Troubled FundAmerica Names Author Ruff CEO
Doomsayer, newsletter publisher and book author Howard Ruff on Monday was named president and chief executive officer of FundAmerica Inc. and announced that he and his associates intend to buy the controversial company’s outstanding stock.
He replaces FundAmerica’s founder, Robert T. Edwards, who was arrested July 19 by Florida officials on charges of operating an illegal pyramid scheme. The company and Edwards maintain that FundAmerica is a legitimate business.
Edwards, who was released on $1 million bond, resigned as president and CEO and stepped down from the Irvine company’s board last week. The company’s operations are under investigation in several states, including California, Texas and Florida.
Ruff, who writes “The Ruff Times” newsletter and is author of the 1978 best seller “How to Prosper During the Coming Bad Years,” said in a release that he is prepared to invest his own money in FundAmerica if necessary.
The value of the proposed transaction, which FundAmerica said in a statement could be completed in two to four weeks, was not disclosed. Ruff’s partners were also not named.
Irvine-based FundAmerica is struggling to survive following Florida’s raid. The company’s assets were frozen last week after a FundAmerica investor filed a $150-million class-action lawsuit in San Francisco federal court charging the company with fraud and racketeering.
Some of the company’s 100,000 members reported they are no longer getting checks for bringing in new members. To many, the company’s problems are threatening its survival.
“He (Ruff) doesn’t agree,” said Michael Baybak, a Ruff spokesman. “It’s evident a new slate and a new ownership is coming in. There is a wholesale transition here.”
FundAmerica also said Monday that board member William Dexter resigned and was replaced by Mitchell Blumberg, a Houston real estate developer.
Ruff is the lastest well-known name to be attached to FundAmerica.
Arthur Laffer, noted supply-side economist and adviser to former President Reagan, resigned from FundAmerica’s board last week following revelations that Edwards had allegedly operated pyramid schemes on three different continents.
Ruff, 59, made his reputation in the 1970s predicting a financial apocalypse that never came to pass. At one point he called on society to hoard gold and food in order to survive. Before writing his bestseller, he wrote another book entitled “Famine and Survival in America.”
Nowadays, he is a bit more relaxed. This year’s conference for Ruffians in Los Angeles was entitled “How to Grow Rich Before You Grow Old.” The Ruff conference--one of the largest such annual events for investors--attracted about 1,500 people in May.
Ruff resides in Mapleton, Utah, and runs the Jefferson Institute, which offers courses on starting part-time businesses.
FundAmerica has been operating since 1986. The company does business in eight states, including California, and took in more than $33 million in the first four months of this year.
FundAmerica officials say the company operates a legitimate multilevel marketing program. The company charges membership fees in exchange for rebates on such things as airline tickets and long-distance phone service.
But Florida regulators charge that the company is a dressed-up version of an age-old scam--the pyramid scheme. They say FundAmerica has no real product and derives all of its revenue from membership fees--anything from a basic membership for $140 to a directorship for $3,200, which entitles the holder to all kinds of bonuses.
The company rewards existing members with sizable bonuses for attracting new members. But Florida authorities say it is a pyramid that will eventually collapse when the stream of new members is exhausted.
Florida authorities say the company took in more than $8 million from residents there.
A hearing is scheduled today in San Francisco to hear a FundAmerica request to have its assets freed.
