FundAmerica, Inc. was a discount buying club that marketed consumer buying club memberships through multi-level marketing. The business began in 1987 in Los Angeles, California before moving its offices to Irvine, California. FundAmerica eventually became defunct following pyramid scheme allegations, bankruptcy, and a reemergence as FundAmerica 2000, Inc.
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The cost of an individual FundAmerica membership was a $100.00 a year with an additional $40.00 administrative fee (first year only). With membership a member would receive a blue mid-size three ring binder with information and forms to fill out. The premise of the membership through FundAmerica was to get members to save monies through rebates and have those rebates automatically transferred to a tax-deferred annuity bearing compounding interest. FundAmerica wanted to get their members to save while spending through the membership.
There were several service providers that offered rebates and/or discounts with a retail FundAmerica membership. Some of the providers with an individual retail membership were savings on long distance through MCI Communications with a 20% rebate, a 5% travel rebate with Ask Mr. Foster Travel Agency, a 10% rebate from the Best Products catalog, and a small rebate through the MBNA America Bank credit card purchases. Additionally, there was a preclipped coupon program where a FundAmerica member would check which items he or she wanted and then the company would send them clipped coupons through the mail. And, there was an accelerated mortgage program to save thousands of dollars on one’s home, through paying bi-weekly rather than monthly payments. Also, there was a $99.00 short notice resort condo program, where through membership, one would call one week prior and reserve an unfilled condo at a resort. The members' rebate monies would be transferred to individual tax-deferred annuity accounts bearing compounding interest.
A FundAmerica Independent Representative could buy into the marketing structure at $400.00 as an Associate (with five wholesale memberships), $1,600.00 as a Manager (with twenty wholesale memberships), or $3200.00 as a Director (with forty wholesale memberships). The next earned level was Executive Director with ten Directors directly underneath him then Presidential Director with ten Executive Directors directly below in the marketing plan. It was the marketing plan that qualified FundAmerica, Inc. as a legal company according to the laws of California. An Independent Representative could "downline" up to twenty wholesale memberships to a new representative making him a Manager, and that new Manager could, in turn, "downline" as many as twenty memberships wholesale to new representatives joining the marketing plan.
For the annual cost of $100, Members received their FundAmerica Membership and their monthly savings were automatically tracked and reported to them in their Member’s Quarterly Magazine. This state-of-the-art, customized, printed magazine — the first of its kind ever to be produced by any organization in the United States — included a personalized statement, much like a monthly credit card statement, detailing Members’ monthly purchases through FundAmerica service providers and the attendant ‘rebate’ of discounted pricing. benefits as an individual Member began being demonstrated — in many cases, worth well beyond the annual cost of membership — FundAmerica achieved critical mass, and professionals from all walks of life began associating with the organization. With FundAmerica’s commitment to proper sales procedures, highquality service and uncompromising accuracy of Member purchase activity — demonstrated by the fact that the company refused to open more than one state at a time — financial and business sector leaders recognized the validity of the Membership. Certified public accountants, financial planners and mortgage bankers began offering Memberships to their clients and applauded the ‘forced savings accounts’ which they viewed as the quarterly Member rebate disbursements into retirement annuities. Real estate agents were giving away an annual Membership to their new homebuyers, and celebrities began inquiring as to how they might become involved. Arthur Laffer, noted supply-side economist and an economic adviser to former President Ronald Reagan, joined FundAmerica as a Member. After utilizing his Membership for several months, he was so impressed with the benefits and rewards of being a Member that he became a Member of the Board of Directors and appeared in a FundAmerica promotional videotape in which he spoke about the benefits and timeliness of participation in FundAmerica. A full twenty years before a young entrepreneur named Jeff Bezos decided that people would rather purchase their reading materials online than visit their local book store, FundAmerica began assembling consumers together in a virtual world without the aid of the Internet. Bezos, like Edwards, knew that profits would eventually come if the services and product offerings were first-class, and yet, they both understood that the first four to five years of a revolutionary concept would mean hard work building the solid foundation, and re-investing revenue streams in forging a loyal customer base and excellent relationships with providers. Additionally, behind the scenes, and in an attempt to mirror the success FundAmerica was establishing with its new, integrated digital network, the framework for the Discover Card was formed in 1987 by the Sears Financial Network. In time, this unique credit card would compete with the FundAmerica MasterCard program and be a direct rival to the VISA and MasterCard franchises worldwide.
