Record Fine Asked for FundAmerica Founder

Florida’s attorney general on Monday proposed to fine FundAmerica founder Robert T. Edwards $20.4 million, the largest penalty that office has issued against an individual, for allegedly violating state law by operating a pyramid scheme.

Edwards, who faces criminal and civil charges relating to the operations of Irvine-based FundAmerica Inc., allegedly violated the state’s Unfair and Deceptive Trade Practices Act, according to Joe Bizzaro, spokesman for Atty. Gen. Bob Butterworth.

He said Florida investigators suspect Edwards of hiding millions of dollars in foreign bank accounts, some of which they claim was stolen from investors.

“We believe this is the highest fine assessed against an individual in Florida,” Bizzaro said. “We certainly don’t think he should profit from any illegal activity here in Florida.” Several states, including California, claim that FundAmerica is a well-disguised pyramid scheme that relies on the sale of memberships for its revenue. But company officials say it is a legitimate consumer club, obtaining discounts for its members on such services as long-distance phone calls.

FundAmerica recently filed for Chapter 11 bankruptcy protection from creditors, after the filing of a $150-million class-action lawsuit that froze the company’s assets and banned it from doing business in the United States.

The company announced a restructuring of its sales program on Monday and said it is negotiating with regulators in two states so it can begin doing business again. The company refused to disclose the name of either state.

FundAmerica and Edwards have denied the charges against them, including organized fraud activity and running an illegal lottery.

Edwards could not be reached for comment Monday, but his attorney said he was shocked by the Florida fine.

“The imposition of the fine is clearly premature and imprudent and improper,” said Neal Sonnett. “Mr. Edwards is a legitimate, honest businessman. He has not broken any laws.”

Edwards is scheduled to appear in Florida Circuit Court in Orlando on Wednesday for a review of his $1-million bail. The Florida Statewide Prosecutor’s Office is asking for a higher bail because it is concerned that he might try to flee the country.

Sonnett said Edwards will be in court Wednesday, which will mark his first public appearance since he was arrested July 19. He is living in a rented home in Newport Beach.

Edwards is wanted in London on pyramid scheme charges there and has gotten in trouble with authorities in Canada and Australia as well.

“These innuendoes about him being a fugitive or nobody knowing where he is are absurd,” Sonnett said. “I will be there by Mr. Edwards’ side and we intend to ask the judge to lower the bail, something we would not have done except for this outrageous motion.”

Butterworth, the Florida attorney general, already had fined FundAmerica $8.2 million, which the company is asking an appeals court to review. The company is also challenging the state’s cease-and-desist order in the Circuit Court in Dade County.