Pay to Play

The son of a world—renowned chef says he wanted to reform the phone industry. The feds say he wanted to get rich quick.

David wore jeans and a denim shirt on the day he entered prison, hobo's garb by his sartorial standards. For most occasions, whether catching a movie with his girlfriend or eating Sunday dinner at his parents' house, he favored a dark designer suit and silk tie. With his natty apparel, short black hair, and fresh-scrubbed mug, he might have strayed out of a Fitzgerald novel.

But if clothes make the man, so too can they hide his humble means. David hunted for suits on the discount rack, buying Armanis for one-tenth their $1,500 retail price and taking them to a tailor to fix the flaws. Likewise, he kept his BMW looking showroom clean, the better to disguise that he purchased it from a used-car lot.

Such frugality gave him the mien of living more lavishly than someone who, for the last 20 years, rented a $600 garage apartment bereft of a kitchen. He preferred to spend his money on those who populate his vast social galaxy, bringing flowers and small gifts to friends for any reason or no reason, always picking up the tab when dining out with them. (His largesse jibed with his 1950s sense of decorum: Before sitting down for a meal, he would spread a napkin across the lap of each woman seated at the table.)

"Life was never about being rich for Danny," says Hollie Webster, a friend of the David family for more than 30 years. "Life was about living richly."

Excluding money derived from a family trust, David scratched out a modest income from diverse pursuits. He and Narsai co-authored a guidebook of Bay Area eateries in 1994, and Daniel later published two volumes of "unusual" children's names for expecting parents. An abstract painter and metal sculptor, he sold artwork that he created in his rented Berkeley studio, and shot publicity photos for the Berkeley Repertory Theatre and other arts groups. In recent years, he worked as a wine merchant, finding buyers for wine lots that he acquired at reduced cost from families selling their houses or divorcing couples splitting their assets.

Starting in the mid-1990s, David also launched three business ventures with Scott Nisbet, a friend since their days attending Berkeley High. Their first two ideas bombed. The third landed them in prison.

Their earliest collaboration, a smoke detector implanted in a Christmas ornament, met with as little commercial success as their initial foray into the phone industry. In 1995, they sought to market prepaid calling cards, a technology already popular in Europe and Japan but a fledgling concept in the United States. They drew more furrowed brows than customers.

David carried out the design and promotion of the cards while Nisbet, who conceived the plan, handled the technical aspects. The son of Robert Nisbet, a Berkeley attorney and the former general manager of AC Transit, he possesses a zeal for telecommunications that appears to run in the family. During his trial in 2004, David related that Scott Nisbet's great-grandfather owned one of the country's first long-distance companies, until AT&T drove him out of business around the turn of the 20th century.

The calling cards marked another high-tech dud for Nisbet, described by a former associate as "a charismatic nerd." A year earlier, he attempted to create a business that would establish wireless phone and video services in Third World nations. The scheme crumbled within months.

Undaunted, Nisbet, who did not respond to SF Weekly's interview requests, saw a fresh opportunity after Congress revamped the nation's telecommunications law in 1996. The raft of reforms included a proviso known as dial-around compensation. It guarantees pay-phone operators a cut of the revenue generated by toll-free calls made from their phones.

Owners of 1-800 numbers cover the cost of calls placed to them, paying a per-call fee to their long-distance carrier. The new rule required the carriers — AT&T, Sprint, and their ilk — to share those profits with pay-phone operators for calls placed from pay phones. Federal regulators dictated that the carriers give 24 cents to pay-phone owners and lessees for each toll-free call. (The current rate stands at 49 cents.)

Nisbet suspected carriers of skimping on dial-around payouts. Over dinner at Brennan's in Berkeley in late 1997, David testified, Nisbet pitched a proposal for testing his hypothesis. They would lease two dozen pay-phone lines, route them into David's studio and an office owned by his father, and attach the lines to fax machines programmed to dial toll-free numbers. Then they would see if the carriers paid them for every call.

Nisbet had talked to a friend who worked as a lawyer with the Federal Communications Commission to verify the plan's legality. Reassured that his partner performed "due diligence," David stated in court, he signed on for the enterprise, fully expecting to repeat their past commercial pratfalls. (David had time for only a brief phone interview two days before reporting to prison and declined to talk about details of the case.)

With Nisbet's guidance, David leased the lines from Pacific Bell and set up a contract with an industry clearinghouse that collects dial-around compensation on behalf of pay-phone operators. David wrote his own name on the paperwork. Nisbet hooked up the fax machines and rigged them to call toll-free numbers virtually nonstop. Jack's Payphone, as they dubbed their endeavor, opened for "business."

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