From prison to the pinnacle

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WEATHER • SUNDAY 61° • SUNDAY NIGHT 53° • MONDAY 58° • FORECAST A23

250 strong and growing

Clydesdales pull their weight and then some as symbol of A-B.

BOONVILLE, MO. • Cooper the

Clydesdale was worn out after

nosy journalists had spent the

morning petting, photographing

and ﬁlming him. The little hor se

plunked down on w ood chips and

went to sleep.

Only a week old, and already

a celebrity, Cooper was the ﬁrst

Clydesdale foa l born at An-

heuser-Busch’s pristine new

breeding facility in central Mis-

souri. But even Anheuser-Busch

Clydesdales who don’t have pres s

releases written about them have

a chance to be in the limelight.

They are, after all, part of An-

heuser-Busch’s decades-long

drive to wrap itself in images of

str ength, tr adition and heritage.

With that in mind, the brew er

is upping its investment in its

four-hoofed friends. It recently

opened the 347-acre farm in

Boonville to help nurture a new

gener ation of Cl ydesdales to en-

tertain Americans.

“The Clydesdales have stood

the test of time,” said Bob Fish-

beck, Budweiser product man-

ag er. “You have new generations

that really take a hold of them ev-

ery year .”

Anheuser-Busch owns about

250 Clydesd a les — the largest

single group in the world. A-B

runs a complex br eeding and en-

tertainment operation that sends

hor ses and hitches to hundreds of

showings every year from Cali-

fornia to Florida. It gets thou-

sands of request s for appearances

every year, and has t o turn do wn

hundr eds more. One request for

a single Budweise r Clydesda le

came from China.

The sprawling new farm west

of Columbia is one example of

Anheuser -Busch’s willingness to

invest in its “gentle giants.” The

Clydesdales’ breeding headquar -

ters partners with Grant’s Farm,

A-B’s other M issouri breeding

facility. Anheuser-Busch won’t

disclose how much it spent to

build the facility and get the ne w

farm up and running, but the

company certainly doesn’t mind

showing it o .

BY JEREMIAH MCWILLIAMS • jmcwilliams@post-dispatch.com > 314-340-8372

HORSES’ HISTORY

Learn more about the history

of the Clydesdales and their

importance to Anheuser-Busch.

STLtoday.com/multimedia

.com

JOHN L. WHITE • jwhite@post-dispatch.com

Clydesdale handler Loren Knoche walks Scott (left) and Bob on Thursday at Anheuser-Busch in St. Louis.

See 4 videos about the Clydesdales

STLtoday.com/videos

See a slideshow of the Clydesdales

STLtoday.mycapture.com

HOMES OF ANHEUSER-BUSCH'S CLYDESDALES

The brewer keeps horses at several locations around the U.S.

SOURCE: Anheuser-Busch | Post-Dispatch

San

Diego

San

Antonio

Tampa

Merrimack, N.H.

Williamsburg, Va.

Ft. Collins, Colo.

Boonville, Mo.

St. Louis

Orlando

Merrimack, N.H.

Williamsburg, Va.

Ft. Collins, Colo.

St. Louis

Orlando

MEMORIES OF THE ADMIRAL

BOOK SIGNING

WITH JOE HOLLEMAN

When • 1-3 p.m. Saturday, April 25

Where • South County Center,

main level by Post-Dispatch Store

kiosk (near Macy’s)

To purchase • thepost-

dispatchstore.com

Millions of St. Louisans

born between the 1904

World’s Fair and the

1964 Cardinals’ World

Series title cruised on the

Admiral.

The Post-Dispatch has

published a history of

the boat, “Rollin’ On

The River,” which is

highlighted by letters and

photos from readers.

This week, we will share

excerpts from the book.

Today, read about the

Admiral’s history and what

shape the boat is in today.

COMMUNITY • B1

DA VID CARSON • dcarson@post-dispatch.com

Darain Atkinson has amassed enviable wealth, including this $17

million home under construction in Lake Saint Louis, but his auto

warranty company is now under investigation in several states.

From prison to the pinnacle

But company that made founder rich now faces public scrutiny.

Nineteen years after leaving fed-

eral prison, Darain Atkinson is a

wealthy man. He and his famil y

own luxury cars, boats, vacation

homes and a $17 million mansion

under construction that will be

the bigg est in St. Charles County.

The convicted thief, burglar,

check-forger and counterfeiter

founded an auto warranty com-

pany eight years ago that now

employs more than 1,000 people.

