FundAmerica Gets Reprieve as Judge Delays Liquidation

A federal bankruptcy judge Tuesday decided to give FundAmerica’s court-appointed trustee another week to demonstrate why the controversial marketing company should not be liquidated.

During a hearing in federal court here, Judge James N. Barr asked trustee Theodor Albert to justify his plan to operate the Irvine company for another 30 days at a cost of $250,000.

“I’d like to know why it is you think it’s a good idea to go on another month,” Barr demanded. “I wish I could see some substance behind this.”

Albert responded that he thought FundAmerica could offer a legitimate product--discounts on services such as travel and long-distance phone calls--but needed time to either resume marketing or to find a third party willing to buy the firm’s assets.

FundAmerica founder Robert T. Edwards and the company are scheduled to go to trial next month on criminal charges that they masterminded a massive pyramid scheme that defrauded more than 100,000 people across the country. Edwards and company officials have denied the charges, saying FundAmerica’s primary business was as a discount buying club.

Albert, who was appointed trustee last month after a power struggle erupted at FundAmerica, said he had been contacted by companies interested in buying FundAmerica “lock, stock and barrel, as is.” The firm’s biggest asset may be its membership list of more than 100,000 people interested in multilevel marketing.

One of the possible buyers is FundAmerica Holdings Ltd., FundAmerica’s parent corporation in Vancouver, Canada. Edwards’ personal attorney, George Davis, owns controlling interest in FundAmerica Holdings and runs the firm.

“I think a pretty good case could be made for the sale of assets,” Albert told Barr.

Albert added, however, that if nothing happened by the end of May he would “come to the court to ask to turn off the lights.”

Barr said that wasn’t soon enough and instructed the trustee to return Tuesday with a progress report on a new FundAmerica sales campaign or a buyer for the company. Barr has approved the eventual payment of some $750,000 in legal fees that FundAmerica owes. FundAmerica has about $600,000 in assets.

Albert said he intends to reduce expenses at FundAmerica through several measures, including possible layoffs among its 30 employees.

“We are probably going to have some staff reductions,” Albert told Barr.