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.

The black BMW knifed south on Interstate 5 toward a destination both known and unknown to Daniel David. As a simple matter of geography, he understood where he was headed — a federal penitentiary in Taft, 40 miles southwest of Bakersfield. It was the idea of living behind bars that posed the mystery, partly because he had never served time, partly because he had refused to believe this day would arrive.

David rode shotgun on the almost five-hour drive from his Berkeley apartment to Kern County. His friend, Peter Akers, sat behind the wheel, easing off the gas when dust clouds swirled across the highway, cutting visibility on a cold, blustery day early last month. Sports chatter played low on the radio while the two men talked, their conversation loose and light despite the reason for that morning's travel: David needed to report to the prison to start a 30-month term for his role in a business venture gone awry.

"It was as nice a trip as you could have under the circumstances," Akers says. Still pressing his legal fight on the road to incarceration, David called his lawyer three or four times, hoping to receive word of an 11th-hour reprieve. "He thought there could be a miracle," Akers says. "He thought we could just be on a long joyride."

But other calls David made along the way betrayed his doubts. He told loved ones he might be out of touch for a while, though even then he kept his tone upbeat, as if he were leaving for vacation. He didn't want anyone to worry.

The car rolled past signs for unfamiliar towns — Coalinga, Avenal, Lost Hills — until Akers exited the rutted interstate near Old River. Some 20 miles later, the Taft Correctional Institution came into view, an archipelago of flat-roofed buildings consisting of a low-security prison and a minimum-security camp. The compound stands on ground the color of sawdust, parched terrain common to the middle of nowhere.

A prison guard in charge of admitting new inmates allowed Akers to join David during the initial phase of the process. The guard described the camp, where David would stay, as "a pretty laid-back place. All you have to do is follow the rules." He concluded the session by stepping out of the room to let Akers and David say goodbye. Their mutual stoicism held for only a moment before both men broke down.

"You can do this," Akers said as they hugged.

The return trip north felt endless to the 59-year-old Akers, who variously refers to David, 41, as his son, brother, and best friend. He replayed their farewell in his mind and wiped away more tears. As the horizon slowly swallowed the sun, his thoughts were interrupted by a call from another friend — Narsai David, Daniel's father.

A culinary icon in the Bay Area, Narsai belongs to the elite fraternity of celebrity chefs, his reputation spanning kitchens of four-star restaurants around the world. Most in this region know him for his daily segments on KCBS radio, during which he serves up recipes, wine reviews, and food news with good-natured brio. Yet talking to Akers, Narsai sounded nothing like the jovial gourmet who once hosted his own PBS program, or who draws crowds to the Union Square Macy's for weekly cooking shows. His voice cracked as he asked about his only child entering federal custody.

Those close to father and son say Narsai's cheery public persona belies his anguish over the younger David's legal woes. In 2002, federal prosecutors alleged that Daniel and a business partner ran a pay-phone scam out of South San Francisco that fleeced nearly $450,000 from long-distance phone carriers. Narsai urged his son to set aside pride and accept a plea deal rather than risk years in prison; Daniel insisted he could prove his innocence.

He lost the gamble when a jury convicted him in 2004 on multiple counts of money laundering, mail fraud, and using a fictitious identity. Narsai and Veni David, Daniel's mother, choked back tears as they listened to the verdict. Their son remained defiant. Outside the courtroom, he declared, "It's not over."

In reaching his profession's summit, Narsai, a first-generation American born to Assyrian émigrés, relied on willpower and resiliency. The traits passed to his son, to judge from Daniel's efforts to clear his name. He has spent upward of $200,000 on attorneys while devoting countless hours to scouring case law and his court files. Dozens of friends and relatives back his cause, with some lending him thousands of dollars to cover legal bills.

