        all defendants
     are natural persons believed to reside in Texas.

4.   At all times relevant to the allegations in this

     complaint, defendants Robert F. McDermott

     [McDermott] ; Robert T. Herres [Herres]; and

     Robert G. Davis are/were plaintiff’s attorneys-

     in-fact [AsIF] who either hold or were holding

     Texas Insurance Department [TID] “Certificates of

     Authority” to operate a reciprocal inter-

     insurance exchange as per Chapter 942 of the

     Texas Insurance Code.

5.   Plaintiff does not complain as to defendants’,

     McDermott, Herres, and Davis, incidental

     insurance company activities as AsIF for United

     Services Automobile Association [USAA], a Chapter

     942 of the Texas Insurance Code reciprocal inter-

     insurance exchange; which is a claim precluded by

     15 USC chapter 20.

6.   The fact that it could be alleged that the three

     18 USC 1962(c) defendants, McDermott, Herres, and

     Davis have left a trail of tears within and

     financial disaster for the families of many

     policyholders by deceptive claims settlement

     practices and brutal litigation techniques is

     irrelevant to this complaint:   it “looked too
      good to be true”, and it wasn’t true.

7.    This is not a 15 USC chapter 20 – regulation of

      insurance complaint.

8.    The fact that it could be alleged that the three

      18 USC 1962(c) defendants, McDermott, Herres, and

      Davis, are fast approaching the end-game of

      perfecting the alleged theft of $10 billion of

      other people’s money without even a securities

      registration is also irrelevant to this


9.    This is neither a Securities Act of 1933 nor

      Securities Exchange Act of 1934 Securities Act


10.   This complaint deals with 18 USC 1962(c) and (1)

      six defendant “persons” (2) who were associated

      with an “enterprise” (3) that engaged in

      interstate commerce and that(4) the defendant

      persons both operated and managed the enterprise

      (5) through a pattern (6) of racketeering

      activities, and (7) the plaintiff was injured in

      his property by reason of the pattern of

      racketeering activity.

11.   United Services Automobile Association [USAA] is
      only an unincorporated business entity, a

      reciprocal inter-insurance exchange [RIE], and a

      creature of the unique Chapter 942 of the Texas

      Insurance Code.

12.   Defendants Duane Divich; Janice Marshall Peebles

      and Richard J. Froese are “soldiers” who may not

      even have scienter of their palpable violations

      of the 18 USC 1962(c) as plaintiff alleges upon

      information and belief.

13.   The six named defendants and the Jane and John

      Doe defendants, taken as a group, are the 18 USC

      1962(c) “association-in-fact”, “the RICO

      enterprise”, which victimizes the natural person

      plaintiff;     it is alleged upon information and


14.   The 18 USC 1962(c) “association-in fact” is not

      USAA:     that USAA is also an association invites


15.   United Services Automobile Association [USAA],

      the unincorporated business entity that is a

      reciprocal inter-insurance exchange [RIE] and a

      creature of Chapter 942 of the Texas Insurance

      Code, is also victim of the 18 USC 1962(c)

      “association-in fact” operated by defendants
      McDermott, Herres, and Davis.

16.   The 18 USC 1962(c) “association-in fact”, the

      RICO enterprise, runs with USAA but parallel to

      USAA;   and is absolutely separate and distinct

      from USAA.

17.   Plaintiff reiterates his alleges that USAA is

      only a 18 USC 1962(c) victim of the 18 USC

      1962(c) “association-in fact”;     and a traumatized

      victim at that.

18.   Plaintiff seeks an order for the immediate

      appointment of a “guardian ad litem” to represent

      the victim.

19.   Plaintiff seeks neither a receiver nor a

      conservator for USAA at this time:     plaintiff

      seeks only a natural person to ascertain the

      needs of USAA, the other 18 USC 1962(c) victim,

      and to speak for it.

20.   18 USC 1962(c) victim USAA is presently voiceless

      and incommunicado, held firmly in the controlling

      grasp [the claws] of the 18 USC 1962(c) defendant

      persons:     McDermott, Herres, Davis, and John and

      Jane Doe.

21.   Plaintiff believes a court-appointed guardian,
      once informed, will be a independent and credible

      movant for appointment of a receiver/conservator

      to take possession of assets presently all too

      much under the defendants’ unilateral control.

22.   Much as in the case of a child or spouse who is

      being abused, this court must appoint a

      guardian/conservator first to speak for the Sec18

      USC 1962(c) victim.

23.   Additionally, plaintiff will ask this court to

      preclude 18 USC 1962(c) defendant persons

      McDermott, Herres, and Davis for speaking for the

      18 USC 1962(c) victim, USAA: and for the time

      being to confine their activities in this court

      to defending the allegations as to their own 18

      USC 1962(c) enterprise.

