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Koenig RICO suit before Judge Seybert  in the Eastern District of NY

June 5 2018 2346 GMT


UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK

ROBERT J. KOENIG

Plaintiff

against

ROBERT F. MCDERMOTT; ROBERT T. HERRES; ROBERT G. DAVIS; DUANE DIVICH; JANICE MARSHALL PEEBLES: AND RICHARD J. FROESE;

AND

JOHN DOE AND JANE DOE, ET AL. WHO ARE ALSO 18 USC 1962(C) PERSONS

Defendants

AND

UNITED SERVICES AUTOMOBILE ASSOCIATION, A 18 USC 1962(C) VICTIM

Third Party Defendant

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Civil Action No.

COMPLAINT

Jury Trial is demanded

  1. 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 complaint.
  9. This is neither a Securities Act of 1933 nor Securities Exchange Act of 1934 Securities Act complaint.
  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 belief.
  14. The 18 USC 1962(c) “association-in fact” is not USAA:  that USAA is also an association invites confusion.
  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.
  1. Plaintiff’s Burden
  1. In order to prevail, plaintiff need satisfy the test of a preponderance of proof, and not the test of “beyond a reasonable doubt”.
  2. But, the defendant must plead his complaint with particularity.
  3. 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 lengthy.
  4. 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.
  1. A Source of thinking in the matters before this court.
  1. Regulation of reciprocals, nationwide, is antediluvian and varies tremendously from state to state.
  2. Dennis K. Reinmuth [1], 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.
  1. As and for a First Cause of Action on Behalf of the Plaintiff, Koenig, against the Defendants McDermott, Herres, Davis and Divich
  1. 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.
  2. 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”.
  3. This widespread misapprehension [2], after years of “disinformation”, is universally accepted across the entire United States:  trained lawyers will often mistakenly argue that USAA is a “corporation”.
  4. 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.
  5. 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”.
  6. 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.
  7. 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 on.
  8. 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”.
  9. 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.
  10. 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”.
  11. 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.
  12. Plaintiff assures this court that in the final analysis “Bambi ain’t a talking baby deer”, and “USAA ain’t a corporation”.
  13. 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 risks.
  14. 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”.
  15. In addition to being only a “large file cabinet”, a “place”, and only an “office building” [3] 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.
  16. The RIE is also a place where the accounting and custody or the “unearned premiums” “might” take place.
  17. 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.
  18. 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”.
  19. 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 unilateral control of the three defendants McDermott, Herres, and Davis and their 18 USC 1962(c) enterprise.
  20. 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 subscribers.
  21. 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.
  22. “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. [4] 
  23. 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”.
  24. The ambit of this action is the practice of special type of fraud:  “affinity fraud”.
  25. 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.
  26. 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”.
  27. No “boards of directors” were required back then - back in the 1920s.
  28. And this plaintiff is unable to find any Texas statute [5] 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.
  29. 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.
  30. 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 owned by he subscribers” at that.
  31. Pretending to have the an otherwise completely gratuitous “Board of Directors” has another sinister purpose, inter al.
  32. In order to unlawfully benefit from the widespread misapprehension that each subscriber is a “member/owner [6] 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”.
  33. Plaintiff knows all about this practice on the part of the three AsIF.
  34. 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.
  35. 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 subscriber.
  36. 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.
  37. 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.
  38. 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.
  39. 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.
  40. 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.
  41. 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.
  42. 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 savings.
  1. Prayer for Relief

Wherefore plaintiff prays for entry of judgement as follows:

(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 employees.

(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 justified.

