Mafia Dreams (eBook)

Chapter 2

The Rileys and Their Rackets

“Joe Riley, you are going to hear evidence, was the son of a family which can best be described as a criminal organization unto itself.”

Assistant U.S. Attorney Patrick McInerney

Ferrell Travis Riley had been one step ahead of the law for more than a decade before moving his family to Kansas City in 1991. By the time insurance regulators caught up with him in one state, Riley was on to the next, leaving a slew of unpaid claims and insolvent corporations in his wake. His modus operandi was to inflate his assets and operate as a “non-admitted” insurance carrier, meaning he could only sell insurance to customers outside the state of domicile. Federal statutes prohibiting insurance fraud did not yet exist, and states typically allowed non-admitted carriers to sell “surplus lines:” risky coverage unavailable from licensed insurers within their borders. By not selling to customers in the state of domicile, Riley claimed exemption from home state regulation and exploited jurisdictional lines like a white-collar version of the roving outlaws from the Old West.

“Ferrell has a strategy for managing criminal activity,” said Riley’s lawyer and co-conspirator, Kevin Hare. “Stay on the move.”

By the time he landed in Missouri, Ferrell, or Travis, as he was more commonly known, had frustrated authorities in 17 other states and was known to congressional investigators as one of the biggest con men in the insurance industry.

“Mr. Riley was able to separate the jurisdictions with regulatory authority over him from the jurisdictions he operated in,” wrote L.H. Otis in National Underwriter. “Mr. Riley’s affairs reveal a man few can match in terms of number of brushes with the law in the course of an insurance career, yet one who has emerged virtually unscathed.”

Ferrell Travis Riley was born on May 14, 1942 in rural San Augustine, Texas, a God-fearing, majority African-American region of low incomes and low crime rates located in the Piney Woods country near the Louisiana line. Time passed slowly and uneventfully in in the heat and humidity of this small, southern county, and records of Travis’s life in San Augustine are scarce. Small in stature with a somewhat pudgy, Irish-American countenance and strangely serrated teeth, Travis Riley was a country boy whose formal education ended before the eighth grade. He could scarcely read or write, but he had a head for numbers and could butcher a hog like nobody’s business. Travis was a church-going boy schooled in the virtues, and he often practiced patience, tolerance, loyalty, generosity, kindness, and love with genuine sincerity. But Travis would prove to be a world-class sinner when it came to the Eighth Commandment. “A natural-born thief,” is how he might have been described in the Piney Woods of his East Texas birthplace.

As a young man, Travis took his meat cutting skills and his head for numbers to Houston, where he opened several businesses including a grocery store-butcher shop, and a fried chicken stand on Highway 90. “Travis Riley was a chicken farmer and a butcher,” said now-retired FBI agent Ronald Halter. “Then he mutated into a dealmaker.”

In Houston, Travis married a Mexican-American woman named Eulogia who went by the name Chita. Together, they had five children: Ferrell Travis Junior, Frank, Ronald, Maria, and finally, in 1974, Joseph, the favorite son who would bear the heaviest burden of his father’s crimes.

“Joe was diagnosed with ADD and dyslexia at around age 5,” said his mother, Chita. “He survived his learning disabilities by having this exuberant personality.”

In that regard, Joe was a chip off the old block. A reporter with the Houston Chronicle said that the affable and “baby-faced” Travis Riley reminded him of “the sort of fellow who could be the glad-hand mayor of a small southern town.”

Joe’s mix of Irish and Mexican parentage gave him a darkly Caucasian look that could’ve passed for Italian. Considering Joe’s future ambitions, it’s unlikely he didn’t notice—and value—this aspect of his appearance. His most prominent facial feature was his mouth. Horizontally short with thick, pursed lips, Joe’s mouth seemed made for a trumpet player, and it’s soft, almost feminine contours belied a disposition thoroughly steeped in machismo.