                 II.    Plaintiff’s Burden

24.   In order to prevail, plaintiff need satisfy the

      test of a preponderance of proof, and not the

      test of “beyond a reasonable doubt”.

25.   But, the defendant must plead his complaint with


26.   The patterns of behavior violative of 18 USC

      1962(c) are so numerous, systematic, multi-
       threaded, played out against so many victims, and

       take place over so many years, that

       particularizations of each instance either known

       or believed to exist by plaintiff could be very


27.    Thus, plaintiff seeks to unify the

       appropriateness of the court’s permitting his

       complaint to survive by offering a small number

       of allegations which may unify a more complex

       finding by the court down the road after

       evidentiary proceedings.

             III.     A Source of thinking in the matters
                           before this court.

28.    Regulation of reciprocals, nationwide, is

       antediluvian and varies tremendously from state

       to state.

29.    Dennis K. Reinmuth            , who is alive and available

       to the court, is a valuable source of critical

       thinking about structure, business practices, and

       kosher behavior on the part of Reciprocal Inter-

       insurance Exchanges.

      The Regulation of Reciprocal Insurance Exchanges by Dennis K.
      Reinmuth (published by Richard D. Irwin, Inc, Homewood, IL 1967) may
      serve the court as an excellent resource for understanding Reciprocal
      Insurance Exchanges.
            IV.     As and for a First Cause of Action on
            Behalf of the Plaintiff, Koenig, against the
               Defendants McDermott, Herres, Davis and

30.    Plaintiff repeats, reiterates an re-alleges each

       and every allegation contained in ¶¶ 1 – 29

       inclusive with the same full force and effect as

       if more fully set forth herein at length.

31.    The three 18 USC 1962(c) defendants McDermott,

       Herres, and Davis “present” a “corporate

       structure” solely to create a misapprehension

       among “everybody” that USAA is a “corporation”.

32.    This widespread misapprehension                 , after years of

       “disinformation”, is universally accepted across

       the entire United States:            trained lawyers will

       often mistakenly argue that USAA is a


33.    In each of the AsIF own gratuitous “Annual

       Reports to Members”, one defendant (either

       McDermott, Herres, or Davis) states either once

       or twice that USAA is not a “public corporation”:

       leaving the reader to “safely conclude” that USAA

       is a “corporation” none the less.

      While USAA is extremely well known and even admired, try to finfd a
      man-on-the-street who will agree to the notion that USAA is not a
      corporation, but rather an unincorporated entity.
34.   Plaintiff is not aware of one single instance

      over his 37 year involvement with USAA when he

      has been told by any of the three AsIF, either

      verbally or in writing, that USAA is an

      “unincorporated entity”.

35.   And having presented as a “corporation”,

      defendants McDermott, Herres, and Davis then

      proceed to wrap themselves in a densely tangled

      web of half-truths and highly fanciful

      confabulations as to ownership, contraptions

      having to do with “governance” and other

      corporate paraphernalia.

36.   Defendants McDermott, Herres, and Davis are

      systematically scheming, racketeering, with the

      objective that the entire world should come to

      see USAA as a “corporation” imbued with a “board

      of directors”, corporate titles as in

      “President”, “Vice President”, “Secretary”,

      “Chief Privacy Officer” [sic], GAAP Financials,

      Auditors and their “opinions”, and so on and so


37.   And the purpose, intent, and object of their

      scheming is to set in place a widespread

      misapprehension as to the essential nature of
      USAA: to make it out as a “corporation” whereas

      it is in fact an “unincorporated entity”.

38.   In essence, Defendants McDermott, Herres, and

      Davis seek to generate a widely held

      misapprehension that USAA is (1) member owned and

      operated, (2) eleemosynary in its attitude

      towards family and children, and (3) likely to

      settle insurance claims along family-oriented

      values rather than normal and commercially

      adversarial terms.

39.   The three defendants have largely succeeded in

      establishing this misapprehension, mostly among

      those subscribers who have never submitted a

      claim and still invest in USAA an uninformed hope

      that it will conduct itself as if the subscriber

      were an member/owner of an association which

      valued family, children, and honest claims

      settlement more than “other insurers”.

40.   The success the three defendants McDermott,

      Herres, and Davis have achieved over the years by

      imparting to their unincorporated 18 USC 1962(c)

      scheme [the enterprise] the appearance of

      “corporate legitimacy” is rivaled only by Walt

      Disney’s anthropomorphization of Bambi.
41.   Plaintiff assures this court that in the final

      analysis “Bambi ain’t a talking baby deer”, and

      “USAA ain’t a corporation”.

