Owners of failed auto warranty company settle states' lawsuits - KMOV.com

Owners of failed auto warranty company settle states' lawsuits

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By Afton Spriggs By Afton Spriggs

ST. LOUIS (AP) -- The former owners of a suburban St. Louis company that was once among the nation's top marketers of auto service contracts have reached a settlement with 11 states that bars them from telemarketing or selling in those states.
   The settlement was announced Monday between former US Fidelis owners Darain and Cory Atkinson and attorneys general in Arkansas, Idaho, Iowa, Kansas, North Carolina, Ohio, Oregon, Pennsylvania, Texas, Washington and Wisconsin.
   The Atkinsons do not have listed phone numbers. Messages seeking comment from the US Fidelis office, and with the attorney for the Atkinsons, were not returned.
   US Fidelis, based in Wentzville, Mo., operated as National Auto Warranty Services and Dealer Services and sold more than 400,000 service contracts.
   But in March, the company filed for bankruptcy amid accusations it used illegal telemarketing ploys and sold worthless warranties. The 11 attorneys general filed suit a short time later.
   US Fidelis also sued the brothers, accusing them of stripping the company of at least $101 million through high salaries, cash distributions and company spending that kept them living in luxury.
   In October, a federal bankruptcy judge in St. Louis approved a settlement calling for the Atkinsons to pay about $10.5 million and surrender possibly $10 million more in assets.
   No criminal charges have been filed, but federal prosecutors continue to investigate.
   The agreement with the attorneys general includes other restrictions on how the Atkinson brothers do business in the 11 states, Wisconsin Attorney General J.B. Van Hollen said.
   "The Atkinsons bombarded Wisconsin residents with illegal robo-calls and deceptive mailings, and unfortunately persuaded numerous Wisconsin residents to purchase their auto service contracts," Van Hollen said in a statement.
   Van Hollen said consumers were misled into believing that their auto warranties had expired or would soon expire. Consumers who purchased a warranty thinking it provided complete coverage later found there were various exemptions, he said. No-call laws were allegedly violated in several states.
   "Every time a company tricks consumers into purchasing a phony product, it sheds a negative light on the business community," Kansas Attorney General Steve Six said.
   Missouri is not part of the settlement. Missouri Attorney General Chris Koster has filed his own suit against US Fidelis and the Atkinson brothers for violating consumer-fraud and telemarketing laws.
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   Associated Press writer John Milburn in Topeka, Kan., contributed to this report.
   (Copyright 2010 by The Associated Press.  All Rights Reserved.)

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