Fund America
Encyclopedia
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.
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.
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.
, 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.
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.
Multi-level marketing
Multi-level marketing is a marketing strategy in which the sales force is compensated not only for sales they personally generate, but also for the sales of others they recruit, creating a downline of distributors and a hierarchy of multiple levels of compensation...
. The business began in 1987 in Los Angeles, California
Los Angeles, California
Los Angeles , with a population at the 2010 United States Census of 3,792,621, is the most populous city in California, USA and the second most populous in the United States, after New York City. It has an area of , and is located in Southern California...
before moving its offices to Irvine, California
Irvine, California
Irvine is a suburban incorporated city in Orange County, California, United States. It is a planned city, mainly developed by the Irvine Company since the 1960s. Formally incorporated on December 28, 1971, the city has a population of 212,375 as of the 2010 census. However, the California...
. FundAmerica eventually became defunct following pyramid scheme
Pyramid scheme
A pyramid scheme is a non-sustainable business model that involves promising participants payment or services, primarily for enrolling other people into the scheme, rather than supplying any real investment or sale of products or services to the public...
allegations, bankruptcy, and a reemergence as FundAmerica 2000, Inc.
Membership
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.Service providers
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 CommunicationsMCI Communications
MCI Communications Corp. was an American telecommunications company that was instrumental in legal and regulatory changes that led to the breakup of the AT&T monopoly of American telephony and ushered in the competitive long-distance telephone industry. It was headquartered in Washington,...
with a 20% rebate, a 5% travel rebate with Ask Mr. Foster Travel Agency, a 10% rebate from the Best Products
Best Products
Best Products is a defunct chain of American catalog showroom retail stores founded by Sydney and Frances Lewis, formerly headquartered in Richmond, Virginia.- History :...
catalog, and a small rebate through the MBNA
MBNA
MBNA Corporation was a bank holding company and parent company of wholly owned subsidiary MBNA America Bank, N.A., headquartered in Wilmington, Delaware, prior to being acquired by Bank of America in 2006...
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.
Marketing plan
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.The Business
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
Allstate
The Allstate Corporation is the second-largest personal lines insurer in the United States and the largest that is publicly held. The company also has personal lines insurance operations in Canada. Allstate was founded in 1931 as part of Sears, Roebuck and Co., and was spun off in 1993...
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.
Conclusion
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 massCritical mass
A critical mass is the smallest amount of fissile material needed for a sustained nuclear chain reaction. The critical mass of a fissionable material depends upon its nuclear properties A critical mass is the smallest amount of fissile material needed for a sustained nuclear chain reaction. The...
, 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.
Additional Facts
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.