SANTA ANA — FundAmerica, the controversial Irvine consumer marketing company, will be liquidated and most of its remaining assets sold at a public auction later this month, it was decided in bankruptcy court here Tuesday.
The company's Chapter 11 bankruptcy trustee said he has already received a $1-million offer from a Canadian company controlled by the attorney for FundAmerica founder Robert T. Edwards.
Meanwhile, onetime FundAmerica President Mitchell Blumberg said Tuesday that he may attempt to outbid the Canadian firm, which is legally known as 394109 British Columbia Ltd. and controlled by Vancouver attorney George Davis.
U.S. Bankruptcy Court Judge James N. Barr has scheduled the auction for May 24.
"I think it is unlikely with the assets on hand I should try a reorganization of the debtor," court-appointed Trustee Theodor Albert told Barr, adding that the company was spending about $60,000 a week just to stay open despite a sizable staff layoff last week. "I think it is imprudent for the estate to burn through the funds," he concluded.
FundAmerica currently has about $1 million in assets.
Albert was appointed last month after a power struggle erupted between the company's management--including Blumberg and Chairman Peter Bradshaw--and Edwards loyalists.
FundAmerica and Edwards are scheduled to go on trial next month in Florida to face criminal charges that the firm was run as a massive pyramid scheme. If the company is liquidated before then, only Edwards would go to trial. The company and Edwards have denied the accusations.
394109 British Columbia has offered Albert $500,000 in cash and a $500,000 promissory note for assets, which include membership lists, copyrights, trademarks and the right to use the FundAmerica name. FundAmerica's $1 million in assets will remain with the trustee and be primarily used to pay off lawyers, who are owed more than $750,000.
Barr suggested the trustee place an ad in The Wall Street Journal announcing the auction. Albert said the bidding will start at $1,050,000.
Though the new owner could use the FundAmerica name and even retain its employees, he or she would have to create a brand new legal entity, Albert said.
"They can begin again the day following the sale but it would in truth be a new corporation," he said.
Blumberg and Bradshaw are considered the most likely bidders besides 394109 British Columbia. "I'm looking at it seriously," Blumberg said.
Asked if he could raise more than $1 million, Blumberg replied "oh, certainly." Blumberg, a Texas developer, said he has raised about $125 million for various real estate projects and said Bradshaw has successfully generated about $110 million in Canadian corporate public offerings.
During the bankruptcy hearing Tuesday, however, an attorney for 394109 British Columbia claimed Blumberg and Bradshaw had bled FundAmerica of its money while in office and would use some of that stolen money to acquire the company. They have denied that embezzlement accusation.
"They will be trying to buy the assets of the company with money that is formerly the company's," said Richard A. Marshack.
Blumberg countered that he and Bradshaw could do a better job than Edwards sympathizers of rebuilding the company. FundAmerica has steadfastly maintained that it is a consumer discount club offering its members savings on services such as long-distance phone calls and travel.
"I love the concept of FundAmerica--there is savings out of spending--and the people who got into it," Blumberg said. "I want to fulfill my mission."
FundAmerica has seen a serious rift develop among its members, caught in the war between Blumberg and Bradshaw and pro-Edwards forces. Some of them believe that Blumberg and Bradshaw--appointed as consultants to Albert--gt too power hungry.
One woman--the wife of a top salesman--lashed out at Blumberg after court Tuesday, bringing to life some of the hostilities.
"I hear hell is a nice place," she said.