Last summer, an appellate court upheld his conviction, dismissing the import of a statement he considers vital to his long-shot bid for a retrial. During David's sentencing hearing in 2005, a prosecutor conceded that the phone companies, contrary to earlier claims of losing money, reaped hefty profits from his enterprise. To his supporters, the admission confirms the virtue of his struggle to win release. To skeptics, he should have listened to his father from the beginning.

"If [Daniel] hadn't been in denial about this for so long," one family friend says, "he'd be out of prison by now."

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."

Four months later, in April 1998, the would-be entrepreneurs received a check for $11,800, the harvest from thousands of calls yielding 24 cents apiece. They reacted by shutting down Jack's to establish a more sophisticated operation in South San Francisco — but not out of greed, David insisted in court.

A few days before the clearinghouse check arrived from the American Public Communications Council, he testified, the group's then-president contacted them. He cautioned that their high volume of toll-free calls could attract the suspicion of long-distance companies, David stated.

The warning spooked Nisbet, who feared the carriers would thwart them from amassing call data records on dial-around payouts, David recalled in court. The APCC sent the two men an itemized list of each long-distance carrier's portion of the $11,800 bill. AT&T, the telecom leviathan that controls half the long-distance market, paid a paltry $30. The figure suggested to them that the country's largest carriers were cheating pay-phone operators.

Eager to prove their theory, the partners agreed to broaden what they referred to as their telecom "survey." But Nisbet wanted to conceal their identities from the phone companies to evade further scrutiny, David testified, igniting an argument between them. "I believed in what we were doing, but I did not believe in [falsifying] the names," he said.

In the end, however, he chose to trust his longtime friend, who 15 years earlier had worked with Daniel at Narsai David's now-defunct restaurant in Kensington. The old high school buddies pushed ahead with their survey. Or what the feds would deem a scam.

David and Nisbet moved fast to resume their self-styled telecom crusade. They rented office space in South San Francisco and, under the names Dave Jacobs and Bill Jansen, leased 23 pay-phone lines from Pacific Bell. Nisbet hooked up the lines to a $15,000 autodialer. They flipped the switch on their new equipment in May 1998, less than a month after yanking the plug on Jack's faxes.

The autodialer placed more than 2 million calls during the next 18 months. Running a software program with a database of toll-free numbers, Nisbet programmed the device to dial 12 to 24 hours a day, with each line active for the same period of time. The machine hung up as soon as someone answered, and no number received a second call after a successful connection.

The duo decided to avoid the APCC after hearing from its president about their high call volumes while operating Jack's. (The agency later sent them an additional $28,000 in dial-around compensation for that enterprise.) Instead, posing on paper as Jacobs and Jansen, they arranged for two other industry clearinghouses to collect the money. They directed both firms to send their quarterly checks to a private mail store in Scottsdale, Ariz., where Nisbet rented a mailbox under the same aliases.

But problems arose once payments and call data records began landing in their mailbox in October 1998. Their fake names, concocted to dupe the long-distance carriers, prevented them from retrieving the parcels. The mail store's owner told Nisbet, who had opened the account over the phone, that he needed proof of Jacobs' or Jansen's identity to release the mail.

One lie spawned another. David and Nisbet designed a bogus driver's license for "William Jansen," making him a resident of Vancouver, British Columbia, and forged a notarized statement verifying his identity. At the time, David testified, he had vague misgivings about the ploy. Four years later, it would bring charges of mail fraud and using a fictitious name for a fraudulent scheme against David and Nisbet.

"It was an extremely awkward bind ... ," David said at his trial. "Did we go about [solving] it the right way? No. Did I see any other way of getting the mail at that moment? No."

The partners faxed the documents to the store owner and directed him to forward their mail to various San Francisco locations — the airport, a nearby motel. Over the next year, they soaked up $480,000 in dial-around compensation, receiving 10 checks payable to Jacobs and Jansen. Sorting out the venture's financial affairs fell to David.