42.   The plain and simple fact of the matter is that

      the Texas reciprocal inter-insurance exchange

      [RIE], called an “association” in this case, is

      no more than a convenient and arbitrarily defined

      vessel in which to hold the 2,500,000 million

      “subscription agreements” (either powers of

      attorney or policies, depending on how you look

      at it) which are made one-at-a-time by individual

      subscribers who come to exchange their insurance


43.   Even if the “attorney in fact” were a corporate

      “attorney in fact”, also known as a “proprietary

      attorney in fact”, the RIE, under the Texas

      Insurance Code,, would still always be an

      “unincorporated entity”.

44.   In addition to being only a “large file cabinet”,
      a “place”, and only an “office building”        if you

      will, where the “subscription agreements” are

      kept, the RIE is also “the venue for ‘exchanging’

      insurance risks”, a “trading place”, or the
       “exchange”, where the AsIF calculate and process

       the amounts owed the subscribers who suffered

       insured losses and at “game’s end” the division

       of the “surplus earned premiums” which are to be

       returned to all subscribers, pro rata.

45.    The RIE is also a place where the accounting and

       custody or the “unearned premiums” “might” take


46.    Such an organization does not require a panoply

       of demi-God “corporate officers”:               plaintiff asks

       this court to view the entire apparatus which

       runs behemoth USAA is being “the property” of

       and under the control of the AsIF.

47.    This complaint alleges the wholesale alienation

       from the subscribers by the three AsIF of

       billions of $ US which they charitably call

       “assigned surpluses” and “unassigned surpluses”.

48.    These are monies which are excess to the

       immediate needs of the RIE, and which have slowly

       and carefully slid from “within the RIE” where

       they are invested in approved securities to

       “outside the RIE” where they are under the

      If one is to believe the three defendants boasting – the largest
      office building in the world, after the Pentagon.
      unilateral control of the three defendants

      McDermott, Herres, and Davis and their 18 USC

      1962(c) enterprise.

49.   It is arguable that the “assigned surpluses”,

      while always vastly excess to the real capital

      needs of the RIE, remain somewhat under the

      supervision of the TID, and are still perhaps

      part of the set of funds still remotely available

      to the subscribers;   however, the “unassigned

      surpluses” are clearly tied up in the 18 USC

      1962(c) enterprise’s “investments”, such as 6

      Flags Amusement Park which clearly has nothing to

      do with the RIE’s business or the welfare of the


50.   Plaintiff will ask this court to make a brutal

      and conclusive distinction between the “unearned

      premiums”, which are the property of the

      subscribers until exhausted by the expiration of

      the subscription agreement, and the “assigned

      surpluses” and “unassigned surpluses” which

      plaintiff alleges the AsIF misrepresent as

      property of the subscribers and still safely

      under the subscribers’ control.

51.   “Unearned premiums”, in the case of a RIE, are
       actually “good-faith deposits” left by

       subscribers to guarantee their individual

       performance and to fund their capacity to pay
       another less lucky subscriber’s claim.

52.    These “unearned premiums” are watched over quite

       carefully by the Texas Insurance Department, as

       they should be:        and plaintiff believes that

       “unearned premiums” are treated “custodially” in

       a manner resembling “escrow accounts”.

53.    The ambit of this action is the practice of

       special type of fraud:           “affinity fraud”.

54.    The gravamen of this action is the convoluted and

       ultimately rather tedious manner in which the

       three AsIF have manipulated their 18 USC 1962(c)

       enterprise to move the subscribers’ money further

       and further away from the subscribers’ control.

55.    USAA was formed in the 1920s, at a time when the

       “organizer” of a Texas reciprocal inter-insurance

       exchange was presented with appallingly low

       hurdles to simply “getting into business”.

56.    No “boards of directors” were required back then

      This deposit is what differentiates the reciprocal inter-insurance
      exchange form the Lloyds method – where “the names”, as they are
      called at Lloyds of London are on the hook for all their assets –
      good to the last drop as it is described in London.
       - back in the 1920s.

57.    And this plaintiff is unable to find any Texas
       statute        presently requiring defendants

       McDermott, Herres, and Davis to have a Board of

       Directors:       it is certainly not mentioned in of

       Chapter 942 of the Texas Insurance Code.

58.    A “Board of Directors”, which may or may not be

       indicated by McDermott, Herres, and Davis’ own

       highly self-serving by-laws, is in this case the

       keystone of a massive over-arching pattern of

       black decadent deceit and gray spotted financial

       fancy which has the sole purpose of creating the

       apparition of some sort of “corporation” which

       legitimizes the AsIF accreting larger and larger

       sums of money on the “unassigned surplus” and

       “assigned surplus” side of the reciprocal inter-

       insurance exchange’s purported balance sheets.

59.    This “corporation stuff” is a three-ring circus

       which the three AsIF, 18 USC 1962(c)

       apparatchiks, “present” in order to have us

       believe that there is really a “corporation”

       behind all these shenanigans:             and a “corporation

      Section 822.152 of the Texas Insurance Code addresses “Directors”:
      but USAA is exempt from that section and most of the Texas Insurance
       owned by he subscribers” at that.

