FundAmerica Pleads No Contest to Reduced Charge in Florida

A company accused of defrauding investors has pleaded no contest to a single felony charge in a deal with Florida prosecutors.

The company, Irvine’s defunct FundAmerica Inc., must pay a $200,000 fine but avoids a criminal trial.

Florida’s attorney general contended that FundAmerica was a pyramid scheme--a company that spent more time signing up new members for a fee than actually selling products. The Florida courts, however, would not let prosecutors introduce a key part of their case--what prosecutors said was evidence that company founder Robert T. Edwards had run pyramid scams on three continents. (He was never convicted.)

So prosecutors agreed to let FundAmerica plead no contest last week to a charge of misrepresenting investors’ odds of success, a less harsh charge than stock fraud.

The 1990 criminal charges helped push FundAmerica into bankruptcy. The company was shut down and its assets sold off to repay creditors.

Now, though, there is a new incarnation of FundAmerica, Irvine’s FundAmerica 2000 Inc., which says that the new company has made changes even though though the Florida case proves that its predecessor didn’t do anything wrong.

“After more than three years of legal fees, a trial was just going to add more,” said Robert C. Gilman, the new company’s executive vice president. “By pleading guilty to an innocuous Florida law, the case goes away.

“We never changed the company name because we feel we never did anything wrong in the first place. And we feel we’ve been completely exonerated.”

The deal with prosecutors, in fact, clears the way for Edwards to take over the successor company, FundAmerica 2000 Inc.

He sold the old company’s name and marketing plan to one of his lawyers, but the deal allowed him to buy a majority stake in the new company if he beat the Florida charges. Edwards is already a consultant to the new company.

The plea deal even allows FundAmerica and Edwards to operate in Florida again in a year. Under the plea bargain, the charges against Edwards will be dropped in a year if he doesn’t violate any laws.

So far, Edwards has stayed out of trouble in Florida, said David J. Audlin Jr., one of the state attorney general’s chief assistant statewide prosecutors.

FundAmerica offered members rebates on long-distance phone calls, airline tickets and other products and services. But prosecutors said its real mission was a classic pyramid scam: Early investors make big commissions selling memberships, but later investors are left holding the bag when the company inevitably runs out of buyers for its memberships and the scheme collapses.

FundAmerica says the new company focuses more on selling products and less on commissions from selling memberships.

It has moved into 18 states and has 150,000 members, according to the company.

Edwards’ lawyer, Neal R. Sonnet of Miami, said in a statement, “While we were always confident that we would prevail at trial, we believe the settlement . . . is fair to both sides.”