Depositing the first three payments posed little trouble, thanks indirectly to Daniel's famous father. At the time, Narsai David provided radio voice-overs for Mechanics Bank, and he and Daniel held accounts at the same Berkeley branch. Recognizing Daniel, bank tellers allowed him to make the deposits, totaling some $36,000, despite the absence of his name on the checks.

His luck soured in January 1999, when a bank manager balked at accepting a check made out to Jacobs and Jansen in the amount of $126,000. The setback led David to approach his friend Stephen Cornet, a San Francisco attorney who has known Daniel's father since the late 1960s, when Narsai managed a restaurant in Berkeley. Cornet had handled minor legal matters for Daniel related to his wine business, and they liked to meet for lunch or dinner every few weeks.

At David's trial, each man recounted their discussion about the origin of the $126,000. Cornet recalled David saying the money derived from a wine deal; David asserted that he credited his new and "legal" telecom business. Ostensibly to insulate the unwitting lawyer from potential liability, David offered no details about the enterprise, nor did he mention that Jacobs and Jansen existed only as figments.

" ... It was sort of lurking in the back of my head [that] if there is anything wrong with what's going on right now," David testified, "there is no way in hell I want to bring in anyone I know."

Cornet agreed to deposit the check in his law firm's trust account, a fund typically reserved for clients' monetary settlements and awards. Within a few days, he wrote a check in the same amount to David, who deposited it in his own bank account. In all, Cornet converted seven Jacobs-Jansen checks totaling $444,000 on David's behalf, a pattern that would result in felony money-laundering charges against David.

Cornet, who helped David for free and faced no criminal charges, declined to comment to SF Weekly. But on the stand he explained why he hadn't sought to meet Jacobs or Jansen before accepting the checks. "I had total trust in Danny."

For his part, David, aside from queasiness over using aliases, retained complete faith in the legitimacy of his and Nisbet's purported survey. The call logs they received with their checks showed that long-distance carriers failed to reimburse them for about 30 percent of their toll-free calls, David stated in court. That figure, if applied across the country, translated to a loss of $300 million in revenue to pay-phone operators.

In April 1999, seeking to elude the detection of long-distance carriers, Nisbet paid $10,000 to a tax accountant to create four shell companies in Nevada. The ruse aimed to reduce the suspicion of carriers — smaller dial-around payouts sent to multiple addresses would gain less notice than a large check mailed to the same location each quarter.

But by August that year, as their autodialer continued calling thousands of numbers a day, David and Nisbet learned that the long-distance companies under their gaze might be watching them. They received a call from a man who worked for one of the industry clearinghouses that collected their dial-around compensation. He sounded nervous, David testified.

" ... It was almost as if either somebody was sitting next to him or someone had told him not to talk to us, I don't know," David said. "But the message was, ÔThe telecommunication carriers are interested in using you as a test case.'"

The same month, as they later found out, an AT&T fraud investigator contacted the FBI to discuss a pay-phone anomaly in South San Francisco. He had discovered that each of the 23 lines at the location generated as many as 300 toll-free calls a day on AT&T's network alone. None of the calls lasted longer than 45 seconds, and the lines turned on and shut off in synchronicity every day. He surmised an autodialer at play — a violation of the federal telecom statute that bans the use of the machines for calling 1-800 numbers. The feds reviewed his analysis and launched an investigation.

In October 1999 FBI agents and South San Francisco police obtained search warrants for David and Nisbet's office. There was no autodialer. At David's trial, Steve Coffin, the FBI's lead agent on the case, stated that someone in the SSFPD called Nisbet a short time before the raid; David testified that the partners heard about the search from the building's landlord after it occurred. Either way, their operation ceased.

The feds built their case against David and Nisbet for more than two years. (Coffin eventually traced the autodialer's paper trail to the New York company where Nisbet bought it. At his trial, David said a friend had placed the machine in storage.) Rather than retreat during the probe, however, the two men renewed their efforts to bird-dog the telecom industry.