60.    Pretending to have the an otherwise completely

       gratuitous “Board of Directors” has another

       sinister purpose, inter al.

61.    In order to unlawfully benefit from the

       widespread misapprehension that each subscriber
       is a “member/owner            protected by a Board of

       Directors, the AsIF have carried out a highly

       successful campaign of often beating up on and

       blunting the actions of subscribers who make

       claims with a highly persuasive argument that

       “they are member/owners” and should thus “settle

       for less”.

62.    Plaintiff knows all about this practice on the

       part of the three AsIF.

63.    The subscribers are member/owners of absolutely

       nothing, except perhaps the rights (a) to “short-

       rate” a policy and be paid back the unearned

       premium,      and (b) to be paid a dividend/rebate

       based on experience and a formula usually

       negotiated directly with state regulators.

      Code: § 942.003 Limited Exemption from Insurance Laws: applicability
      of certain laws.
      Which plaintiff freely admits is likely true as to “ownership” of the
      “unearned premiums” in the AsIF custody at any given time.
64.   Even then the purported dividends/rebates are

      often confiscated and involuntarily stuffed into

      what USAA calls a “Subscriber Savings Account”

      rather than simply paid back as a dividend to the


65.   15 USC chapter 20 and state regulators govern

      these insurance company matters:   and as the

      three defendants will doubtless be very quick to

      wrap themselves in McCarren-Ferguson, plaintiff

      reiterates that this action alleges no 15 USC

      chapter 20 violation.

66.   In fact, much the way other 18 USC 1962(c)

      enterprises have found it in their best interest

      to run their “fronts” in a businesslike manner,

      the three AsIF pride themselves on their

      insurance industry ratings much the way a Mafia

      18 USC 1962(c) garbage collection enterprise

      might polish the hubcaps on their shiny new

      garbage trucks.

67.   In fact, had defendants McDermott, Herres, and

      Davis simply stuck to their knitting, collected

      their AIF commissions, and said nothing about

      purported ownership by purported member/owners of

      either the “assigned” or “unassigned” surpluses,
      there would be no action as we have here.

68.   Plaintiff alleges that all the “corporate pot

      banging” and hoo-haa which characterizes

      defendants’ McDermott, Herres, and Davis

      corporate self-aggrandizement are in fact the

      unlawful structure and illegal command and

      control mechanism of the 18 USC 1962(c)

      enterprise which plaintiff alleges to exist:     the

      18 USC 1962(c) association-in-fact.

69.   Plaintiff alleges that defendants McDermott,

      Herres, and Davis have placed him and his family

      on the 18 USC 1962(c) torture rack of their

      criminal enterprise, bankrupting him, chasing his

      mother off-shore for safety (where she in fact

      died in the Canary Islands fleeing McDermott’s,

      Herres’ and Davis’ private investigators), and

      viciously harassing his children and ex-wife.

70.   Furthermore, throughout plaintiff’s entire 37

      year involvement with the three defendants, but

      especially during the years 1989 to the present,

      it will be shown that defendants McDermott,

      Herres, and Davis have engaged in a systematic

      ongoing 537 U.S. 393 (2003) extortion of Koenig

      by threatening his family members and thereby
      obtaining his property.

71.   Defendants McDermott, Herres, and Davis sent

      private investigators who wore black, drove black

      cars, and trespassed upon the premises of

      Koenig’s family members and former residences of

      family members with the sole purpose and intent

      of intimidating Koenig so that he would no longer

      complain about their theft of his family’s entire


                     V.       Prayer for Relief

Wherefore plaintiff prays for entry of judgement as


           (A)   A cease and desist order compelling

                 defendants McDermott, Herres, Davis and

                 Divich to cease and desist from all

                 surveillance activities and to stay one

                 mile away from plaintiff and any members

                 of his family.

           (B)   That such a cease and desist order be

                 extended to defendants’ McDermott,

                 Herres, and Davis’ many many lawyers,

                 adjusters, private investigators, and


           (C)   That defendants McDermott, Herres, Davis
               and Divich furnish a list of all lawyers,

               and private investigators, employees, and

               contractors who have had any involvement

               in any activities, lawful or unlawful,

               directed to towards plaintiff so that

               Plaintiff may serve them with the order

               prayed for above.

         (D)   $10,000,000 in direct damages.

         (E)   Exemplary damages of $20,000,000.

         (F)   Treble damages.

         (G)   And such other relief as this court finds


          VI.     As and for a Second Cause of Action
          on Behalf of the Plaintiff, Koenig, against
            the Defendants McDermott, Herres, Davis,
                      Marshall, and Froese

72.   Plaintiff repeats, reiterates an re-alleges each

      and every allegation contained in ¶¶ 1 – 71

      inclusive with the same full force and effect as

      if more fully set forth herein at length.

