News Column

US Fidelis Co-founder Sentenced to Eight Years in Prison

Sept. 26, 2012

Robert Patrick

Darain Atkinson, who with his brother Cory founded what was once one of the nation's largest sellers of auto service contracts, was sentenced Tuesday in federal court here to eight years in prison for bilking consumers and the Internal Revenue Service.

As his wife wiped away tears, Darain Atkinson, 47, of St. Louis, apologized for defrauding customers of U.S. Fidelis out of millions of dollars.

"They were just dollar signs, not a soul," he said.

Atkinson said his millions made him more miserable that he ever was before. "Living in a mansion and having anything that money can buy was very empty and unsatisfying," he explained.

The Atkinson brothers founded and ran National Auto Warranty Services, which peddled extended service contracts nationwide, and later became US Fidelis. It collapsed in late 2009 amid allegations of widespread fraud.

The men were accused of taking more than $100 million from the company and spending it on lavish homes, cars and luxury items.

The company used deceptive and misleading direct mail and telemarketing campaigns to fool customers into thinking they were talking to auto dealers or manufacturers, and receiving a more comprehensive warranty than they actually were, according to court documents.

The profit on a typical contract worth $2,000 or more was often more than $1,200, and Fidelis kept 60 percent of that. A separate company financed the transactions for customers.

Fidelis employees were told to arbitrarily withhold 10 to 40 percent of any refunds due to unhappy customers. And the Atkinsons sometimes made payments on behalf of customers, so that the company would receive its full payment from the finance company before the account went into default, plea documents say.

Darain Atkinson pleaded guilty to federal and state charges in April, and will be sentenced Oct. 1 on the state charges in St. Charles County Circuit Court.

Under federal sentencing guidelines, he faced eight years in prison. His lawyers asked for five, citing his charitable works, his religious faith and his cooperation with the unwinding of his former company.

U.S. District Judge John Ross said he would not give Atkinson credit for charity. "It's easy to be charitable when you're doing it with other people's money," he noted.

Cory Atkinson, 42, of Chesterfield, pleaded guilty in June. He was sentenced Sept. 18 to 40 months in federal prison on conspiracy and tax fraud charges and ordered to pay back $4.49 million in back taxes. He will be sentenced Friday on state fraud and stealing charges to four years in prison, his lawyer said last week.

Cory Atkinson is getting less time because Darain Atkinson led the company and has a criminal history that includes convictions for burglary, forgery and other crimes, according to court testimony.

Among those watching his sentencing today was former professional baseball star Darryl Strawberry, a friend.

Source: (c)2012 the St. Louis Post-Dispatch. Distributed by MCT Information Services.

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