Thestor yofU.S .Fidelisf ounder

Atkinson could be a model of re-

habilitation. But

it’s one being cast

int o question no w

as attorne ys gen-

eral from at least

40 st ates investi-

gate whether the

company has vio-

lated consumer

pr otection law s.

The Better Business Bureau

say s that, in the last thr ee y ears,

mor e than 1,100 people have ﬁ l ed

complaints about Wentzville-

based U .S. Fidelis , or its aliat ed

companies. The watchdog gr oup

says consumers complain that

the ﬁrm’s telemarketers deceive

consumers .

Consumers purchas e extended

service contracts after the manu-

facturer warr anties expire. Cus-

tomers typically make a down

payment f or the service and pay

a monthly fee that is deducted

automatically from their credit

cards or bank account s.

Critics in lawsuits, consumer

advocacy w ebsites and in the BBB

reports say the U.S. Fidelis sales

BY MATTHEW HATHAWAY • mhathaway@post-dispatch.com > 314-340-8121

AND ELIZABETHE HOLLAND • [email protected] > 314-340-8259

Foreclosures start

vicious sales circle

Buyers get in and out quickly as homes crumble.

BY TIM LOGAN

tlogan@post-dispatch.com > 314-340-8291

AND KEVIN CROWE

kcrowe@post-dispatch.com > 314-340-8325

Ther e’s an old brick two-fam-

ily on Iowa Avenue,a half-block

o Cherokee Street, that quali-

ﬁ e s as a serious ﬁ xer-upper.

Plywood leans against a

ground floor window, and a

charr ed metal side door creaks

and ﬂaps in the wind. Bricks and

chunks of w ood paneling sit in

the fr ont yard, and thr ough the

jagged remnants of the upstairs

windows, you can see a torn-

up ceiling. In February, a city

inspector found 21 code viola-

tions, just on the outside.

And yet, this place has been

sold twice since November.

Welcome to the bott om of the

real est ate market.

The house on Iowa is one of at

least 90 St. Louis-area houses

in two years to pass through the

hands of a little compan y based

in Tulsa, Okla., that special-

izes in “disposing of problem

assets.” Operating under the

names Destiny Ve ntures and

SB Holdings, it has bought and

sold thousands of homes in

foreclosure-ridden neighbor-

hoods across the Midwest since

the mortgage crisis began. And

it’s just one of perhap s a dozen

that ar e quietly buying mor e.

This burgeoning “bulk fore-

closur e” trade is the latest wav e

of the mortgage meltdown to

ripple through neighborhoods

such as Dutchtown, Walnut

Park, Jennings and Spanish

Lake.Littleout-of-st atein vest-

ment ﬁrms fueled by str eams of

privatecapit alare buyinghomes

fr om banks desper ate to dump

them. They rarely pay more than

$10, 000 per house.Then theyﬂip

them, oft en to another investor,

’04 ’05 ’08’07’06

200

400

600

800

1,000

965

SOURCES: St. Louis cIty Assessor’s Office; St. Louis

County Assessor’s Office | Post-Dispatch

The number of home sales for

$10,000 or less — a sign of bulk

purchases and flipping — in St. Louis

and St. Louis County jumped 85

percent from 2006 to 2008.

ROCK-BOTTOM

SALES JUMP

Atkinson

See CLYDESDALES • Page A16

See HOUSES • Page A15

2 M

STLtoday.com/birdsnest • POST-DISPATCH WEATHERBIRD ®

See FIDELIS • Page A12

4/30/2009

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A12 • ST. LOUIS POST-DISPATCH M2• SUNDAY • 04.19.2009

reps often lie about the coverage

provided by the extended auto

warranties, refuse to provide

customers with contracts until

after they purchase a warranty

and lure consumer s with bogus

oers that create a false sense of

ur gency.

Last year, then- Attorney Gen-

eral Jay Nixon ﬁ led suit against

the company, claiming it vio-

lated federal and state telemar-

keting laws, including the No

Call list. Lawyers on April 1 ﬁ led

a class-action suit against U.S.

Fidelis in St. Charles County al-

leging violations of Missouri’s

consumer-pr otection law.

Company officials say they

have responded to nearly every

consumer complaint the BBB

has received and that the com-

pany is an industry leader in fair

cust omer service.

CRIMINAL CHARGES

Atkinson, 44, and his three

brothers grew up in Garden

City, Kan. The brothers — Da-

rain, Cory, Kevin and Robert

— all have worked at U.S. Fidelis,

which Darain formed in 2001.