73.   Plaintiff alleges a systematic pattern of

      criminally-motivated 18 USC 1962(c) exegesis as

      to the AsIF’s posture towards interpreting the

      terms of claims settlement.

74.   Defendants McDermott, Herres, and Davis’
      systematic post property loss and post-casualty

      picking through the subscribers agreements and

      the subscribers’ lifestyles has reached truly

      criminal proportions.

75.   It doesn’t take much study to realize that

      subscribers in any RIE are intrinsically and

      structurally antagonistic to each other’s


76.   The AIF of a RIE has an intrinsically delicate

      task of remaining neutral about the life-styles

      and special characteristic of insurability in

      each subscriber’s individual case lest the AIF

      acquire improper tastes about who should get

      prompt claims settlement and who should not.

77.   Part of the pattern of 18 USC 1962(c)

      racketeering by the “association-in-fact” is a

      gratuitous tendency to evaluate the

      appropriateness of paying a claim by judging the

      claimant’s life style.

78.   The insurance industry has a wonderful phrase,

      “moral hazard”, which refers to a particular

      insured’s behavior or lifestyle, in as much as it

      might contain a hint as to whether that person is

      more susceptible than the average to sustaining
      damage and submitting claims – even legitimate


79.   It is probably very easy for the operator of even

      a legitimate insurance company to wonder how easy

      and profitable things might be if “we just didn’t

      have these pesky claims to deal with”.

80.   Ideally, the more detached AIF can and should be

      fairly neutral about the need to pay claims as

      the AIF should have no personal financial

      interest in the cost of claims:   the AIF has

      received his commission, and that’s that.

81.   An unintended consequence of these three A’sIF

      systematic and secular success in converting

      subscribers funds to “unassigned surplus” capital

      accounts, demonstrably and irrevocably beyond the

      subscribers’ control, is that the AsIF have

      started to become independently wealthy and

      thereby antagonistic to subscribers who make


82.   The AsIF evidently began to see the “assigned and

      unassigned surpluses” as “their money”.

83.   A particularization can be had from plaintiff’s

      own personal experience;   which is not an
      allegation for which damages are sought in this


84.   Defendant AIF McDermott, with criminal intent,

      underwrote a standard New York City cooperative

      apartment policy while evidently harboring a

      secret and undisclosed reservation to summarily

      reject any claim for water damage to “plaintiff’s

      property” – the fixtures and improvements which

      plaintiff had installed in the apartment, and

      which plaintiff was obliged to insure and repair

      (whatever the cause of damage) under the terms of

      his cooperative apartment leasehold.

85.   Defendant Janice Marshall Peebles, when she was

      Janice Marshall, [upon information and belief] a

      licensed New York State insurance agent working

      for defendant McDermott, accepted as being in

      order and signed the subscriber’s agreement which

      McDermott proffered and then countersigned as

      plaintiff’s AIF.

86.   Plaintiff alleges that defendant Marshall had

      been seduced by the dark side of a “Darth

      Vadarian” force imposed by defendant McDermott on

      USAA and its underwriting and claims settlement

87.   There is no other possible explanation as to why

      defendant Marshall solicited and accepted

      plaintiff’s subscription agreement when she

      undoubtedly knew that defendant McDermott

      intended to evade settling the likely claim for

      water damage.

88.   A NYC cooperative apartment home owners policy is

      for the most part an insurance policy for water

      damage:   defendants Marshall and McDermott knew

      that, and conspired to rip plaintiff off.

89.   Plaintiff alleges that in 1989 defendant

      McDermott was already starting to suffer pangs of

      withdrawal from the pleasure he was having

      stealing and using plaintiff’s money to build a

      18 USC 1962(c) enterprise.

90.   Defendant McDermott’s rejection of plaintiff’s

      perfectly ordinary routine claim for property

      damage and loss of use of a NYC Coop Apartment

      after landlord’s high-pressure Con-Ed supplied

      steam pipes, which were outside of the

      plaintiff’s demised premises, exploded, was prima

      facie extraordinary.

91.   Alleged criminal McDermott never even actually

      adjusted the losses with any sort of industry
      standard report:     he just kind of walked away

      with sort of a “sue me if you don’t like it


92.   McDermott has starting to display the diffidence

      of a “dapper don”.

93.   Alleged criminal McDermott never even explained

      why he didn’t want to pay.

94.   Alleged criminal McDermott simply didn’t pay, and

      then sort of said “your move”:     McDermott never

      furnished any real reason for not paying as there

      was no real reason.

95.   The only reason for not paying was perhaps that

      McDermott wanted     money to make a contribution to

      the Anderson Medical Center or some other of the

      charities he was so fond of spending the

      subscriber’s money on.

