Businessman Defrauded Investors, Judge Decides

A federal bankruptcy judge has ruled that a Newport Beach businessman defrauded investors by masquerading as an Air Force colonel, a Harvard-educated lawyer, a CIA operative and a prisoner of war in Laos.

Judge Robert W. Alberts also ruled that Edgar Dale Allen, 70, lied to Bankruptcy Court about his business and personal background. Allen concealed personal property and assets and those of his company, American Life Underwriters, failing to account for as much as several million dollars, according to testimony the judge called credible.

Allen “is liable to plaintiffs for fraud and is not entitled to the economic fresh start afforded to honest debtors under the code,” Alberts wrote in an 86-page decision issued last week.

Allen said this week that he will appeal. He said the judge was “totally confused” in his ruling and “doesn’t know anything about insurance.” Allen said that he wasn’t allowed to submit relevant evidence to the court and that assertions that he couldn’t account for millions of dollars “is the biggest joke . . . in America.”

Allen also continues to insist that he was injured while taken captive during a covert CIA mission in Laos in December 1963.

“Needless to say, I’m very disappointed” by Alberts’ decision, Allen said. “Under any circumstances, we’re appealing.”

The judge’s decision caps a four-year fight by investors to force Allen to repay what they thought were secured investments. They said he enticed them with tales of wartime heroism, business acumen and ties to prominent Republican Party officials. Allen argued their investments were personal loans that weren’t repaid because of a failed business venture.

“Hopefully, he won’t be able to do this to anyone else,” said Jon Illingworth of Tustin, whose late father invested $40,000 with Allen in 1993.

“This should send a message to all those who would lie, cheat and defraud others that it will not be tolerated,” said William R. Kennon, a Tustin attorney representing investors.

Allen filed personal and business bankruptcy in April 1997, claiming about $2 million in secured and unsecured debts. He listed personal property worth $8,550, plus community property interest in a $700,000 Corona del Mar home. A year before, Allen had transferred ownership of the house to his wife, local GOP official Jo Ellen Allen.

Allen’s attorney, Theodor C. Albert, contends that Allen is a bona fide war hero and that he intended to repay his investors. Allen testified that he opened an insurance office in Florida in the early 1990s, hoping to provide insurance and other investments to teachers through a Dade County credit union.

License to Sell Securities Suspended

In 1996, Allen’s license to sell securities was suspended after a former employee filed complaints with federal regulators. The employee, Gerald Nowotny, said he became suspicious of Allen after discovering that investment documents had been altered. Allen later blamed Nowotny--who had directed $225,000 in loans to Allen from his family and friends--for ruining his business.

Seven investors argued in court that Allen conned them into giving him money by weaving a tapestry of trustworthiness. On the walls of Allen’s Newport Beach office hung photos of Allen with various GOP officials, including former Rep. Robert K. Dornan, who Allen told investors wore a POW bracelet inscribed with his name.

Dornan, who helped create the Vietnam War era bracelets, said his bore the name of a family friend shot down in Laos in 1965.

Military fraud expert B.G. “Jug” Burkett--author of “Stolen Valor,” a book on bogus Vietnam War heroes--and a CIA officer testified during the bankruptcy proceeding that Allen’s claims of being shot down and held prisoner in Laos in 1963 while on a secret mission for the CIA weren’t credible. Investors testified that Allen related harrowing tales of his capture and told them that then-Secretary of State Henry A. Kissinger had paid $1 million in gold for his return.

CIA Official Would Testify

William McNair, information review officer for the CIA directorate of operations, said the agency does not generally comment on its activities but will testify to refute claims of CIA affiliation.

“Obviously, I’m ecstatic about the outcome,” Burkett, of Dallas, said this week.

Allen’s stepdaughter by his second marriage, Tamara Leslie, testified that he told her family and neighbors that he was an attorney and had graduated from Harvard University. Harvard records show Allen neither attended classes nor earned a law degree there.

Allen acknowledged during the proceedings that he is not an attorney and that his resume’s listing of membership in the Federal Bar Assn. was a mistake.

In June, Allen filed for bankruptcy protection for another venture he began operating before seeking protection from American Life Underwriter creditors, using the same address and phone number.

Allen listed debts of $251,500 for Mega Agency Group, whose bankruptcy filing also was assigned to Judge Alberts.