CHICAGO — Marcia Markwalker says Nelson Hallahan's hands constantly shook and he couldn't look her in the eye, yet her unease she and her late husband still gave him $35,000 to invest and recommended that friends do the same.
Hallahan and his wife, Janet, flashed their wealth around working-class Peoria in the 1990s, but rather than sowing doubts about the Ponzi-scheming couple, the relative of another victim surmises it helped them sell their get-rich-quick dreams.
The U.S. Marshall's Service said that acting on a tip, agents arrested the Hallahans in Arizona on Saturday, 12 years after they failed to report to an Illinois prison after pleading guilty to bilking investors out of 1.2 million. The two were living in separate homes in Tonopah, a sleepy desert community 50 miles west of Phoenix, although authorities didn't know why or how they were earning a living.
Markwalker, upon learning of the arrest on Monday, recalled how uncomfortable she was handing her and her husband's money to Nelson Hallahan.
"I sensed something. ... I said to (my husband), 'He can't even talk to us, look us in the eye,'" said Markwalker, who served as mayor of Bartonville, near Peoria, before retiring. "I said, 'We're going to be sorry.'"
The Markwalkers were looking to feather their nest egg a bit, and lost money they couldn't afford to lose. But Marcia Markwalker said they felt even worse for some of the Hallahans' other victims they heard about, including widows, retirees and even Janet Hallahan's own parents.
"That broke my heart because they were nice, decent people," Markwalder said of Janet Hallahan's parents. "They lost their home."
The Hallahans pleaded guilty to federal charges of conspiracy to commit mail and bank fraud and conspiracy to commit money laundering, then disappeared in January 2000, days before they were to report to prison.
Nelson Hallahan, 65, and Janet Hallahan, 54, lived in several Southwest states under several aliases since fleeing Illinois, authorities said. They were living under fake names in separate Tonopah homes a few minutes each other when they were arrested, Matt Hershey, a supervisory deputy U.S. Marshal in Phoenix, said Monday. The tip came from someone who saw the couple profiled on a recent "America's Most Wanted" broadcast.
Hershey said authorities hadn't determined why they were living in separate homes. He said investigators hadn't found evidence suggesting they had operated any schemes in recent years, but he said there was no evidence that the pair had obtained gainful employment.
"They were staying off the grid, living in a rural area, not really having things in their names," Hershey said. "They were just trying to lay low."
Mike Waters, a Peoria attorney whose late uncle Jim Waters was among the Hallahans' victims, said he plans to be there when the couple next appears in an Illinois courtroom. He represented his uncle, a former postal worker, in a victims' lawsuit after the Hallahans filed for bankruptcy, and he said the Peoria couple stole from people who couldn't afford it.
"These were working class people of modest means who invested their entire life savings," he said. "Most of them were retired and didn't have much chance to recover."
Like all Ponzi schemes, the Hallahans promised significant returns on investments and paid early investors with money they received from newer ones. They also defrauded investors by selling interests in a tanning salon they later sold without telling investors, the statement said.
It was the type of victims targeted that helped fuel the scheme, Markwalder said. They were people who did well with the Hallahans for a while and wanted to share their good fortune with their friends and relatives.
"When something good is happening in anything, I like to include people," she said, explaining why she told people she knew about the Hallahans, who subsequently invested their own money.
Even the sight of Janet Hallahan in her expensive clothes and jewelry didn't bother them and may have even helped sell their scheme because everybody could see how well the Hallahans were doing.
It later became shockingly clear what they were doing and what it had cost them all.
"While they were doing all this extravagant stuff they were wiping out people making $30,000, $40,000 a year," said Waters, who heard stories of the two walking around town in fur coats.
Teresa Allred, 63, said she and her husband considered the Hallahans friends.
They gave the Hallahans $15,000 to buy more tanning beds for the salon. Allred, who lives with her husband just outside Peoria in Morton, said that when the Hallahans borrowed the money to buy tanning beds, she had already sold the salon.
"With friends like that, who needs enemies?" she said.
Darilynn Knauss, a Peoria-based federal prosecutor, said it is highly unlikely anyone will see any money from the Hallahans.
"The money's gone," she said.
That's not a surprise to Markwalder, who has figured for years that the money she and her husband lost is gone forever.
Hershey, the federal marshal, said the Hallahans were scheduled for an initial court appearance in Phoenix on Monday. At some point, the court would begin procedures for them to be extradited to Illinois.Comment on this story
Waters said he plans to be there when the Hallahans are eventually returned to Illinois and return to court for sentencing. Knauss said the Hallahans are each facing a maximum sentence of 25 years for the charges they skipped out on and up to 10 years in prison for failing to appear for sentencing.
"I wouldn't mind seeing him (Nelson Hallahan) one more time," he said.
Hershey said he hoped the capture of the Hallahans would offer some solace.
"If nothing else, their arrest will allow these victims some closure," he said.
Associated Press writer Amanda Myers in Phoenix contributed to this report.