JEFFERSON CITY, Mo. — Missouri Attorney General Chris Koster announced that U.S. Fidelis Co-Founder Darain Atkinson was sentenced to eight years in prison Monday. He pleaded guilty to stealing consumers’ refunds, insurance fraud, and consumer fraud in April and reportedly must pay $4 million in restitution.
Atkinson’s brother, Cory Atkinson, who co-owned the direct-to-consumer marketer of vehicle service contracts, was sentenced Friday to four years for insurance fraud, consumer fraud, and stealing consumers’ money by lying about the vehicle repair coverage in contracts associated with the oil additive the brothers offered for sale.
“In 2009, my office received more complaints about service contract sellers than about any other industry. The industry was plagued by deceptive practices and half-truths,” Koster said in a press release. “My office’s prosecution of the owners of U.S. Fidelis set in motion a dramatic change in that industry — a transformation reflected in the considerable decrease in complaints my office received about service contract sellers last year.
“The criminal prosecutions of Darain and Cory Atkinson should serve as a powerful reminder that my office will not tolerate unfair and deceptive business practices,” he added.
In addition to the criminal charges against the Atkinsons, Koster’s office filed civil lawsuits against auto service contract telemarketers and formed a task force to recommend new requirements in the industry. That task force recommended new legislation, which passed in 2011. Koster said his office has entered into nine settlements with service contract marketers and continues to litigate with five others.
On Sept. 28, Judge Ted House sentenced Cory Atkinson to four years in prison on the state charges against him. Both of the brothers’ sentences will run concurrently with previously set federal sentences.
Darain Atkinson pleaded guilty in April to misleading customers in the St. Louis area and nationally. At the time, Koster outlined a range of violations, including keeping refunds owned to customers; leading customers to believe that contracts covered more vehicle repairs than they actually did; using deceptive practices to avoid state laws related to insurance or service contracts; and leading consumers to believe that U.S. Fidelis was affiliated with automakers and dealers when that was not the case.
Both brothers were indicted last summer, which led Missouri Governor Jay Nixon to sign a new law that targets businesses engaging in deceptive practices to sell auto-related service contracts.
U.S. Fidelis’ practices first came into question in 2008 when the Pennsylvania attorney general claimed the company purposely violated ‘Do Not Call’ guidelines. The company filed Chapter 11 bankruptcy in 2010.