  1. As and for a Second Cause of Action on Behalf of the Plaintiff, Koenig, against the Defendants McDermott, Herres, Davis, Marshall, and Froese
  1. 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.
  2. 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.
  3. 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.
  4. It doesn’t take much study to realize that subscribers in any RIE are intrinsically and structurally antagonistic to each other’s interests.
  5. 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.
  6. 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.
  7. 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 claims.
  8. 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”.
  9. 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.
  10. 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 claims.
  11. The AsIF evidently began to see the “assigned and unassigned surpluses” as “their money”.
  12. A particularization can be had from plaintiff’s own personal experience;  which is not an allegation for which damages are sought in this action.
  13. 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.
  14. 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.
  15. 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 processes.
  16. 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.
  17. 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.
  18. 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.
  19. 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.
  20. 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 attitude”.
  21. McDermott has starting to display the diffidence of a “dapper don”.
  22. Alleged criminal McDermott never even explained why he didn’t want to pay.
  23. 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.
  24. 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.
  25. 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.
  26. 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.
  27. 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.
  28. Defendants Herres and Davis have extended McDermott’s alleged criminal conduct into the present.
  29. 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 20.
  30. 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”.
  31. Froese was the “contract insurance adjuster” employee dispatched by alleged criminal defendant McDermott to settle plaintiff’s ordinary claim.
  32. 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.
  33. 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.
  34. 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 misrepresentation.
  35. 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.
  36. 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.
  37. 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 God].
  38. 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.
  39. 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.
  40. The AsIF were no longer satisfied with their AIF commissions for the relatively simple job of running a RIE:  they wanted and needed more.
  41. 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.
  1. Prayer for Relief

Wherefore plaintiff prays for entry of judgement as follows:

(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 subscriber.

  1. 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.
  2. 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 justified.

  1. As and for a Third Cause of Action on Behalf of the Plaintiff, Koenig, against the Defendants McDermott, Herres, and Divich
  1. 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.
  2. 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.
  3. 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.
  4. McDermott’s contract employee adjuster (whom plaintiff never met) “countered” with an offer of $510, which was slightly more than $500.
  5. 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.
  6. 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).
  7. This allegation is highly particularized and will require discovery to acquire the statistics to prove it.
  8. However, it is not a “snark hunt”:  and if true, can be quickly and easily established by statistical analysis.
  1. Prayer for Relief

Wherefore plaintiff prays for entry of judgement as follows:

  1. 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 subscriber.

(B)        A finding that defendants McDermott, Herres, and Davis have engaged in 18 USC 1962(c) have inflated a claim made by the plaintiff.

(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 justified.

  1. As and for a Fourth Cause of Action on Behalf of the Plaintiff, Koenig, against the Defendants McDermott, Herres, and Davis
  1. 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.
  2. 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 account”.
  3. 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 explanation.
  4. It is unclear whether the new auditors, Ernst and Young, have provided an opinion about USAA’s purported financials for 2004.
  5. The situation as to USAA’s purported auditors is unsettling.
  6. 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 subscribers.
  7. 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”.
  8. 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”.
  9. Accordingly, the appointment of some sort of independent party to speak for the RIE may be highly appropriate.
  10. 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.
  1.  (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.

  1. 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 AsIF.
  2. 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.
  3. 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.

  1. And such other relief as this court finds justified.
  1. As and for a Fifth Cause of Action on Behalf of the Plaintiff, Koenig, against the Defendants McDermott, and Herres.
  1. 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.
  2. 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.
  3. 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.
  4. This failure to fully disclose the method and quantity of their compensation is unique among the population of Fortune 200 senior executives.
  5. 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.
  6. 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.
  7. These ex-military men do not wear “Red Badges of Courage”: they do however raise red flags of warning.
  1. 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 surpluses”.

(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 justified.

Plaintiff’s Address:

Robert J. Koenig

PO Box 232

Oyster Bay NY 11771

Voicemail and fax:  +1.212208.0938

Phone:  +1.516.214.0601

Robert J. Koenig
September 7, 2005



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[1]        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.

[2]        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.

[3]        If one is to believe the three defendants boasting – the largest office building in the world, after the Pentagon.

[4]        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.

[5]        Section 822.152 of the Texas Insurance Code addresses “Directors”:  but USAA is exempt from that section and most of the Texas Insurance Code: § 942.003 Limited Exemption from Insurance Laws:  applicability of certain laws.

[6]        Which plaintiff freely admits is likely true as to “ownership” of the “unearned premiums” in the AsIF custody at any given time.