With FundAmerica Inc.'s assets frozen, some of its top salespeople have decided to strike out on their own.
Twenty or more of FundAmerica's "presidential directors"--seeking to continuing living in the high style to which they've been accustomed--have formed a company called VisionMarketing that intends to join forces with another multilevel marketing firm.
"VisionMarketing was started by the top producers of FundAmerica," said a VisionMarketing spokesman, who asked not to be identified. "Most of the top guys were making $30,000, $40,000, $50,000 a month with Fund-America. We're all stuck without jobs and we have a lot of bills out there that need to get paid because we were doing a lot of stuff."
FundAmerica and its founder, Robert T. Edwards, are facing criminal charges of fraud and operating an illegal pyramid scheme in Florida. They are also facing a federal civil class-action lawsuit charging fraud. Both the company and Edwards have denied the criminal and civil charges.
The federal judge in the $150-million civil suit has frozen Fund-America's assets, preventing it from paying any sales commissions to its 100,000 members, including its presidential directors, who are at the top rung of the company.
Presidential directors are Fund-America's top salepeople, who achieve that position by bringing 10 directors into the company. A director must purchase 40 memberships at wholesale, an investment of about $3,200. The presidential directors receive commissions on sales by each director.
The company claims it is a multilevel marketing firm and consumer-buying club that offers its members cash rebates on services such as travel. But authorities in several states, including California, say it is a pyramid scheme, deriving almost all of its income from membership sales.
VisionMarketing is structured in a similar fashion to FundAmerica and has started taking out newspaper advertisements to attract members. In fact, it is appealing directly to FundAmerica members to join.
"FundAmericans. Why have over 20 presidential directors (top salespeople) with earnings in excess of $30,000 per month got involved in our program?," asked one ad placed recently in the Los Angeles Times. "Here's YOUR opportunity of the decade to be front-line with successful leaders. Success breeds success."
Officials of FundAmerica--which once billed itself as "the financial opportunity of the decade"--refused to comment on VisionMarketing.
"Some of us thought FundAmerica was the greatest thing in the world," said the VisionMarketing spokesman. "We have gotten our hearts ripped out as well as our pocketbooks."
VisionMarketing said Monday that it has reached a tentative agreement to distribute the products of Sparks, Nev.-based Phoenix International Corp., which it claims is a multilevel marketing company. The firm makes diet cookies and supplements for everyone from "Girl Scouts to retirement homes" according to VisionMarketing.
Just like FundAmerica, Phoenix International has different levels of sales employees who soon find that it pays to bring in new members. While they were called directors in FundAmerica, Phoenix calls them counselors and supervisors.
Phoenix International itself has gotten into trouble lately. The U.S. Food and Drug Administration notified the company in May that its marketing practices were violating federal regulations.
The company "made unsubstantiated medical claims that the products were useful for weight control, cardiovascular disease, colon cancer, diabetes and diverticulitis," the FDA said in a May statement.
Some diabetics were told that they could eat the cookies instead of taking insulin, the agency said. "Use of these products in lieu of medication prescribed by a physician could present serious adverse health consequences for some individuals," the FDA warned in its statement.
Besides those claims, tests by the FDA and the state of Mississippi showed that the cookies weren't neither low-calorie nor high fiber.
"It had about half the fiber as they claimed and about twice the calories," said Janet McDonald, consumer affairs officer with the FDA in San Francisco.
Phoenix International withdrew its products but has since put them back on the market after getting a labeling change approved by the FDA.
Phoenix International executives could not be reached for comment.
Earlier this summer, Texas Atty. Gen. Jim Mattox filed a lawsuit charging Phoenix International with making deceptive claims about its product. The Consumer Protection Report--a periodical for state attorneys general--reported that the lawsuit required the company to refund money to anyone returning the cookies and to pay $18,000 to the state for its costs.
The company is under investigation in several states. "We've been taking a look at it," said Philip Byrnes, deputy attorney general of consumer affairs in Nevada.
Phoenix International has more than 50,000 independent distributors, many in the southeastern United States.
Besides VisionMarketing, two FundAmerica salespeople are taking out newspaper ads trying to convince compatriots to start selling the nutritional products of another multilevel marketer, Dallas-based Omnitrition.
The company sells drinks and other products with names like "Wow" and "Go for It." Omni IV is an earth-colored drink containing kelp, ginseng and bee pollen. Jerry Rubin, who gained fame as one of the Chicago Seven in the late 1960s, is one of Omnitrition's top salesmen.
Top salespeople earn in excess of $30,000 a month, said FundAmerica member Dave Sarro. "Don't be left out," he urged in a newspaper ad. "Go where most of the top moneymakers are. Our program is the hottest program today. Without a doubt the financial opportunity of the decade."