A proposed legal settlement in US Fidelis' bankruptcy would allow the Wentzville company's owners, and their wives, to keep too much money and while inappropriately shielding them future civil lawsuits, Missouri Attorney General Chris Koster said in a motion objecting to the deal.
Other objections have been filed by a US Fidelis customer from Murphysboro, Ill., and Michigan plaintiffs in a consumer class-action suit against US Fidelis and its owners, the brothers Darain and Cory Atkinson.
U.S. Bankruptcy Judge Charles Rendlen III must sign off on the proposed settlement, and a hearing on it has been scheduled for Wednesday.
Under the terms of the deal, which was made public Sept. 30, the Atkinsons would surrender to US Fidelis about $10.5 million - plus assets that might fetch at least $10 million more.
The money would go to pay the company's creditors, but strings would be attached. Creditors would be able to tap into that money only after they agree not to sue the brothers or their wives.
In exchange, US Fidelis would drop a suit accusing the Atkinsons of trying to cheat creditors by fraudulently plundering at least $101 million from the company, which once was the nation's No. 1 seller of extended auto-service contracts.
Although the brothers have never given up their ownership of US Fidelis, they are barred from trying to exercise any control over it. An independent management team has run the firm since it filed for bankruptcy on March 1.
That team is supposed to work for the benefit of creditors - a growing group that includes other businesses, customers and states accusing the company of violating consumer-fraud and telemarketing laws.
In his objection, which was filed Friday, Koster notes that the deal leaves the Atkinsons and their wives with about $1.5 million in cash and other assets, plus $1 million in retainers paid to criminal-defense lawyers.
According to Koster's motion, the settlement serves little purpose.
That the company would win its suit against the Atkinsons "is not seriously in dispute," according to Koster's motion. It states that the Atkinsons "have no apparent defense" to accusations of wrong-doing, and that the costs of litigating the case and collecting any judgements likely would be less than what the Atkinsons are allowed to keep under the terms of the proposed settlement.
It allows the brothers' wives to keep $500,000 each and some cars, jewelry, clothes and household items. The women would be prohibited from turning those assets over to their husbands. About $250,000 will remain in education-savings plans for three children of Cory Atkinson.
In exchange, the Atkinsons must surrender millions in cash plus 10 residential properties - including mansions and vacation homes purchased or built at the height of the real estate bubble - as well as fleets of cars, boats and motorcycles.