A co-founder of U.S. Fidelis, an auto warranty company based in Missouri, was sentenced to eight years in federal prison on Tuesday for defrauding customers and the IRS.
Darain Atkinson’s sentencing in U.S. District in St. Louis for theft and fraud came a week after his brother and Fidelis co-founder, Cory Atkinson, was sentenced to 40 months in prison for related crimes. Both sentences were expected under plea deals with prosecutors.
U.S. Fidelis was one of the largest auto warranty companies before its downfall three years ago. The company’s warranties sold for between $2,000 and $4,000 but were essentially worthless because fine-print exemptions and liability caps made it impossible to get money for repairs, according the St. Louis Post-Dispatch.
The Post-Dispatch reported that the company used deceptive and misleading direct mail and telemarketing campaigns to fool customers into thinking they were talking to auto dealers or manufacturers and receiving a more comprehensive warranty than they actually were, according to court documents.
The company went bankrupt in 2009 as clients litigated for repair money. When it closed, U.S. Fidelis owed more than $1 billion to customers and creditors, but was only able to pay $26.5 million.
As the company was floundering, the two brothers spent more than $100 million on lavish homes, cars and luxury items.
“They did it all intentionally and for no other reason that I can see other than greed,” U.S. District Judge Catherine Perry said of the brothers.