Darain is president; Cory, 39, is

vice president. Kevin Atkinson,

45, is a manager there, as was

Robert Atkinson, who died last

year.

When the boys were growing

up, their father, Ernest Atkin-

son, held a variety of jobs in the

Garden City area, among them

bookkeeping-related positions

and cattle raising, said their

grandmother, Amelia Atkinson.

In 1986, while living in the

Gar den City area, Darain Atkin-

son, 21 at the time, was char ged

with burglary, theft and forg-

ery. According to court docu-

ments, he brok e int o a furniture

st ore and st ole money and blank

checks, which he later cashed

at several banks. When police

arrested him, he was carrying

$1,680 in cash.

After pleading guilty in No-

vember 1986, Darain Atkinson

was given probation. That was

revoked in June 1987 when he

pleaded guilty in federal court

to a counterfeiting charge for

producing $40,000 in bogus

$20 and $50 notes. About two

months later, he went to prison

on the st ate charges.

In a 1988 lett er fr om the Kan-

sas prison that was part of his

court ﬁ le, Darain Atkinson asked

a judge for an early release fr om

his state prison term so he could

start his federal prison sentence

as soon as possible.

He also said he wanted to en-

roll in a drug-treatment pro-

gram once he became a federal

inmat e. He described himself as

a model prisoner who had pro-

vided information to authorities

“to get some drug pushers off

the str eet.”

And Darain Atkinson prom-

ised to sin no more. He would

straighten up and become a

businessman, he told the judge.

Lat erthatyear, he was releas ed

from state custody and sent to

federal prison. He was released

on Sept. 7, 1990. As he recalled

that day in a brief interview on

Friday: “When the bars closed

behind me, I was rehabilitated.”

His time in prison was “a

blessing in disguise” because it

set him on the right path — and

it led him to Jesus, Atkinson said

in the int erview. “I am absolutel y

a chang ed man.”

LAUNCHING A COMPANY

In July 2001, Atkinson started

the company that would be-

come U.S. Fidelis, known at the

time as Big Time Productions.

The compan y’s name chang ed to

NationalAuto Wa rrant yServices

Inc. in February 2003. On Jan.

22, it became U.S. Fidelis Inc.

According to the business’s

most recent annual report, Da-

rain Atkinson is the company’s

pr esident, treasur er and a board

member; Cory Atkinson is listed

as the only other board member,

as well as the company’s vice

pr esident and secret ar y.

The two Atkinson brothers

ran the compan y in its early days

out of a store fr ont in Centr e on

the Lake strip mall in Lake Saint

Louis. Ernest Atkinson, wh o

lives in Went zville, said his sons

beg an the business “on a Chris-

tian concept,” and that 10 per-

cent of everything going to the

chur ch or charity.

“They have tried to do ever y-

thing that they could with this

business in order to have it hon-

est,” he said.

His sons’ secret to success,

Ernest Atkinson said, “is being

smart and working hard and do-

ing things honestly. Yo u’ve got

God on your side, and he’s going

to make you pr oﬁtable.”

The co mpany moved to a

lar ger space in St. Peters, but by

2006, the company had grown

to 300 emplo yees and was look-

ing for more space. The com-

pany settled on the old Belz Fac-

tory Outlet Center, a 346,000-

square-foot complex at Inter-

state 70 and Highway 40. More

than 1,000 U.S. Fidelis employ-

ees now work there, and part of

the mall has been converted to

house Element Church, where

the Atkinson family and many of

the compan y’s manag ers att end

services.

That church is expanding into

spacethat was recently the home

to Exodus , a Christian nightclub

owned by Atkinson that opened

and closed within months .

GREAT PROSPERITY

The company’s he adquarters is

impr essi ve, but the building that’s

become the talk of St. Charles

County’s real estate industry is

Darain Atkinson’s future home

— a 20,752-squar e-f oot mansion

under construction on the banks

of Lake Saint Louis.

County Assessor Scott Ship-

man said that when complet ed,

it will be the largest home in the

county, and by a considerable

mar gin:Thene xtbigg estis15,000

square feet.

According to the Lake Saint

Louis building department, plans

show the mansion will have a

bowling alley, a beauty salon, a

libr ar y, a meditation room, a bil-

liar ds room and an observation

tower accessible by a spiral stair-

case.

Plans call for a cust om indoor

pool and an outdoor pool with a

waterfall, slide and a bar-and-

kitchen area. They also include

a sculpture garden and an aut o

courtyard with a seven-car ga-

rage. To dat e, according to Lake

Saint Louis building permits, $17

million has been slated for the

Lakeview home’s construction.

