FundAmerica Founder’s $20-Million Fine Set Aside

Florida Atty. Gen. Bob Butterworth has set aside a $20-million fine imposed against FundAmerica Inc. founder Robert T. Edwards in connection with criminal charges accusing him of running the company as a Florida pyramid scheme.

Butterworth took the action Monday on the recommendation of an administrative hearing officer who said Edwards, a Newport Beach resident, had not had a chance to present an adequate defense.

Edwards’ attorneys called Tuesday’s decision a victory, but officials in Butterworth’s office said they intend to obtain a fine against him for up to $20 million through the administrative hearing process.

“Mr. Edwards has not broken any laws, and he intends to vigorously fight these spurious charges,” attorney Neal Sonnett said in a press release issued by FundAmerica.

Edwards was chairman of Irvine-based FundAmerica but resigned after Florida officials arrested him for operating a pyramid scheme. The company, which has filed for Chapter 11 bankruptcy protection from creditors in Santa Ana, has since tried to distance itself from Edwards to gain back business.

The company revealed Butterworth’s decision in a press release. FundAmerica President Mitchell Blumberg called the press release part of a “coordinated effort” to ensure the company’s and Edwards’ vindication in Florida.

FundAmerica has said it is a legitimate consumer club that obtains discounts on such services as long-distance phone calls for its members, but regulators in several states, including California, say it is an elaborate pyramid scheme in which thousands of people lost money.