Co-founder of US Fidelis gets 8 years

AP News
Posted: Sep 25, 2012 2:31 PM
Co-founder of US Fidelis gets 8 years

ST. LOUIS (AP) — The co-founder of the defunct auto service contract seller US Fidelis was sentenced Tuesday to eight years in federal prison — more than twice as long as the sentence his brother received last week.

Darain Atkinson, 47, also was ordered to pay $4 million in restitution during sentencing in U.S. District Court in St. Louis for conspiracy to commit mail and wire fraud and filing false tax returns.

Both Atkinson and his 42-year-old brother Cory, both of Lake St. Louis, pleaded guilty earlier this year to state and federal charges related to the operation of the business, which was based in the St. Louis suburb of Wentzville.

Cory Atkinson was sentenced in federal court last week to more than three years in prison and ordered to pay $4.5 million in back taxes. He'll be sentenced on state charges Friday and will get a four-year term, attorney William Marguli said.

Darain Atkinson's sentencing on state charges is scheduled for Monday.

Margulis said Cory Atkinson got the lighter sentences because Darain Atkinson was more involved in the day-to-day operation of the company and prosecutors considered him more responsible for the crimes.

US Fidelis, previously known as National Auto Warranty Services and operating under the name "Dealer Services," was among the nation's largest marketers of auto warranties in the mid-2000s. It sold more than 400,000 service contracts.

But complaints about the firm began to mount, so much so that by 2009, 11 states barred US Fidelis from telemarketing or selling. The company filed for bankruptcy in March 2010.

The company misled consumers about what was covered by warranties, lied about affiliation with automakers and dealers and used other deceptive practices. Among other things, prosecutors said the company fraudulently withheld substantial portions of refunds due to customers who canceled vehicle service contracts and were owed full or prorated refunds.

Federal prosecutors said the Atkinson brothers used company funds for personal expenses such as luxury vehicles and million-dollar homes in suburban St. Louis, Lake Tahoe and the Cayman Islands. The men reportedly received more than $71 million from the business and its predecessor from 2006 to 2008.