Atkinson said he wanted to

build his Lake Saint Louis man-

sion large enough to accommo-

date charitable fundraisers he

plans to host.

Thehouseis har dlythe onlysign

of Darain Atkinson’s prosperity.

Records sho w he and his wife,

Mia,als o own four other homes in

St. Charles Count y and a 50-foot

yacht. They also own luxury cars,

including a 2006 Bentley Con-

tinental GT valued at $144,900 ,

according to tax records.

Tax records also show the com-

pany owns a 44-foot, 2007 Marine

Technology speedboat dubbed “Bat

Boat” and six vehicles, including a

2005 Ford GT racer with a super-

char ged V8 engine and valued at

$10 7,420, as well as a 2008 Dodg e

Challeng er SRT8 muscle car val-

ued at $33,434.

That love of high-powered

vehicles seems to influence the

company’s marketing strategy:

In February, it announced that

it would be a primary sponsor

of NASCAR Nationwide Series

driver Stev e Wa llaceofRust y Wal-

lace Racing in 25 races this year.

Team vice president Gr eg Wallace

reinf or ced its commitment to U.S.

Fidelis in an e-mail on Friday:“We

ar e in the racing business, and U.S.

Fidelis provides valuable sponsor-

ship to our team.”

Atkinson would not talk about

other propert y he owns because

he said he fears for his family’s

safety. He didn’t elaborate.

His telephone int ervie w Friday

with a reporter was given on the

condition that questionswouldbe

limit ed to his criminal histor y and

the mansion being built in Lake

Saint Louis. Atkinson’s spokes-

man, Ken Fields of the Fleish-

man-Hillard public relations

ﬁ rm,participatedin the telephone

interview. He would not allow

Atkinson to answer several ques-

tions about his personal ﬁ nances

or other pr operty he owns .

Questions about U.S. Fidelis’

operations were directed to

Chris Riley, the company’s new

chief executive and a former se-

nior partner at ABMI, a consult-

ing ﬁ rm based in Ov erland Park,

Kan., that specializes in corporate

mer gers and acquisitions.

Riley, named CEO last month,

declined to discuss speciﬁc sales

and marketing tactics used by

the company and

said the company

is committed to

dealing with cus-

tomers honestly

and fairly. He said

U.S. Fidelis sup-

ports increased

regulation of

the exte nded

aut o warranty industry, includ-

ing a ban on reaching customer s

through unsolicited, outbound

calls. U.S. Fidelis discontinued

that pr actice about nine months

ag o, Riley said.

In a stat ement last week, Riley

said the company had resolved

virtually all the complaint s the

BBB had received and is work-

ing on addr essing the remaining

complaints.

That doesn’t satisfy Michelle

Corey, the president and chief ex-

ecutiveoftheBBBinSt.Louis,who

replied in a st atement that U.S.

Fidelis does respond to formally

lodg ed consumer complaints but

fails “to address the fundamental

reasons why consumers complain

in the ﬁ rst place.”

Riley would not discuss Darain

Atkinson’s criminal background

and he would not comment on the

lifestyles enjoyed by Darain and

Cory Atkinson. Rile y described

the brother s as “very community

orient ed” and that they’ve gi ven

significant financial support to

Element Church.

Meanwhile, Darain Atkinson

wouldnot discussU.S. Fidelis,nor

the complaints from its cust om-

er s. But he ackno wledged that the

company has made him wealthy.

“There is an or der in the King-

dom of Heaven,” he said. “God

has blessed us. Why he has

blessed us, I don’t know. ”

Mark Schlinkmann, Mark Learman, Susan

Weich and Shane Anthony of the Post-

Dispatch contributed to this report.

BBB says more than 1,100 people have ﬁ led complaints against auto warranty company or its afﬁliates

FROM A1

HOMES OWNED BY DARAIN

ATKINSON AND HIS WIFE

• Under construction, a waterfront

mansion on Lakeview Court, on Lake

Saint Louis. St. Charles County land

records indicate the house will be

20 ,752 square feet when ﬁ nished. So

far, construction costs have totaled

$17 million, permits show.

• A 3,618 -square-foot home with a

market value of $779 ,810 on Hawks

Landing Drive in Wentzville. It was

purchased in 2003.

• A 3,835-square-foot home valued

at $636,160 on Woodview Drive in

unincorporated St. Charles County,

bought in 2005.

