By Gustavo Arellano
By R. Scott Moxley
By Alfonso Delgado
By Courtney Hamilton
By Joel Beers
By Peter Maguire
By Charles Lam
By Charles Lam
He is a financial genius who manages "assets in the billions" for wealthy investors; earned a law degree at Harvard University; played baseball for the New York Yankees; flew Air Force One for President John F. Kennedy; and, as a colonel in the Air Force, was injured and held as a POW in the 1960s after performing covert missions for the Central Intelligence Agency (CIA) in Southeast Asia. She is the high-profile vice chairperson of the Orange County Republican Central Committee, a public-relations officer for Southern California Edison, and a frequent television commentator who espouses Christian traditional values and conservative politics.
But last month, federal bankruptcy Judge Robert W. Alberts shattered the impressive façade, ruling that Eddie had for years fabricated his life story in schemes to defraud wealthy and modest-income individuals of millions of dollars. The Allens had hoped that the court would give Eddie and his company, American Life Underwriters, bankruptcy protection to block the investors from ever collecting their missing money. But after reviewing more than two years' worth of evidence, Alberts was unequivocal: Eddie had been "thoroughly discredited," in part by knowingly giving false testimony and presenting doctored evidence. The judge also accused Allen of continuing to hide several million dollars from creditors.
"At the outset of the trial, it was contended on Allen's behalf that there was only a 'kernel of truth' in the plaintiff's allegations. The court concludes that, quite to the contrary, the evidence before it indicates only kernels of truth in Allen's contentions," Alberts wrote in his 86-page Sept. 6 ruling. "This court finds that Allen was not a colonel in the U.S. Air Force; he was not shot down, captured and held prisoner during the war in Southeast Asia; he is not a Harvard-educated attorney or, for that matter, an attorney at all; and he was not the very successful, wealthy and astute businessman portrayed. Plaintiffs justifiably relied upon such misrepresentations when investing. . . . [Allen] is liable for fraud and is not entitled to the economic fresh start afforded to honest debtors under the [bankruptcy] code."
Nor are these accusations ancient history. On June 25, 2001, Mrs. Lee Pickett of Port Ludlow, Washington, asked the FBI to investigate the Allens. "Jo Ellen Allen is an accomplice to the façade by participating in recruitment dinners and social events with prospective victims," wrote Pickett, who gave Eddie $550,000 to invest for her. "Jo Ellen was present at a dinner I attended and gave a persuasive presentation about her husband's business venture. She uses her well-connected Republican Party alliances to promote Eddie's stature in the business community."
Pickett closed her letter by begging the FBI to intervene, saying Eddie's "fraud" had driven her and her husband into financial hell. "I'm 79 years old and have been told to prepare to go blind," Pickett wrote. "My husband is handicapped with a debilitating disease, and we have been forced to declare bankruptcy to try and save our home. Mr. Allen has bled us financially and destroyed what is left of our lives." The bankruptcy judge cited Pickett's courtroom testimony in his decision that Allen had defrauded his clients.
Allen, however, remains defiant. He told a reporter that the judge was "totally confused" and didn't understand the insurance business. His latest attorney, Donald Segretti—a former Nixon administration staff member convicted of crimes associated with the Watergate scandal in the 1970s—told the Weekly he and Allen are preparing an appeal.
With eyebrow-raising charges of sexual infidelity as well as colorful courtroom appearances by high-ranking CIA agents, past presidential advisers and decorated Vietnam-era military officers—all of whom refuted Allen's claims—it was Orange County's most fascinating bankruptcy trial. But news of the case—and Alberts' bombshell ruling—almost didn't make it out of the Ronald Reagan Federal Courthouse in Santa Ana. The Orange County Register—whose editors and management often share the Allens' politics and circulate in the same social and political circles—ignored the story altogether. The Los Angeles Times' Jean Pasco, a longtime friend of Jo Ellen's, sat on the story for nine days until Saturday—the least-read edition of the week. The Times also buried Pasco's coverage on Page 3 of the local news section. Not surprisingly, Pasco's version of events noticeably omitted evidence of Jo Ellen's participation in what Alberts called Eddie's "business machinations."