96.   Over 16 years, no judge, no lawyer, and no

      insurance expert has been able to even begin to

      explain why McDermott criminally accepted

      plaintiff’s subscription for a routine and

      conventional NYC coop apartment policy while at

      the same time harboring a secret reservation and

      undisclosed intent to not pay the normal,
       ordinary, routine, work-a-day claim submitted by

       plaintiff for water damage.

97.    In fact, if plaintiff had not been insured at

       all, thereby not having assigned to alleged

       criminal McDermott the right, privilege and

       obligation to settle the matter, plaintiff would

       have been much better off.

98.    Dealing with defendant McDermott was like

       learning that your McDermott-supplied life

       preserver didn’t work because he had never

       intended to supply it with gas to inflate it in

       the first place:   and once plaintiff got out into

       the swim of things, he learned that McDermott had

       weighed his life preserved down with lead.

99.    Defendants Herres and Davis have extended

       McDermott’s alleged criminal conduct into the


100.   Now:   this is neither a tort action for property

       damages against an insurer who never intended to

       settle a legitimate claim; and it is not a cause

       of action of the sort precluded by 15 USC chapter


101.   It is, however, a primarily a 18 USC 1962(c) and
       secondarily a 537 U.S. 393 (2003) action against

       defendants McDermott, Herres, and Davis,

       Marshall, and in particular against USAA

       contract-employee adjuster Richard J. Froese who

       attempted to extort plaintiff by encouraging

       plaintiff to admit to having caused the water

       damage to his apartment by “unintentionally

       permitting a bathtub to overflow”.

102.   Froese was the “contract insurance adjuster”

       employee dispatched by alleged criminal defendant

       McDermott to settle plaintiff’s ordinary claim.

103.   Froese carefully explained to plaintiff on

       several visits that if he [plaintiff] simply

       admitted to spilling the water that he [Froese]

       could personally guarantee that the claim would

       be paid in full.

104.   Plaintiff assumed at the time that Froese was

       clumsily soliciting a bribe:   the bathroom was 6

       inches below the rest of the apartment and a

       flood out of the bathroom into the higher living

       areas would have required the temporary

       suspension of the laws of physics.

105.   But plaintiff now knows that Froese was trying to

       trap plaintiff into submitting a false claim
       which would then be converted to a charge of


106.   While a false claim that plaintiff had spilled

       the water (an insured event) should have resulted

       in the same settlement as the correct and proper

       claim that the cooperative apartment

       corporation’s pipes had exploded, one was true

       and one was a lie.

107.   It remained a mystery to plaintiff for many years

       why alleged criminal Froese would have tried to

       trap him into making a false claim when the true

       and correct claim was absolutely good enough.

108.   Froese also made it clear to plaintiff in our

       meetings about the extensive damage to

       plaintiff’s apartment that plaintiff should be

       careful about pressing a claim for damage from

       the landlord’s broken steam pipes as such a claim

       would be unfair to the other subscribers as

       “they” did not live in a New York City

       Cooperative Apartment and that in Texas a

       resident of a cooperative apartment “never paid

       for damages to the apartment” [sic – so help me


109.   Froese told plaintiff that in Texas the landlord
       always paid for the type of damages he had

       sustained and that defendant General McDermott

       had “personally” advise him to not pay the claim.

110.   But now, later on, after studying McDermott and

       his successors Herres and Davis, we can see that

       the AsIF at USAA, even in 1989, were starting to

       acquire a lust for money and an increasing

       indifference to properly settling claims.

111.   The AsIF were no longer satisfied with their AIF

       commissions for the relatively simple job of

       running a RIE:       they wanted and needed more.

112.   Defendants McDermott, Herres, and Davis began to

       view the “unassigned surpluses” they were

       generating as “their money”:       and as “surplus

       funds” that were not really belonging to the

       subscribers any more, the AsIF were becoming

       increasingly reluctant to release “their funds”

       towards settlements.

                     VII.     Prayer for Relief

Wherefore plaintiff prays for entry of judgement as


           (A)   A finding that defendants McDermott,

                 Herres, and Davis have engaged and
      continue to engage in a pattern of 18 USC

      1962(c) exegesis towards subscribers.

(B)   A finding that defendants McDermott,

      Herres, and Davis have engaged and

      continue to in a pattern of 18 USC

      1962(c) exegesis towards plaintiff


(C)   A finding that in 1989 plaintiff

      subscriber’s subscription agreement, his

      account balances, the damages sustained,

      his submission of a claim, and his good

      faith were all in order and consistent

      with a reasonable expectation that his

      claim would be timely settled.

(D)   A finding that the A’sIF adjusters engage

      in a pattern of 18 USC 1962(c) enterprise

      and in 537 U.S. 393 (2003) extortion.

(E)   A finding that defendant Froese engaged

      in both a 18 USC 1962(c) enterprise and

      in 537 U.S. 393 (2003) extortion to

      secure from plaintiff a false admission

      that he had caused damage which would

      then be settled more favorably than if he

      made a truthful explanation as to the
                source of the damage.

