Top FundAmerica Executive Faces Fraud Charges : Investigation: Official of Irvine-based marketing firm is arrested in connection with a Florida state probe of an alleged pyramid scam.
The top executive of the Irvine-based marketing firm FundAmerica Inc. was arrested Thursday in Delaware on fraud charges in connection with a Florida state investigation into whether the company ran an illegal pyramid scam, Florida state regulators said.
Robert T. Edwards, president of FundAmerica, was arrested in Wilmington. He is being held on charges of criminal organized fraud and unlawful lottery activity, said Joe Bizzarro, spokesman for the Florida attorney general’s office.
FundAmerica, a network marketing firm, confirmed in a statement Thursday night that its offices in Irvine were searched in connection with an investigation by the Florida attorney general’s office.
The Florida attorney general also issued a “cease and desist order” against the company in connection with the investigation and accused the company of running a scam that bilked state residents of more than $8 million. FundAmerica has 21 days to respond to the order.
FundAmerica’s statement said the company was “shocked by the actions of the Florida statewide prosecutor’s office.”
Clifton H. Jolley, a FundAmerica spokesman, said the company has been operating for four years and that the Florida regulators did not attempt to contact the company before issuing the cease and desist order. The company also said that regulators did not understand the difference between a legal network marketing company and an illegal pyramid scheme.
“If you’re going to search our offices, for heaven’s sake, search it for something we haven’t already given you,” Jolley said. “We have fully cooperated. This may have been done for dramatic reasons.”
Jolley said the company was still operating, but he said the Florida state actions would have a “chilling effect” on its sales organization. Authorities in Texas, Florida and California are investigating the company, but Jolley said the company is allowed to do business in California.
FundAmerica members reportedly were told they could save money on long-distance telephone calls and airline tickets. The company charged people $3,200 to become sales representatives, who could earn commissions and bonuses by recruiting other representatives and club members.
Florida Statewide Prosecutor Peter Antonacci said that recruitment practice constituted a pyramid scheme, which is inherently fraudulent because if every eligible person were to become a sales representative, those signing up last would have no one to recruit and no way of earning the promised return on investment.
FundAmerica received at least $8.2 million in Florida through the sale of more than 2,500 director-level sales positions since it began its Florida operations in March, according to the office of Florida Comptroller Gerald Lewis.
More than 98% of the $33 million in gross income reported by FundAmerica during the first four months of 1990 came from the recruitment plan, according to Lewis’ office.
Bizzarro, the Florida attorney general’s spokesman, said there is an active warrant for Edwards’ arrest in England in connection with an alleged unlawful pyramid scheme.
Florida officials said that FundAmerica’s offices in Irvine were searched Thursday by the Orange County district attorney’s office. They said county prosecutors and the California secretary of state’s office are assisting Florida authorities in their investigation.
FundAmerica officials in Irvine could not be reached for comment late Thursday.
The Associated Press contributed to this report.