Travis’s businesses prospered enough to afford his family an expensive home in River Oaks, Texas, with a swimming pool in the backyard and a Cadillac in the garage. In the late-1970’s, Travis branched out into insurance, opening his own company, Sheldon Insurance, and obtaining an agency appointment with Dexter Lloyds Insurance Company of Houston in 1982. In 1983, he organized and financed the Riley Insurance Agency on behalf of Frank Riley, the business-minded second son who would later dabble in professional boxing and manage the family’s offshore operations.

Regulators in Texas described Ferrell Travis Riley as conservative and unassuming with a great deal of personal charm. A former Wyoming insurance commissioner described Travis as looking like a mortuary operator. One regulator said of Riley, “On a personal level, he’s the type of person you could have over for bridge. As a businessman, if you shook his hand, you had better count your fingers.”

Comparisons to glad-hand mayors aside, Travis was able to project charm and charisma without flashing grins. “Picture a hand saw with a serrated blade; that’s what his teeth looked like,” said Agent Halter. “It was the queerest thing. Each one was a dagger. He’d never smile.”

Travis Riley’s entrepreneurial ambitions were not limited to insurance. He rented office space on Wesleyan Street for a company called Tri-World Travel, which he used to finance group junkets to Las Vegas and Hong Kong by charging tickets to his Diner’s Club card. Tri-World unraveled after both Diner’s Club and American Airlines sued for a combined $60,000.

In the mid 1980’s, Travis and Chita divorced, and Travis began a serious relationship with his secretary, a former school teacher named Cheryll Susan Coon. Over time, Coon’s role in Travis’s businesses would expand from secretary to partner, with Coon managing financial affairs, accounting, and office operations, while Travis—on paper at least—acted as a “consultant.” Together with the four Riley sons and an assortment of spouses, stepchildren, and close associates, Riley and Coon would expand the family’s insurance business into an international juggernaut of fraud that raked in millions of dollars every year.

“Cheryll was attractive, well-groomed and well-dressed,” said Agent Halter. I believe she had a master’s degree in business administration. She came across as very legitimate, but like Travis, she was good at lying, cheating, and stealing.”

“Mr. Riley and Ms. Coon apparently cultivated an aura of religious piety and professional reserve while privately reveling in a lavish lifestyle,” wrote L.H. Otis in National Underwriter.

With Frank Riley assisting Travis and Cheryll in the insurance business, Ferrell Travis Riley Jr. focused on the family’s real estate investments. Together with a close family associate named Jack Brown, the Rileys owned and operated heavily mortgaged condominiums in Park City, Utah; campgrounds in Mississippi and Oklahoma; a Las Vegas based time share company that sold resort leaseholds in 17 states; and a historic but dilapidated hotel in Marfa, Texas.

One of Jack Brown’s functions in Riley’s enterprises was to help falsify appraisals and overvalue real estate investments, creating the illusion that Riley’s insurance companies had adequate assets to qualify for licensing and pay premiums when in fact they did not. The El Paisano Hotel in remote Marfa, Texas offers an example of how the Rileys managed their assets:

In 1988, the Rileys fought for lower property taxes on the El Paisano by filing a protest to the hotel’s appraised value of $795.000. Considering the poor condition of the hotel and the lack of tourism in Marfa, their case was convincing, and the appraiser reduced the value of the property to $490.000. Six days later, in an application to the Wyoming Insurance department, the Rileys claimed the hotel was worth $6.46 million.

“I sure would love taxing them on that amount,” said the Presidio County Assessor, who added that no property in the economically depressed town was worth that much money. “I think you could buy a good portion of this county with that kind of money, if it was cash.”

Beginning in 1983, Travis used a $600,000 loan from Woodforest Bank to begin acquiring stock in Dexter Lloyds. According to bank president Albert Daigle, the loan was never repaid.

By February of 1986, Riley had become the majority owner of the company. State law required disclosure of the acquisition, but Travis kept his ownership hidden. When some policyholders were not paid for claims, regulators took notice and began investigating. In August 1986, the Commissioner of the Texas State Board of Insurance ordered Dexter Lloyds to be placed under regulatory supervision. When they entered the Rileys office, regulators found, “…a zoo, with bond sales and financial transactions noted on scraps of paper strewn about, a staff paid at night in cash, and an elderly couple from a...