          (F)   A finding that defendants McDermott,

                Herres, and Davis manipulated and

                continue to manipulate the 18 USC

                1962(c)victim, USAA, to their own direct

                personal benefit, in a fashion which

                resulted in this plaintiff not receiving

                a settlement and eventually losing his

                home, declaring bankruptcy, and then

                losing everything.

          (G)   $10,000,000 in direct damages.

          (H)   Exemplary damages of $20,000,000.

          (I)   Treble damages.

          (J)   And such other relief as this court finds


          VIII.  As and for a Third Cause of Action on
          Behalf of the Plaintiff, Koenig, against the
            Defendants McDermott, Herres, and Divich

113.   Plaintiff repeats, reiterates an re-alleges each

       and every allegation contained in ¶¶ 1 –112

       inclusive with the same full force and effect as

       if more fully set forth herein at length.

114.   Defendant Duane Divich [Divich] was advised by

       plaintiff in about 1992 that an adjuster
       dispatched by defendant and AIF McDermott had

       inflated a claim made by a third party against

       plaintiff from $475 to $510:     a difference of

       about $35.

115.   Plaintiff explained to Divich that even though it

       was highly questionable whether claimant’s

       automobile had sustained any damage, claimant had

       offered a repair estimate from the area’s most

       expensive body shop for less than $475.

116.   McDermott’s contract employee adjuster (whom

       plaintiff never met) “countered” with an offer of

       $510, which was slightly more than $500.

117.   Plaintiff explained to defendant Divich that this

       inflating of the claim had the effect of putting

       the settlement over the $500 hurdle which then

       permitted McDermott to charge plaintiff back for

       the settlement – this making the plaintiff pay

       for his own claims settlement.

118.   Plaintiff, upon information and belief, alleges

       that the defendant AsIF, McDermott, Herres, and

       Davis systematically inflate claims settlements

       which are slightly below the hurdle permitting

       charge back to the subscriber in a manner which

       is violative of 18 USC 1962(c).
119.   This allegation is highly particularized and will

       require discovery to acquire the statistics to

       prove it.

120.   However, it is not a “snark hunt”:          and if true,

       can be quickly and easily established by

       statistical analysis.

                     IX.       Prayer for Relief

Wherefore plaintiff prays for entry of judgement as


           (A)   A finding that defendants McDermott,

                 Herres, and Davis have engaged in 18 USC

                 1962(c) pattern of inflating claims to

                 that they can be charged back to the


           (B)   A finding that defendants McDermott,

                 Herres, and Davis have engaged in 18 USC

                 1962(c) have inflated a claim made by the


           (C)   $10,000,000 in direct damages.

           (D)   Exemplary damages of $20,000,000.

           (E)   Treble damages.

           (F)   And such other relief as this court finds

           X.      As and for a Fourth Cause of Action
           on Behalf of the Plaintiff, Koenig, against
           the Defendants McDermott, Herres, and Davis

121.   Plaintiff repeats, reiterates an re-alleges each

       and every allegation contained in ¶¶ 1 –120

       inclusive with the same full force and effect as

       if more fully set forth herein at length.

122.   KPMG, the longtime CPAs for the RIE and the

       alleged 18 USC 1962(c) enterprise which runs

       parallel to the legitimate insurance business

       front “presented” by the three defendants

       McDermott, Herres, and Davis, have either removed

       themselves or been separated from the “USAA


123.   In the world of “public corporations”, this is a

       “reportable event”, and plaintiff believes that

       such an event may not be allowed to pass without


124.   It is unclear whether the new auditors, Ernst and

       Young, have provided an opinion about USAA’s

       purported financials for 2004.

125.   The situation as to USAA’s purported auditors is


126.   It is alleged that the situation within the three
       defendants McDermott, Herres, and Davis’s 18 USC

       1962(c) enterprise has reached the point where

       there is a virtual party going on with the funds

       falsely represented to still belong to the


127.   As the 18 USC 1962(c) enterprise was and is

       funded though a pattern of 18 USC 1962(c)

       misrepresentations that the subscribers are

       member/owners of the 18 USC 1962(c) enterprise,

       the funds in question have been unlawfully

       accumulated through alienation of the

       subscribers’ property in a manner which the

       subscribers would not have so gleefully permitted

       had they known the truth about the ownership if

       the “unassigned surpluses”.

128.   A situation exists where three defendants

       McDermott, Herres, and Davis may have a

       considerable incentive to accelerate the rate at

       which funds under their control are rendered even

       more distant from the subscribers potential to

       “claw them back”.