Jo Ellen Chatham was born in Indiana in 1946 on either Aug. 8 or Aug. 26; she has listed both dates on official documents. When she was a 21-year-old Los Angeles college student in 1968, a Malibu district judge married her to Ronald W. Thurber, a defense-industry budget analyst. They lived in a modest Granada Hills house, and she worked as an assistant professor at West Los Angeles College, teaching U.S. government classes and, for a short time, coordinating student campus activities. Thurber recently stated that his then-wife "wanted to be somebody," "wanted to be in politics her whole life," and was "snobbish."
The couple had been married less than eight years when Jo Ellen met the smooth-talking Eddie—already twice married and divorced—during a Little League baseball game in Northridge. Two months after her divorce of Thurber was final in May 1976, Jo Ellen and Eddie were married by a Baptist minister.
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.
Jo Ellen—who failed to respond to more than a half-dozen requests for an interview—has apparently been suspicious of Herdman. The Republican-run Orange County district attorney's office has refused to investigate Eddie's businesses despite numerous complaints from bilked victims. However, they had no problem cooperating with Jo Ellen's freelance investigation into Herdman. On Aug. 14, 1997, the DA's office faxed to Jo Ellen a detailed law-enforcement report on Herdman. Chief Assistant DA Maurice Evans and Deputy DA Burl Estes wrote, "Pursuant to your request this morning, I had Irene in teletype run a warrant check on Ms. Herdman. The check was negative. Ms. Herdman has no warrants. As a backup check, I checked our office system with similar negative results. The teletype printout is attached."
Corporation and court records show that Eddie has established a succession of financial firms. The paper trail is so complicated and contradictory that Eddie himself was at pains to explain in court who owned the companies and how much money flowed through the accounts. Each time, he drafted investors with promises of huge returns and then declared bankruptcy or left the company entangled in a web of lawsuits. In the 1970s, he launched the National Association for Employee Benefits. He left the firm swamped in legal claims. He created American Life Underwriters in 1992 and filed for bankruptcy in 1997 following multiple lawsuits alleging fraud. At the same time he was attempting to steer American Life into bankruptcy, Eddie quietly launched Mega Agency Insurance Services and Mega Agency Group—the company to which the Picketts entrusted more than half a million dollars. Eddie told investors Mega would soon be worth $75 million; in 1999, it followed American Life into bankruptcy. In June 2001, yet another new investment firm, Metropolitan Financial Group, opened in Eddie's office space with his old phone numbers, even as Judge Alberts tried to sort out the American Life and Mega bankruptcies.
Creditors have worked unsuccessfully to get at the one asset they know Eddie does have: the Allens' Corona del Mar home. But before the 1997 bankruptcy declaration, Eddie gave Jo Ellen exclusive ownership of their home, frustrating his creditors again. Jo Ellen turned around and mortgaged the home three times, so encumbering it with loans that it is valueless to creditors. One of those who aided Jo Ellen and Eddie in those moves was none other than Dale Dykema, a key member of the elite Republican Lincoln Club.
By the time the Allens entered the Santa Ana courtroom, Eddie, who once advertised that he managed "assets in the billions" and was personally worth $150 million, claimed virtually no assets—some furniture, clothes, a leased car and a 10-year-old dog. He figured his monthly expenses at $11,866, including $1,000 for dinners at the Balboa Bay Club.
"She asked me, 'Why are you so mean to my husband?'" Illingworth says, "I told her, 'Because your husband's a crook and steals other people's money.'
"She's got a lot of explaining to do."Next week: Eddie Allen, master spy.
Jo Ellen Allen on KOCE's Real Orange
Photo by Jack Gould