Judge Appoints Trustee to Run FundAmerica : Bankruptcy: A Newport Beach attorney is chosen after court says two made a ‘blatant’ attempt to take over the firm.

A federal bankruptcy judge ended a power struggle at FundAmerica Inc. Thursday by appointing an independent trustee to run the controversial marketing company, a decision some spectators believe will result in its liquidation.

FundAmerica said it was preparing to emerge from Chapter 11 bankruptcy and had planned to begin selling memberships again as early as next week after a nine-month hiatus. The company has maintained that it is a consumer buying club offering its members discounts on travel, hotels and financial services, but regulators in several states say it was a massive pyramid scheme.

FundAmerica filed for protection from its creditors last August.

U.S. Bankruptcy Judge James Barr on Thursday selected Newport Beach attorney Theodor Albert as the FundAmerica trustee after deciding that Chairman Peter Bradshaw and President Mitch Blumberg had made a “blatant attempt to take control of the company” from its owner, FundAmerica Holdings Ltd. of Vancouver, Canada.

FundAmerica Holdings had asked Barr Thursday to dismiss the two men after they issued themselves 51% of the controlling interest in FundAmerica. Earlier this week, FundAmerica Holdings locked Blumberg and Bradshaw out of the company offices.

FundAmerica Holdings claimed that Bradshaw and Blumberg had threatened to cooperate with a criminal investigation of FundAmerica and its founder, Robert T. Edwards, unless they were given $1.6 million, 2% of sales--estimated at $15 million--and 30% of the company’s stock.

Blumberg and Bradshaw denied the accusations and said they issued stock to themselves to prevent Edwards from returning to FundAmerica. FundAmerica Holdings’ president and owner is George Davis, a Canadian attorney, who acknowledged Thursday that he is acting on behalf of Edwards, who was indicted last July on charges he masterminded a pyramid scheme with more than 100,000 members. Edwards is scheduled to go to trial in June.

Barr said Thursday, in justifying his appointment of a trustee, that he believed “anything that is being done by FundAmerica Holdings is the work of Robert Edwards.” FundAmerica has said repeatedly in the last year that Edwards had completely severed his relationship with the firm.

Now, some of FundAmerica’s followers believe that the company is finally about to collapse.

For starters, the company owes its attorneys and accountants $1.9 million but only has about $700,000 in assets, according to FundAmerica bankruptcy counsel William N. Lobel. Then there is the matter of sales. The trustee may not want to resume selling memberships, and even if he does, there is some question as to how many people would want to buy them after all the bad publicity the company has received.

Lobel pleaded with Barr not to name a trustee, saying it would be FundAmerica’s “death knell,” but in a subsequent interview he said the company still had a chance of surviving.

“This debtor made $700,000 a day before it ran into problems. If it has a marketing program that makes a tenth of that,” then $2 million in attorney’s and accountant’s fees will soon be paid, he said.

Barr ordered Blumberg and Bradshaw not to remove anything from FundAmerica before Albert’s arrival or they might be “in more trouble than just a lawsuit.”