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His Pyramids Were Schemes, Authorities Say : Marketing: FundAmerica of Irvine was only Robert T. Edwards' latest dubious venture. Surpassing the Pharaohs, he's left his mark on three continents.

August 12, 1990|GREGORY CROUCH and ANNE MICHAUD | TIMES STAFF WRITERS

Some say FundAmerica founder Robert T. Edwards built pyramids better than the Egyptians.

Constructed on at least three continents, his monuments weren't made out of sandstone. They were made of money.

From Australia to England to California, investigators say, the 49-year-old Canadian presented himself as an earnest businessman when he really is a globe-trotting con man. He seems to have two overriding talents: He can persuade nearly anyone that he can make them truly rich, and he knows when to get out of town.

Edwards left Canada in the early 1970s, just before the national police there filed criminal charges against him for allegedly running a pyramid scheme. He resurfaced in Great Britain, but went on the lam when another pyramid operation collapsed. Four years ago, he slipped out of Australia under a cloud after his sales firm failed.

"He left the country with some money sticking to his fingers," asserted Norman Prentice, spokesman for the South Australia Department of Public and Consumer Affairs in Adelaide. "He never came back to this country and, I might add, neither did the money."

Now, authorities in the United States say they have uncovered the Great Pyramid of Edwards' career--FundAmerica Inc. in Irvine.

Four states, including California, allege that FundAmerica is a pyramid scheme and are investigating the company and Edwards. On Thursday, Florida formally charged Edwards and FundAmerica with organized fraud, securities fraud and illegal lottery activity. If convicted, he could get more than 65 years in jail.

Edwards has denied the charges against him. He says he is a legitimate entrepreneur, traveling the world to create multilevel marketing companies that are as upstanding and as successful as Amway or Mary Kay Cosmetics.

FundAmerica is his piece de resistance. The four-year-old company has 100,000 members in eight states and was bringing in big money. Documents filed in Florida indicate that it took in $33 million in just the first four months of this year.

Well-known business figures--such as supply-side economist Arthur Laffer and investment guru Howard Ruff--were so taken with Edwards that they became FundAmerica members and for a while accepted leadership roles in the company.

FundAmerica has steadfastly maintained that it is a run-of-the-mill consumers club, saying that its sole purpose is to earn cash rebates for its members on services such as travel and long-distance phone calls.

State authorities, however, contend that it is a gussied-up pyramid scheme, deriving almost all its income from membership sales, and that a market has even formed around selling them in blocks. California officials said there are 100,000 members, but another 900,000 memberships were sold to existing members in packets that have not been resold.

Indisputably, those at the top of the alleged pyramid got rich selling FundAmerica memberships. Twenty-five-year-olds sported six-figure incomes and Armani suits. A few attorneys quit their jobs because they could make more money at FundAmerica. Some Harvard Business School graduates said it was the financial opportunity of a lifetime.

Edwards was "the marketing genius" behind it all, it was said again and again in glossy FundAmerica brochures and videotapes.

But ever since his arrest in Florida on July 19, Edwards has become persona non grata. Free on $1 million bail and reportedly still living in Newport Beach, Edwards and his attorney, Hy Shapiro, would not comment for this article.

The company Edwards created is now struggling for its survival. FundAmerica spokesmen say Edwards, who was being paid $1 million a month before his arrest, is completely divorced from the firm. And late this week they said they are trying to recover some $11.3 million that he mysteriously wired to entities in Hong Kong and the Netherlands before his arrest.

FundAmerica needs the money. Company officials said it is on the brink of filing for Chapter 11 bankruptcy protection from creditors. Should FundAmerica go bankrupt, it would be following in the footsteps of many earlier Edwards entities.

The locales are different, but that's about the only distinction among Edwards' companies. His modus operandi has changed little over the past two decades, according to interviews with investigators, victims and others familiar with his operations.

Typically, he sweeps in as the answer to every penny pincher's prayers. He forms a club of bargain hunters so huge that merchants agree to prearranged discounts in exchange for the prospect of a lot of business from members. This in itself is not a pyramid scheme; some investigators even think it's a great idea.

But Edwards adds a few special twists, investigators say.

For starters, members don't see the first few hundred dollars in savings--it goes into a trust fund. FundAmerica said it was a fund for one's golden years. "Spend your way to retirement," was a company jingle.

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