• A second house on Woodview

Drive, a 1,350-square-foot ranch

the Atkinsons bought in 2006 for

$575,000 but that records say is

valued at $232,760 .

• A 1, 972-square-foot ranch on Pigeon

Drive in Lake Saint Louis that the

couple bought last year for $330 ,000

(its value is listed at $339 ,170).

HOMES OWNED BY CORY

ATKINSON AND HIS WIFE

• A remote, 9,015-square-foot home

the couple had built in 2006 on 10.7

acres on Atkinson Way in St. Charles

County. County records say the

property is valued at $2.41 million.

• A newly built 4,695-square-foot

home near the Northstar ski resort

in Truckee, Calif ., near Lake Tahoe.

According to property and real estate

records, the couple bought the home

late last year for $2.875 million.

• A waterfront, 4, 914-square-foot

home in the La Riva Estates section

of the Porta Cima neighborhood in

Sunrise Beach, in the Lake of the

Ozarks area. Camden County records

did not indicate what was paid for the

property; however, county records

say the home was appraised at

$590 ,300 in 2008.

• A 2,100-square-foot house at 505

Lias Way in Wentzville, purchased in

2007 and valued at $158,010.

• A 1,41 9-square-foot home at 718

Wenstone Crossing Way in Wentzville,

bought in 2006 and valued at

$154,510.

• A tract of land near the Atkinson

Way property, on Bless Us Drive East,

bought last year for $102, 950 .

CARS AND BOATS

• On their 2008 St. Charles County

personal property assessment form,

Darain Atkinson and his wife, Mia,

reported a 2006 Bentley Continental

GT valued at $144 ,900; a 2005

Mercedes-Benz SL500 valued at

$56,875; a 2006 Ford pickup; a 24-

foot boat; a 20-foot boat; and two

boat trailers.

• Cory Atkinson and his wife, Heather ,

reported a 2006 Porsche 911 Carrer a

valued at $61,200; a 2005 Corv ette

CV valued at $38,650; a 2007 Cadillac

Escalade valued at $38,058; a 2005

Ford Mustang; and a 2005 Ford

pickup.

• Darain Atkinson also owns a 50-

foot 2005 Sea Ray yacht named

“Isabella,” according to a boat

registration database. Those records

indicate the boat’s hailing port is

Lake Saint Louis. The value guide

used to assess property in Missouri

lists the yacht’s market value at

$439,100 .

• Likewise, Cory Atkinson owns a 40-

foot 2005 Porter boat dubbed “Quick

Silver” that he keeps in Sunrise

Beach, in the Lake of the Ozarks area,

boat registration records say.

• Records show a third boat — a

44-foot, 2007 Marine Technology

speedboat named “Bat Boat” — that

is listed on National Auto Warranty

Services’ 2009 assessment form.

National Auto Warranty is the name

of the Atkinsons’ warranty company

before they changed it in January

to U.S. Fidelis. Bat Boat also is kept

in Sunrise Beach, according to boat

registration records.

• National Auto Warranty’s

assessment form also lists six

vehicles and a trailer. The vehicle

with the biggest price tag is a 2005

Ford GT racer, a high-performance

car with a supercharged V8 engine,

valued at $107,420, according to

assessment records. Also listed

is a 2008 Dodge Challenger SRT8

muscle car valued at $33,434, a 2006

Chevrolet, 2007 Chevrolet, 2006

Ford and 2007 Ford.

LAURIE SKRIVAN • lskrivan@post-dispatch.com

The U.S. Fidelis call center in Wentzville. The auto warranty company says it’s working to improve customer service after consumer advocates

dismissed its business practices as deceptive.

Riley

Enjoying the rewards

FIDELIS •FROM A1

THE NO. 1 ST. LOUIS WEBSITE AND NEWSPAPER • READ BY 1.3 MILLION ADULTS EACH WEEK

FRIDAY • 04.24. 2009 • $1.00

1 F

TOMORROW 82° • FORECAST A22

WEATHER • TODAY 83° • TONIGHT 61° •

STLtoday.com/birdsnest • POST-DISPATCH WEATHERBIRD ®

The boat was rocking, and the

passenger s came knocking.

In the 1970s, rock ’n’ roll com-

manded the boat. When disco

reared its head lat e in the decade,

the Bob Kuban Brass held sway

over the dance ﬂoor. Rock bands

such as the Young er Brother s and

March Hare played the upper

decks .