129.   Accordingly, the appointment of some sort of

       independent party to speak for the RIE may be

       highly appropriate.
130.   This is not an irrevocable step and need cause

       absolutely no harm to the defendants, whether

       McDermott, Herres and Davis operate a 18 USC

       1962(c)    or not.

                  XI.       (A)   Prayer for Relief

          (A)    A finding that defendants have the

                 possibility to engage in activities which

                 unlawfully diminish subscribers’ funds.

          (B)    A finding that plaintiff, as he is fully

                 entitled to be a subscriber and has a

                 Subscriber Savings Account on deposit

                 with AIF Davis, has sufficient standing

                 in this action to allege a likelihood

                 that “unassigned surpluses” and “assigned

                 surpluses” in AIF Davis’ instant custody

                 are likely to be unlawfully diminished,

                 and to make a demand for such a finding.

          (C)    A finding that USAA, the RIE, is a

                 possible victim of the AsIF’s 18 USC

                 1962(c) enterprise, and unlikely to be

                 able to speak openly about its condition

                 and status to this court:      much like an

                 abused child or battered spouse.

          (D)    An order that a “guardian ad litem” be
      appointed to inquire in a due and

      diligent manner into the status and

      condition of funds which may have been

      improperly emptied out of USAA and moved

      over to the “unassigned surpluses” and

      “assigned surpluses” and which now may

      improperly be under the control of the


(E)   A finding that plaintiff has been injured

      by the 18 USC 1962(c) pattern of improper

      accumulation of “unassigned surpluses”

      and “assigned surpluses” and the

      subsequent AsIF’s misrepresentations as

      to his ownership in those “unassigned

      surpluses” and “assigned surpluses”, and

      the AsIF’s misapplication of those funds

      in ventures and enterprises unlikely to

      benefit plaintiff.

(F)   An immediate return to plaintiff of all

      his Subscriber Savings Accounts, and his

      share of “unassigned surpluses” and

      “assigned surpluses”.

(G)   $10,000,000 in direct damages.

(H)   Exemplary damages of $20,000,000.
          (I)   Treble damages.

          (J)   And such other relief as this court finds


          XII.    As and for a Fifth Cause of Action on
          Behalf of the Plaintiff, Koenig, against the
                Defendants McDermott, and Herres.

131.   Plaintiff repeats, reiterates an re-alleges each

       and every allegation contained in ¶¶ 1 –130

       inclusive with the same full force and effect as

       if more fully set forth herein at length.

132.   The three defendants McDermott, Herres, and

       Davis, over the 37 years that plaintiff has been

       a subscriber, have taken every opportunity to

       conspicuously self-induct themselves into the

       “Fortune 200”, as if either their 18 USC 1962(c)

       enterprise or USAA the RIE were a “corporation”,

       which neither is.

133.   Accepting their wish to be viewed as the Chief

       Executives of a Fortune 200 “company”, plaintiff

       asks the court to take judicial notice that over

       37 years not one of the defendants - neither

       McDermott, Herres nor Davis - have every

       disclosed their method or amount of compensation.

134.   This failure to fully disclose the method and
       quantity of their compensation is unique among

       the population of Fortune 200 senior executives.

135.   When one considers that defendants McDermott,

       Herres, and Davis actually disclose nothing about

       their compensation – nothing at all - then their

       demonstrated reluctance to disclose becomes a

       patterned “badge of secrecy”, worn at all times.

136.   By self-inducting themselves in their uniquely

       egregious, over-keening, and self-congratulatory

       manner into the Fortune 200, they hoist a red

       flag that their pretense to deserving our

       accolades for joining the august company of CEOs

       who do disclose their compensation is a warning

       for us to beware.

137.   These ex-military men do not wear “Red Badges of

       Courage”: they do however raise red flags of


                    XIII.   Prayer for Relief

          (A)   A finding that the failure of defendants

                McDermott, Herres, and Davis to disclose

                their compensation is indication that an

                18 USC 1962(c) enterprise exists under

                their control.
        (B)   A finding that this 18 USC 1962(c)

              enterprise has grievously damaged

              plaintiff by catching him unaware that

              defendants McDermott, Herres, and Davis

              were not operating a responsible Fortune

              200 company, but instead operating a

              racket which was set on bankrupting him

              if that was what it took to fund the

              defendants’ unlawfully accumulated 18 USC

              1962(c) “assigned and unassigned


        (C)   $10,000,000 in direct damages.

        (D)   Exemplary damages of $20,000,000.

        (E)   Treble damages.

        (F)   And such other relief as this court finds


Plaintiff’s Address:
Robert J. Koenig
PO Box 232
Oyster Bay, NY 11771
Voicemail and fax: 212 208.0938
Phone: 516.214.0601

Robert J. Koenig

September 7, 2005

Description: Several days after this Federal Action against USAA was filed in the Eastern District for New York, Robert J. Koenig was jailed by Robert G. Davis and Josue Robles of USAA.