U.S. Fidelis co-owner pleads guilty to conspiracy and tax fraud charges
St. Louis, MO - Cory Atkinson pled guilty to conspiracy to commit mail and wire fraud and filing false tax returns.
According to court documents, Cory Atkinson and his brother, Darain Atkinson, owned and operated National Auto Warranty Services, Inc., which was structured as a privately held company with each brother owning 50% of the business. In January 2009, National Auto Warranty changed its name to US Fidelis, Inc. National Auto Warranty/US Fidelis (NAWS) routinely conducted business using the fictitious name of Dealer Services. The brothers also operated related businesses using some form of the name US Fidelis, and owned a direct mail business, which was known as DS Direct.
The primary business of NAWS was marketing and selling vehicle service contracts (VSCs) throughout the United States. Typically, NAWS acted as a broker/seller of VSCs on behalf of other VSC administrators. NAWS made a profit and attempted to make a profit by marking up the price of the VSC, which was often more than $1,000. The total purchaser cost for a VSC was often greater than $2,000. NAWS used a variety of techniques to market and sell VSCs, including direct mail to consumers, media advertisements and unsolicited telephone calls. A VSC was not a warranty or an extended warranty, and NAWS had no affiliation with an automobile manufacturer, no authority to provide an automobile manufacturer's factory warranty and no authority or ability to alter or extend a factory warranty, according to the indictment.
According to the plea agreement, as part of the conspiracy, in 2008 Darain and Cory Atkinson made fraudulent payments on behalf of VSC purchasers who were in default or likely to be in default so that NAWS would receive its dealer profit when it was not entitled to receive such profit.
In addition to the conspiracy charge, with his plea, Cory Atkinson also admitted that he filed a false tax return for the tax year 2006 that failed to include millions of dollars in distributions that he received from NAWS. According to the plea agreement, between 2006 and 2008, Darain and Cory Atkinson received millions in distributions from NAWS, a substantial percentage of which funds were used to pay for their personal expenses. For example, records from NAWS indicate that in 2006, Cory Atkinson received distributions in excess of $14 million. In 2007, Cory Atkinson filed a joint federal income tax return that omitted more than $1 million in taxable distributions from NAWS.
"IRS Criminal Investigation is committed to investigating individuals who use their corporations as personal piggy banks," said Stephen Boyd, Special Agent in Charge, IRS Criminal Investigation.
CORY ATKINSON of Chesterfield, MO, pled guilty this morning to one felony count of conspiracy to commit mail and wire fraud, and one felony count of filing false tax returns before United States District Judge Catherine D. Perry. Sentencing has been set for September 18, 2012.
DARAIN ATKINSON of St. Louis, MO, pled guilty April 9, to one felony count of conspiracy to commit mail and wire fraud, and one felony count of filing false tax returns, and is scheduled for sentencing July 12, 2012.
Conspiracy count carries a possible penalty of five years in prison and/or fines up to $250,000; and the tax count carries a possible penalty of three years in prison and/or fines up to $250,000. In determining the actual sentences, a Judge is required to consider the U.S. Sentencing Guidelines, which provide recommended sentencing ranges.
This case was investigated by the Internal Revenue Service-Criminal Investigation, United States Postal Inspection Service, Federal Bureau of Investigation and the Missouri Attorney General's Office. Assistant United States Attorney John Bodenhausen is handling the case for the U.S. Attorney’s Office.