The Associated Press
ST. LOUIS — A former top executive of Missouri-based US Fidelis believes the company’s owners’ greed and lack of corporate business acumen drove the company into bankruptcy.
Philip Jehle, chief financial officer and vice president of operations from 2004 through 2007, told the St. Louis Post-Dispatch that Darain and Cory Atkinson — each of whom own 50 percent of the company — pulled more than $100 million from the firm two years before it ran out of money.
Jehle said the funds came in the form of traditional executive compensation and shareholder distributions, paying for mortgage payments on mansions and vacation homes and such things as luxury cars and boats.
Until recently, US Fidelis claimed to be the nation’s top marketer of vehicle service contracts. But beneath a cloud of accusations that it used illegal telemarketing ploys and sold worthless warranties, the company has filed for bankruptcy.
Jehle said payouts to the brothers came whenever either had an immediate need for cash or personal bills to be paid.
“There was no formality to the process whatsoever,” Jehle said.
Missouri Attorney General Chris Koster accused the brothers Thursday of plundering their company to keep assets away from creditors. Koster is urging a bankruptcy judge to appoint an independent trustee to run the firm.
Spencer Desai, an attorney representing Cory Atkinson in the federal bankruptcy case, acknowledged that US Fidelis often paid his client’s living expenses, but said that was part of his executive compensation and shareholder dividends.
“When a company shows profits, it’s appropriate for it to distribute those profits to its shareholders,” Desai said.
Darain Atkinson’s attorney in the bankruptcy case, Norman Pressman, declined to comment.
Last year the company generated $264.5 million in gross revenue from sales of service contracts, and paid roughly $20 million on behalf of or directly to the brothers in salaries, bonuses and other expenses.
At its peak, US Fidelis employed more than 1,100 people at the company’s call center in Wentzville, about 40 miles west of St. Louis. At least 600 of those workers were laid off in November and December.
Bankruptcy court is allowing the company to keep paying about 100 workers to persuade customers to not cancel their policies.
Every time a customer cancels, Fidelis must pay back its finance company. Last fall, the company began paying more to its biggest finance company, Chicago-based Mepco Finance Corp., than it was collecting in new sales, according to Scott Eisenberg, who was recently named as the firm’s chief restructuring officer.
Eisenberg’s team says the brothers and their real estate holding companies owe Fidelis more than $65 million, which a company lawyer says the Atkinsons borrowed.
According to the bankruptcy filing, the brothers were paid a base salary of $96,923, plus a $25,000 weekly draw. Jehle said the Atkinsons also used company funds to cover big balances charged on credit cards, not counting things like home mortgages the company picked up.
Jehle said he quit the company in 2007 over a dispute with Darain Atkinson over the company’s telemarketing efforts.
Matt Casey, who represents US Fidelis customers in a class-action lawsuit, said the brothers’ compensation structure should expose them to individual legal liability.
“They didn’t respect the corporate formalities, and they undercapitalized the company,” Casey said.
