ST. CHARLES • Just two years ago, the brothers Darain and Cory Atkinson were self-made millionaires with palatial homes, fleets of exotic cars and more than 1,100 employees working at the Wentzville headquarters of the auto service contract company they founded, US Fidelis.
On Wednesday, they appeared in a courtroom in St. Charles in suit pants and shackles after being indicted on charges of consumer fraud, stealing and illegally selling insurance.
Hours earlier, just before they surrendered themselves at the St. Charles Justice Center, the Atkinsons declined to speak with a reporter. There, the brothers were booked before appearing for arraignment at the courthouse, where their lawyers entered not guilty pleas on their behalf.
The Atkinsons said nothing during the hearing before St. Charles County Circuit Judge Lucy Rauch. Nor did they answer questions from a clutch of reporters who gathered outside the County Jail on Wednesday evening, when they were each released on a $250,000 bond.
Calling the Atkinsons' alleged crimes "systemic, widespread and purposeful," Missouri Attorney General Chris Koster said his office had a responsibility to seek criminal charges.
The ambitious prosecution marks an unusual move for a state attorney general's office. Prosecutions under state law most often are handled by local prosecutors.
But Missouri law allows the attorney general's office to enforce the state's primary consumer protection law - the Missouri Merchandising Practices Act - through civil suits or criminal prosecution.
While the state has sought criminal charges against some alleged con artists, those prosecutions have tended to focus on lone operators accused of small-time scams. Historically, the attorney general's office pursues more elaborate cases alleging complex frauds through civil suits.
A St. Charles County grand jury handed down the indictment on Friday, but it remained sealed until Wednesday. In 14 counts against Darain Atkinson, 46, who was president of US Fidelis, and 13 counts against Cory Atkinson, 41, the company's vice president, prosecutors allege that their company intentionally cheated consumers by:
• Keeping refunds they owed customers who canceled coverage.
• Charging fees higher than authorized in sales contracts.
• Lying during sales pitches about limitations on coverage and caps on claims paid, and falsely suggesting to consumers that US Fidelis was affiliated with automakers and dealers.
• Sold insurance without a license when it peddled so-called product warranties, a form of vehicle coverage that is conditional on the purchase and use of certain auto additives.
Additionally, Koster said US Fidelis is largely responsible for the St. Louis area becoming a hub for similar companies selling extended auto service contracts. The company widely marketed the after-market vehicle coverage in commercials and more than 1 billion unsolicited telephone "robo-calls."
The company, which had led the nation in the sale of auto service contracts, collapsed in late 2009 amid allegations of widespread consumer fraud. The Atkinsons were sued last year for stripping more than $101 million from the firm at the expense of creditors and hundreds of thousands of customers.
To settle that suit, the brothers surrendered virtually their entire fortunes to the company's bankruptcy estate. The trappings of their over-the-top lifestyles - mansions, exotic cars and yachts - have since been publicly auctioned or put up for sale.
The settlement left each of the brothers' wives with $500,000 plus $75,000 in jewelry and household items. But the deal prohibited the women from turning those assets over to their husbands.
David Warfield, an attorney for a committee of US Fidelis creditors and the architect of that deal, said the bankruptcy estate would not object to the settlement money being used by the wives to post bond for their husbands.
The bankruptcy settlement between the Atkinsons and their company's creditors didn't seek the return to company coffers of more than $1 million in criminal-defense retainers paid by US Fidelis on the Atkinsons' behalf.
As a result, the brothers were represented at arraignment by lawyers specializing in white-collar defense. Nathan Garrett, of the Kansas City firm of Graves Bartle Marcus and Garrett, represents Darain Atkinson; Shazzie Naseem and Jeremy Weis, both of the Kansas City firm of Berkowitz Oliver, represent Cory Atkinson.
In October, Koster's office cited the prepayments to law firms when it objected to the settlement in bankruptcy court. But Koster said Wednesday that his office has no immediate plans to challenge those retainers.
If convicted, Darain Atkinson will be considered a "persistent felony offender" because of a 1986 conviction for theft, burglary and forgery, and a 1987 conviction for manufacturing counterfeit federal reserve notes. As a result, he could face an enhanced sentence of up to life in prison, according to the attorney general's office.
Cory Atkinson, who has a 1987 felony conviction for trespassing, could face up to 15 years in prison if convicted on the most serious count of his indictment.
The Better Business Bureau, which has led a national crusade against US Fidelis and the service contract industry, celebrated the indictments as long overdue.
"Finally, there is a sense that those directly responsible for the US Fidelis fiasco are being held accountable," said Michelle Corey, president and chief executive of the bureau. "This is a victory for the thousands of customers who were victimized by the deceptive practices of the nation's most notorious seller of vehicle service contracts."