In February 2002, a month before a grand jury indicted them, David and Nisbet sued AT&T and the city and county of San Francisco. The pair alleged that prepaid calling cards jointly sold by the three parties failed to divulge the surcharge callers absorbed when using the card from pay phones.

The case settled a year later, after AT&T agreed to distribute $50,000 worth of free calling cards to low-income residents. The deal also required the carrier to disclose the pay-phone surcharge on vending machines nationwide where it sells the cards. (AT&T officials did not respond to requests for comment for this story.)

San Francisco attorney Charles Carbone represented David and Nisbet in the calling-card case. A telecom expert, he vouches for the authenticity of their dial-around compensation research, contending that the 60-page survey they produced bolstered their claims on the pay-phone industry as a whole. He further argues that David and Nisbet stopped shy of breaching the autodialer statute, which prohibits using the device for the sole purpose of generating revenue.

"These guys weren't just trying to make money," Carbone says. "They were performing a public service, as they did in bringing attention to the surcharge on [AT&T's] calling cards."

Nonetheless, a federal grand jury indicted the business partners in March 2002 on charges of mail fraud, money laundering, and using fictitious names for a fraudulent scheme. Prosecutors alleged that David and Nisbet bilked $444,000 from long-distance carriers and some 2 million toll-free subscribers, each of whom lost 24 cents apiece.

The vast majority of cases involving alleged violations of telecommunications law end up before the FCC. The agency tends to dispense justice by meting out fines and suspending or revoking operating rights, though it also can refer cases to federal and state agencies for criminal prosecution. Carbone believes David and Nisbet's case belonged before the FCC. The agency never saw it.

"The people at AT&T went straight to the FBI for a reason," he says. "They wanted to scare the shit out of anyone who would ever think about doing something like this."

Daniel David's trial began in March 2004. By then, his friendship with Scott Nisbet belonged to the past. Federal prosecutors had persuaded Nisbet to plead guilty to one count of mail fraud before the start of David's trial. But as part of the agreement, the feds stipulated that his sentencing occur after David's trial.

The tactic in effect removed Nisbet as a potential asset in David's case. If called as a defense witness to corroborate Daniel's testimony, Nisbet would invoke his rights against self-incrimination to avoid potentially jeopardizing his plea deal. He intended to save his own scalp.

Narsai David, for one, wished Daniel would ape Nisbet's example and acquiesce, according to sources who know both Davids. (Narsai declined to comment to SF Weekly.) Daniel chose to soldier on, a decision many of his friends applaud.

"This was a witch hunt by AT&T," says Jack Frater, who first met the Davids through a mutual friend in the mid-1970s. Frater, who gave Daniel the nickname Tigger for his exuberance as a boy, admires his friend for refusing to impale himself on a plea deal. "He's not going to say he's guilty for something he didn't do."

Other friends of the David family suggest Daniel succumbed to "misplaced pride," as one puts it. The person asked to remain anonymous, fearful of risking friendships with the two David men. "I think there was a disconnect between [Daniel's] moral sense and what he was doing with Scott Nisbet. They had good intentions when they started, but then the whole thing got away from them."

Those who know Narsai and Daniel describe them as close, if less than inseparable. Daniel grew up watching his father evolve into one of the country's best-known chefs, a gourmet at ease sharing kitchen or dais space with Wolfgang Puck and Paul Prudhomme. His eatery in Kensington, Narsai's Restaurant, reigned among the region's prominent fine-food establishments during a 16-year run that ended in 1986. Daniel served as everything from busboy to maitre d' to musical guest, his alto sax providing the bass line to the room's easy charm.

But friends insist the closing of Narsai's Restaurant, if sad for patrons, didn't knock Daniel's career ambitions from orbit. He ran his father's catering business for a few years, and while attending college in California and Arizona, he spent his summers in France, working with chefs who knew Narsai. Even so, a passion for art outweighed Daniel's love of cooking, and Narsai refrained from foisting his culinary legacy on his son, whom he's quick to call the better chef.

