Brothers file bankruptcy settlement plan in St. Louis in US Fidelis case

Friday, October 1, 2010

Brothers file bankruptcy plan in US Fidelis case

ST. LOUIS — Two brothers who own a bankrupt company that claimed to be the nation’s top marketer of auto-service contracts will pay it about $10.5 million and surrender possibly $10 million more in assets under a proposed settlement in federal bankruptcy court.

The St. Louis Post-Dispatch reported Friday that the deal involving US Fidelis executives Darain and Cory Atkinson, if approved, could give hope to creditors and customers who bought extended auto-service contracts from the company and believe they are owed refunds.

The company, based in Wentzville, filed for bankruptcy in St. Louis in March beneath a cloud of accusations that it used illegal telemarketing ploys and sold worthless warranties. Bankruptcy documents suggest the Atkinson brothers used company money to maintain lavish lifestyles for themselves and their families.

Neither the brothers nor US Fidelis have not been charged with any crime, though the company has acknowledged it is sharing financial details with federal prosecutors.

As part of the proposed deal, filed Thursday, the Atkinsons’ wives would keep $500,000 apiece — along with jewelry, clothes and household items — but be barred from turning those assets over to their husbands.

Assets surrendered would go into a fund that then could be tapped by US Fidelis creditors and customers who agree not to sue the brothers. The potential amount of that fund remains unclear, largely because the surrendered assets — including 10 residential properties, many bought or built at the height of the real estate bubble — are difficult to value.

The settlement plan does not call for US Fidelis to recover about $1.1 million the brothers have paid to retain criminal-defense lawyers.

An Oct. 20 hearing has been scheduled on the matter, which the Post-Dispatch said has the blessings of the brothers, their wives, and a committee of unsecured creditors and an independent management team now overseeing the company.

The settlement applies only to the lawsuit US Fidelis filed against the brothers in April, accusing them of stripping the company of at least $101 million through high salaries, cash distributions and company spending that kept the brothers, and their families living luxuriously.

Assets include the primary residence of Darain Atkinson and his wife, Mia Atkinson, that cost $26.7 million to build. That house now is listed for sale for $14.9 million.

The Atkinson brothers’ estates also include 11 automobiles, 11 boats and 14 motorcycles and other vehicles, with US Fidelis unlikely to recover the top-dollar sums the brothers often paid.

Under the proposed deal, the Atkinsons would surrender much of their home furnishings and jewelry, including at least five Rolex watches, 17 Tiffany & Co. baubles and 11 Cartier rings and bracelets.

Under the proposed settlement, Mia Atkinson would keep up to $25,000 in jewelry, furnishings up to $50,000 and two vehicles with a total resale value no greater than $75,000. Heather Atkinson — Cory Atkinson’s wife — would get to keep up to $75,000 in jewelry and furnishings and two vehicles with a combined resale value not more than $50,000.

About $250,000 will remain in education-savings plans for Cory Atkinson’s three children.

Rob Eggmann, a US Fidelis lawyer, said the if Darain and Cory Atkinson are found to have lied about their assets, the settlement deal would be voided and the brothers subject to possible perjury charges.

Information from: St. Louis Post-Dispatch,

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