A federal bankruptcy judge on Wednesday said he would approve a settlement requiring the brothers who own Wentzville-based US Fidelis to surrender their fortunes.
The company, which has been run by an independent management team since it filed for bankruptcy on March 1, sued Darain and Cory Atkinson for allegedly stripping at least $101 million as part of an effort to defraud creditors.
Under the settlement, the Atkinsons would give back to their company about $10.5 million — plus luxury homes, cars, boats and other assets expected to fetch at least $10 million more. The money would be used to pay US Fidelis' creditors, a group that eventually could grow to include hundreds of thousands of its former customers, U.S. Bankruptcy Judge Charles Rendlen III said Wednesday.
The settlement would have the effect of likely shielding the brothers from civil suits filed by attorneys general and others, but the deal would have no bearing on any criminal prosecution.
Referring to an ongoing federal criminal investigation as "the giant monster that people seem to ignore," Rendlen said it is critical for creditors to secure the Atkinsons' wealth before the money is spent on additional legal fees or seized by federal prosecutors.
The Atkinsons have not been charged with any crime, but US Fidelis has acknowledged that it is sharing financial information with investigators from the U.S. attorney's office.
Before it stopped selling extended auto-service contracts late last year, US Fidelis was the nation's No. 1 marketer of the vehicle-protection plans and one of St. Charles County's largest employers.
Missouri Attorney General Chris Koster is suing US Fidelis and the Atkinsons for violating consumer-fraud and telemarketing laws. His office objected to the settlement on the grounds that it left the Atkinsons' wives with too much money, and that the settlement would pressure creditors to drop legal claims against the Atkinsons.
That's because creditors would be able to tap into money from the settlement only after they agree not to sue.
In rejecting the state's argument, Rendlen sided with the majority of the 15 or so lawyers participating in Wednesday's hearing. Speaking in support of the deal were lawyers representing the Atkinsons and their wives; US Fidelis; a committee of unsecured creditors; the firm's biggest single creditor, Chicago-based Mepco Finance Corp.; and three state attorneys general.
Under its terms, the Atkinson brothers and their wives would turn over all their assets to US Fidelis. The company would give each of the Atkinsons' wives $500,000 plus $75,000 in jewelry and household items. Each wife also would get two vehicles; and about $250,000 will remain in education-savings plans for three children of Cory Atkinson. US Fidelis would not seek to recover about $1.1 million the brothers have paid to retain criminal defense lawyers.