The owners of a bankrupt firm that once was the largest seller of extended auto warranties in the nation have been barred from doing business in Idaho, under a settlement announced today by Idaho Attorney General Lawrence Wasden. "These individuals got rich by blanketing the country with deceptive mailings, unwanted telephone calls, and high pressure sales tactics, often aimed at senior citizens,” Wasden said. “They made millions selling nearly worthless service contracts, in many cases to people who were covered by a manufacturer’s warranty. This settlement prohibits them from repeating those practices in Idaho.”
Wasden and ten other state attorneys general sued the defunct company and its owners earlier this year, alleging the illegal actions stemming from deceptive junk mail, telemarketing robocalls and misleading TV ads. Click below to read Wasden's full news release.
STATE OF IDAHO
OFFICE OF THE ATTORNEY GENERAL
For Immediate Release
November 8, 2010
Largest extended auto warranty sellers barred from Idaho
(Boise) – The former owners of U.S. Fidelis, once the nation's top seller of extended auto warranties, are permanently prohibited from selling auto service contracts or telemarketing in Idaho, Attorney General Wasden said today. The legal settlement also restricts how the owners, Darain and Cory Atkinson, advertise any other product or service and requires them to surrender nearly all their assets.
U.S. Fidelis operated as National Auto Warranty Services and Dealer Services until its bankruptcy last spring. More than 400,000 consumers nationwide paid the Wentzville, Mo., company thousands of dollars for service contracts the attorneys general alleged were sold through illegal and deceptive means. Its founders, Missouri brothers Darain and Cory Atkinson, were also accused of plundering $101 million in corporate assets for their own personal gain.
”These individuals got rich by blanketing the country with deceptive mailings, unwanted telephone calls, and high pressure sales tactics, often aimed at senior citizens,” Attorney General Wasden said. “They made millions selling nearly worthless service contracts, in many cases to people who were covered by a manufacturer’s warranty. This settlement prohibits them from repeating those practices in Idaho.”
Wasden and ten other state attorneys general sued the defunct company and the Atkinsons earlier this year, alleging the defendants engaged in illegal actions stemming from deceptive junk mail, telemarketing robocalls and misleading TV ads. The complaint alleged the company’s solicitations misled consumers to believe their auto warranties had expired or would soon expire and confused customers into thinking that they were being contacted by a manufacturer or other entity affiliated with their original vehicle warranty. Many consumers who were led to believe they were purchasing a warranty providing “bumper to bumper” coverage of all major repairs later found the contracts full of exemptions.
The states also accused the defendants of violating Do-Not-Call laws, using technology to bypass caller ID and mask the origin of sales calls, refusing to allow consumers an opportunity to review the complete written service contracts, denying valid refund requests, improperly obtaining consumers’ personal information and violating state telemarketer registration laws.
The Atkinsons denied any wrongdoing but agreed to surrender at least 90 percent of their assets pursuant to a related bankruptcy agreement, including assets from 20 related corporations.
The settlement also restricts the Atkinsons’ future business and marketing practices, prohibiting them from:
· Telemarketing in any of the participating states.
· Marketing or selling motor vehicle service contracts.
· Misleading consumers about the source of an offer.
· Disproportionately targeting consumers 65 or older.
· Selling or providing personal information obtained from a consumer to unaffiliated companies for marketing purposes without the consumer’s consent.
Idaho filed its settlement today in Fourth District Court in Ada County.
The Atkinsons owe Idaho $93,000 in civil penalties and costs related to the investigation and litigation. With the surrender of their assets, any recovery will come from the U.S. Fidelis bankruptcy.
The other participating states are Arkansas, Iowa, Kansas, North Carolina, Ohio, Oregon, Pennsylvania, Texas, Washington and Wisconsin.
U.S. Fidelis was the nation’s largest extended warranty dealer for autos before its collapse. State attorneys general began investigating U.S. Fidelis in 2008. The company declared bankruptcy on March 1, 2010. The states, whose earlier attempt to negotiate a settlement had stalled, filed their lawsuit soon after the bankruptcy announcement.
In October 2010, a federal bankruptcy judge said he will approve a settlement that requires the Atkinsons to give $10.5 million to U.S. Fidelis and surrender millions in additional assets, including Darain’s 40,000-square-foot mansion, a 50-foot yacht and 10 other boats, 11 autos and 14 motorcycles. The bankruptcy settlement was conditioned on the states’ agreement to settle claims with the Atkinsons.
Verizon has sued U.S. Fidelis for making three million illegal calls to cell phone customers over seven months in 2008, and BMW and Subaru brought a lawsuit for trademark infringement. The Federal Trade Commission sued U.S. Fidelis’ contracted telemarketer, Voice Touch, for robocalls. In March, Voice Touch agreed to pay more than $655,000 in consumer restitution and is banned from telemarketing.
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