These rebates were automatically calculated by the service and product providers and transferred directly into a Member Trust Account — the receipts and accounting of this Member Trust Account were audited by certified public accountants each and every month to verify the accuracy and safety of these Member-owned funds. Members then had the option, every quarter, of receiving their rebates, once they had reached $250 or more, either in the form of a check or as an individual Retirement Annuity from one of the nation’s oldest insurance companies, Mutual Benefit Life Insurance Company. When Mutual Benefit Life was sold, annuities were transferred to Lincoln Benefit Life, another well-established institution and a Member of the Allstate Financial Group. Sales of the annual Membership through Independent FundAmerica distributors soared, and Member purchases through the Membership skyrocketed as individuals realized the world of savings that was available to them through this unique and financially rewarding concept. With Fortune 100 service providers regularly verifying the consistently growing group purchases of FundAmerica Members, other mainstream organizations wanted to become involved in this remarkable ‘virtual store concept’. Basically what Saul Price of Price Club had made so successful with his brick and mortar super-stores throughout the Western United States, FundAmerica was doing with a Membership card, buying clout and a sophisticated software tracking system. Retailers and financial institutions began to take notice, and it was then that FundAmerica and MBNA America, the country’s largest affinity card provider, reached an agreement to provide qualifying FundAmerica Members with a FundAmerica MasterCard. Now, with the sophistication of FundAmerica’s back-office tracking software and integrated Trust Account audit streams, Members would soon have access to a much broader world of savings as FundAmerica negotiated additional group buying agreements with other national chains, institutions and product and service organizations. Within the first 120 days of its release, FundAmerica became MBNA America’s fastest-growing affinity group, outpacing new member signups of such organizations as the American Automobile Association and Ducks Unlimited. Indeed, the sky appeared to be the limit. Even though FundAmerica was only operating in the states of California, Arizona, Colorado, Oregon, Texas, Utah, Washington, and Florida, it began attracting major attention. As word of the income opportunity as an Independent Distributor marketing Memberships to individuals and local and national groups grew, as well as the tremendous savings
Realizing the incredible promotional benefits of an integrated member savings portfolio, VISA, MasterCard and Discover Card launched their own versions of the rebate programs, offering tiny percentages to cardholders on their purchases. This revolutionary concept was now adopted by leading financial institutions around the world.
On one hand, the retail FundAmerica membership was a sound idea saving for a future retirement - saving while spending, however on the other, the marketing plan with its "wholesale buy-in" and "downlining" created problems with the state of Florida. It was the state of Florida that put an end to this so-called "business opportunity of a lifetime." FundAmerica, Inc. had almost reached what people in the multi-level marketing field call critical mass, despite only operating in California, Arizona, Colorado, Oregon, Texas, Utah, Washington, and Florida. Critical mass is when an mlm company is poised for geometric growth exponentially. According to Florida officials some 98% of more than $33 million in gross income (during the first four months of 1990) came from "wholesale membership sales."
Over the course of several months, FundAmerica was vindicated as a legitimate, timely and revolutionary membership savings program and network marketing opportunity. The State of Florida, having dropped all charges against Edwards and FundAmerica, ended up citing FundAmerica for not having a valid business license in the State of Florida, fined the company $25,000, and prohibited the company from doing business within the State of Florida for twelve months. Edwards and FundAmerica subsequently were able to release the nearly $4 Million in withheld commissions to Independent Distributors. FundAmerica Member rebates, always fully funded and held in a Member Trust Account were disbursed in accordance with the provisions of the FundAmerica Membership. Attempts to revitalize the FundAmerica program under the name of FundAmerica 2000, including Edwards’ additional, personal investment of nearly $20 Million, ultimately failed. The damage to the company, its Independent Distributors and its Members by overzealous Florida officials and the sensation-hungry media was simply too great for Independent Distributors to overcome.
As a matter of public record, by mid-October 1990, in just under 90 days of the State of Florida’s erroneous actions and baseless charges, a federal bankruptcy judge refused to order the removal of the beleaguered company’s current management. “There has been a lack of proof to sustain the appointment of a trustee at this stage of the case,” said U.S. Bankruptcy Judge James N. Barr in Santa Ana. “I have no indications that current management is doing anything illegal or anything that is to the detriment of the estate.” Additionally, Florida was the only state to file criminal charges against the company, and California Attorney General John Van de Kamp stepped forward to assure citizens of his state that he “found that FundAmerica’s business model and membership did not violate any state law.”
And, ironically, the Florida comptroller who was responsible for the false charges being brought against the company and Edwards, would be disgraced in 2003 through an impeachment resolution for accepting campaign cash to overlook problems at failing Florida financial institutions under his direct oversight.