ST. LOUIS (CN) – Missouri Attorney General Chris Koster objects to US Fidelis’ bankruptcy settlement proposal. Koster says the settlement would allow company owners Darain and Corey Atkinson and their wives to keep too much money, and be inappropriately protected from civil litigation.
Other objections from US Fidelis customers have also been filed.
The settlement would require the Atkinsons to give $10.5 million to US Fidelis and surrender at least $10 million more in assets.
The brothers’ wives would keep $500,000 each, along with some cars, jewelry, clothes and household items; another $250,000 would remain in the educational plan for Corey Atkinson’s three children.
“Nowhere aggregated in the settlement motion is this fact: the defendants walk away from this deal with $1,525,000.00 in cash, accounts, and hard assets,” the “State of Missouri’s Objection to Settlements” states.
“Not included in that amount are rent-free living for one of the defendant’s relatives and retainers for personal criminal representation that the debtor paid for each of the brothers. The debtor’s schedules suggest that the full amount of these retainers was at least $1 million, meaning the total value going to the defendants likely exceeds $2.5 million. While completing litigation and collecting in this matter would not be without cost, the State of Missouri doubts that said costs would exceed $2.5 million.”
The money would go to pay creditors, who would have to agree not to sue the brothers or their wives in exchange for the money. Koster says such immunity should not be offered.
In exchange, US Fidelis would drop its claim that the Atkinsons took at least $101 million from the company, at the expense of creditors.
US Fidelis was once the nation’s No. 1 seller of extended warranties for vehicle.
“One problem with this arrangement is that the defendants unjustifiably receive, in effect, $20+ million worth of leverage that they can use to convince their creditors to grant them releases from various personal liabilities,” Koster wrote.
“Another problem is that it leads to inequities as between creditors. Those creditors who only have claims against the debtor will lose nothing by granting the defendants a release, but those creditors who happen to have claims against both the debtor and the defendants will likely have to choose between releasing non-debtor third parties from otherwise perfectly valid obligations or receiving nothing.”
U.S. Bankruptcy Judge Charles Rendlen III is considering the proposed settlement.