God Bless America

How a Newport Beach power couple used right-wing politics to build an empire worth absolutely nothing

For the next decade, Jo Ellen built her conservative credentials. In 1983, notorious anti-feminist Phyllis Schlafly helped Jo Ellen launch a state chapter of Schlafly's national organization, Eagle Forum, a right-wing advocacy group with close ties to the conservative fringe of the Republican Party.

Soon, Jo Ellen began appearing frequently as a political commentator on television and radio shows, including KNBC's award-winning weekly Free for All. In her 1985 résumé, she listed occupations including "television artist" and "recognized authority on legislative, educational and family-related issues." Such local conservatives as Congressman Bob Dornan, Assemblyman Gil Ferguson and Supervisor Tom Riley showered praise on the woman with the quick wit, pretty blue eyes, shapely legs and an unmistakable bouffant hairstyle that was (and remains) straight out of a 1950s Betty Crocker cookbook.

In 1988, Jo Ellen tried to parlay her résumé into a public office, running under the "traditional family values" banner for the Newport Mesa Unified School District board. (Eddie was described in her campaign's brochure as a "prominent Newport Beach businessman and financial adviser.") Her big policy points: teach only sexual abstinence in schools and let parents ban certain textbooks. She lost.

That same year, Jo Ellen earned her doctorate in political science from the University of Southern California; she began insisting that people call her "doctor." In 1991, Dr. Jo Ellen Allen's byline appeared over political commentary about Republican social causes in the Newport Beach/Costa Mesa Daily Pilot. She appeared with political commentator Hugh Hewitt, Will Swaim (now editor of the OC Weekly), Pilot editor Bill Lobdell (now a Times religion writer) and UC Irvine political-science professor Mark Petracca on a feisty local cable debate show called The Lobdell Group.

Though Jo Ellen had obtained a measure of notoriety, she and Eddie struggled financially. In January 1992, they were evicted from their Newport Beach home for failing to pay $14,000 in rent. On Feb. 15 of that year, they moved rent-free into a lavish Santa Ana house owned by Newport Beach school official Stephen Wagner. Despite the financial challenges, three days later, Jo Ellen filed to run for the 69th state Assembly District. Within weeks, the Allens lost a car to repossession and—according to financial reports from that period—did not own any personal property.

Turning to her campaign, Jo Ellen immediately slammed sitting conservative Democratic Assemblyman Tom Umberg as not socially conservative enough and was "part of the problem of more government, more regulation." At the time, Allen was understandably mum about her close ties to Wagner, a married but closeted homosexual who was later arrested and convicted of embezzling almost $4 million from school-lunch programs during a six-year period. He died of AIDS in prison in 1995.

The Umberg-Allen campaign was bitter. Allen produced mailers depicting Umberg as Pinocchio alongside text that read, "This is the story of a little boy who grew up and couldn't tell the truth." Umberg, a former federal prosecutor, responded with stinging questions about how the Allens earned their livings. One of his mailers stated, "[Jo Ellen], her husband and their family business [National Association for Employee Benefits] have been involved in dozens of legal battles together, including allegations of fraud, embezzlement and misappropriation of funds."

"Umberg has taken some lawsuits and led folks to believe things that aren't true," a self-described "mad" Jo Ellen explained to the Register.

Little was made of the fact that Eddie's company somehow poured $28,000 in "loans" into Jo Ellen's campaign; $12,000 was never repaid and remains an issue in Eddie's current bankruptcies. Umberg trounced his opponent at the November 1992 polls, and three months later, the defeated Allens moved back to Corona del Mar, where—thanks to the profits from one of Eddie's most suspicious business moves—they were able to buy the Spy Glass Hill house.

 

While Jo Ellen was busy campaigning in 1992, Eddie launched American Life Underwriters and, according to his own testimony, began searching the country for wealthy individuals. He called them his "big accounts." Allen lured investors with his false résumé, promises of large annual returns and talk of his wife's high-placed political connections, including Congressmen Dornan and Christopher Cox, U.S. Senator Paul Laxalt, and Orange County Assemblyman Curt Pringle.

In one case, Eddie hit pay dirt, collecting more than $500,000 from Doris Lach of West Palm Beach, Florida. According to court records, Lach thought Eddie—who claimed to be managing assets "in the billions"—was going to invest the money for her; he claims it was a loan. Later, when much of the principle plus dividends were due, Eddie said he couldn't pay. One reason Eddie couldn't pay, according to his own ledgers, was that he had used much of Lach's money to purchase the Spy Glass Hill House, as well as to settle claims against him from previous clients.

In 1995, Mrs. Lach died and—in a stroke of luck for Eddie—one of her daughters, Lucinda Herdman, was named the estate's representative. According to two sworn affidavits from Herdman's relatives, Eddie and Herdman were "romantically and emotionally involved" for at least two years, and he contemplated divorcing Jo Ellen.

Eddie and Herdman have denied the allegation, but it is certain that Herdman secretly accepted a job as vice president of Eddie's company for $125,000 and then, without consulting the estate's other beneficiaries, signed with Eddie what they call a weak settlement agreement on behalf of her mother's estate. During the bankruptcy trial, a tearful Eddie claimed he could prove he couldn't possibly have had an affair: he carried a card in his wallet that declared him impotent. The bizarre assertion elicited no follow-up questions in court, but Herdman remains Eddie's business associate and travel companion.

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