"Narsai's enormously proud of Danny," Hollie Webster says, "but watching his son go through this has also been enormously hard on him."

Daniel's case likely would have dodged media attention if he were a pipe fitter's kid. Narsai fretted that the publicity clinging to the case would harm Daniel's psyche, as news accounts invariably referred to the younger David as "celebrity chef's son."

Federal prosecutors depicted him differently: as a telecom con artist who swindled millions of toll-free subscribers, despite each receiving only a single hang-up call, and countless long-distance carriers. They also disputed his pretrial claims that he and Nisbet planned to use their survey's findings to bring a class-action suit against long-distance carriers on behalf of pay-phone operators. The duo failed to earmark any of the funds they earned in dial-around compensation for such litigation, prosecutors asserted, and spent about half of the $444,000 on their legal defense.

David admitted on the stand that "the idea of making some money was certainly attractive." But a $2,500 trip to Hawaii, a $3,700 furniture purchase, and a $4,000 wine deal represented his most lavish expenditures with the dial-around proceeds. Prosecutors also skewered him for dining at upscale eateries most days, a point Webster counters with a sigh. "That's what he's always done. What's a guy without a kitchen supposed to do?"

Thomas Carlucci, David's attorney, argued that the money barely influenced his client's life, and that much of the profits went to covering overhead on the business and paying back loans. Carlucci, who refused to comment to SF Weekly, portrayed Nisbet as the scheme's prime culprit, the high-tech guru whose insistence on using aliases doomed the duo's purpose.

The jury found the prosecution's narrative more persuasive, convicting David after a weeklong trial, perhaps influenced by what Carbone refers to as the "ski-mask theory": If a person conceals his identity, no matter the ulterior ideal, he must be doing something wrong. In May 2005 U.S. Circuit Judge Susan Illston sentenced David to 30 months in prison and ordered him to pay restitution of $444,000. (For pleading guilty, Nisbet received a 15-month term; he walked out last year.)

At that hearing, Assistant U.S. Attorney Stacey Geis, who inherited the case from the prosecutors who handled the trial, made a startling admission: The long-distance carriers, rather than losing money, profited from David and Nisbet's scheme. "The phone companies here are not the victims," Geis said. "They were unjustly enriched in the same way the defendants were unjustly enriched."

The remark occurred during a discussion about the best way to disperse the funds that David would repay, given the logistical madness of sending checks for 24 cents to more than 2 million toll-free subscribers. David and his supporters contend that Geis' comment reveals two crucial points.

First, while passing along a mere 24 cents to David and Nisbet for each toll-free call, the long-distance carriers earned untold sums from those same calls. More critically, her statement implies that prosecutors knew the phone companies profited, but argued otherwise at trial.

"They buried that fact," Carbone says. Prosecutors also succeeded in persuading Illston to limit what Carlucci could say about the pay-phone surcharge case that David and Nisbet brought against AT&T. If jurors had heard that he helped force the carrier to adopt a reform beneficial to consumers, Carbone says, "They might have seen what he was trying to do with dial-around compensation in a similar light."

Questions for prosecutors about David's case were redirected to Luke Macaulay, spokesman for the U.S. Attorney's Office. He dismisses the notion that the government deceived the jury. "The phone companies were victims in that they were mislead in the overall scheme," he says.

David's supporters believe that if the jury had heard about the long-distance carriers making money off his venture, its verdict might have changed. At least one juror disagrees. Told by SF Weeklythat the carriers in fact profited from David and Nisbet's autodialer phoning frenzy, Paul Sowell utters a blunt retort.

"That doesn't change anything. If these guys were about serving the public good, why cash the checks?"

Friends of the Davids are unsure whether father or son will have the harder time adjusting with Daniel behind bars. More than one person says Daniel's incarceration has left Narsai "a broken man."

Inside the prison, Daniel's resolve to gain a retrial has brought the prospect no closer than since he lost his appeal last summer. He has 29 more months to serve. Scott Nisbet does not.

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