FundAmerica’s Founder Paid $5 Million in ’90
The new head of beleaguered FundAmerica Inc. said Friday that a review of the firm’s books revealed that company founder Robert T. Edwards was paid $5.4 million thus far this year and that he mysteriously wired $11.3 million to two foreign entities.
Howard Ruff, named FundAmerica’s chairman and chief executive this week, said Edwards’ pay “blew me away.”
“That’s several times more than the CEOs in most Fortune 500 companies” earn, Ruff said.
The financial revelations came as an official of the California Attorney General’s office filed a statement in a federal court case alleging that FundAmerica operated an “illegal pyramid or endless chain scheme” in California, where the company is under investigation.
The developments also come a little more than two weeks after Florida officials arrested Edwards and accused him of operating FundAmerica as an illegal pyramid scheme. Florida officials allege that Edwards bilked $8.2 million from the state’s residents.
Edwards, who is free on $1-million bond, has denied the charges, claiming that FundAmerica is a legitimate marketing company. The company supposedly sells memberships for a fee in exchange for rebates on various goods and services and is said to have about 100,000 members nationwide.
Ruff said Florida officials have told him they will indict the corporation itself on criminal charges Thursday. Florida prosecutor Peter Antonacci confirmed Ruff’s statement, although he would not discuss the specific charges.
“This was not unexpected,” Ruff said. “Other companies in network marketing have come under indictment and survived. It does not automatically mean the death and demise of FundAmerica.”
Ruff, who writes a nationally followed investment newsletter, announced earlier this week that he and several unnamed associates intended to buy FundAmerica and attempt to save it from bankruptcy.
In a meeting with supporters Tuesday, Ruff said his first look at FundAmerica’s books indicated that there were no improprieties and that the company could be put on a sound footing. He seemed less certain Friday, saying he doesn’t know if the firm can be rescued.
The company has about $17 million in assets, nearly all of which were frozen at the order of the federal judge presiding over a $150-million class-action lawsuit against FundAmerica filed in San Francisco.
In a legal opinion filed in the case, Susan Henrichsen, California Deputy Attorney General, said FundAmerica’s marketing plan emphasizes that participants can pay money for the chance to make even more money by recruiting people into the organization.
“The money earned by such participants is based principally on their recruits’ purchases from the company, and not on sales” of a product or service, Henrichsen said.
Henrichsen said Friday that California’s probe of FundAmerica is continuing. She claimed that evidence shows there were six to 10 times more memberships sold than there are actual members, a sign that memberships were sold over and over again without being used.