In 1974, the boat’s steam en-

gines were replaced by diesel: A

gain of horsepower, and a loss of

heritage.

When the 1978 season ended,

Admir al fans assumed they would

have t o w ait just six short months

for the next cruise.

Admiral ﬁ n ds

its groove

Rollin’ on the Riv er >

1970s • The Admiral

rocks on, despite a loss

of steam (power).

Pressure tactics

used at US Fidelis

Customers, ex-workers recount call center sales practices.

LAURIE SKRIVAN • [email protected]om

Sales reps at US Fidelis have sold more than a half-million extended auto-service contracts nationwide

in eight years. A lawsuit ﬁled April 1 against the ﬁrm accuses it of misleading customers.

Page A2

MORE GM CUTS

IN WENTZVILLE

Plant will be idled extra

weeks and more employees

will be laid off, GM says. B1

• STL Friday is located

behind the Business section

The Better Business Bureau gives tips for purchasing auto-ser vice contracts. Page A8

BY MATTHEW HATHAWAY • mhathaway@post-dispatch.com > 314-340-8121

AND ELIZABETHE HOLLAND • [email protected] > 314-340-8259

WENTZVILLE • The head-

quarters of US Fidelis is a

sprawling symbol of its success.

More than 1,000 people report

to work at the former Belz Out-

let Mall, a building now ﬂagged

by the halo-crowned logo of its

curr ent owner.

Compa ny sales reps have

peddled more than a half -mil-

lion extended auto-service

contracts nationwide in eight

years. Its success, c ompany

executives say , is r ooted in the

way it tr eats customers — with

honesty and integrity.

Yet, in interviews with the

Post-Dispatch, consumer s and

former emplo yees describe the

way telemark eters mislead cus-

tomers of US Fidelis , now un-

der investigation by at least 40

state att orneys general and the

Missouri Department of Insur-

ance.

The storiestoldb ythose con-

sumers and former employees

illustrate the claims made by

watchdog groups and are also

at the heart of a class-action

lawsuit ﬁled ag ainst the ﬁrm on

April 1.

They say US Fidelis sells con-

tracts b y creating a false sense

of urgency, concealing infor-

mation about limit s on cover-

age and demanding upfront

payments before sending out

contr act s.

Tami Lucas, 49, worked at

the company for about seven

months. She was fired March

7, she said, after she took a sick

day without permission. Lucas,

who worked in sales, said she

oft en felt guilty aft er pres suring

Ameren

suspends

plans for

new plant

However, opponents

say utility could restart

efforts down the road.

When Tom Voss asked the Mis-

souri Legislature for help to build

another nucle ar power plant, the

Amer enUEchief executi ve prom-

ised high-paying jobs to help

turn around Missouri’s moribund

economy.

Pressed by lawmakers, how-

ever, Voss acknowledged that

even with new legislation, the

pr ospects of a multibillion-dol-

lar nucle ar plant — whi ch could

take a decade to build — were 25

per c ent at best.

Now that Ameren’s favored

legislation has died, Voss is say-

ing that the nuclear plant option is

dead,too.Thurs da ymorning,Voss

said the compan y is suspending its

efforts to build a sec ond nuclear

plant in Callaway County.

Proponents of the nuclear

plant say Missouri missed a criti-

cal opportunity to meet its long-

term ener gy needs with a sour c e

of power that is cle aner than fa-

cilities that burn coal or natural

gas. Opponent s say the pr opo sed

legislation would not adequat ely

pr otect consumer s from double-

digit rate incre as es .

Voss said the legislative eort

was about ﬁnding a cost-eecti ve

funding mechanism to the best

power alt ernative available. “We

developed a bill that we thought

was the minimum we needed to

provide financial certainty,” he

said. “We are stepping away fr om

the nuclear option at this time.”

Stepping away, however , is in

the eye of the beholder.

“We’ll take that with a gr ain of

salt,” said Kathleen Logan Smith

of the St. Louis-based Missouri

Coalition for the Environment.

Smith and other AmerenUE

critics, including consumer lob-

byist John Coman, say the plant

BY TONY MESSENGER •

tmessenger@post-dispatch.com

573-635-6178

House

ﬂ o ats

$1 billion

tax break

GOP scraps spending

plan for federal funds

but faces tough Senate.

JEFFERSON CITY • House

Republicans abruptly dropped

a wide-ranging spending plan

Thursday and proposed using

federal stimulus funds to give

Missourians a $1 billion tax bre ak.

The new approach would re-

duce individual income taxes for

the next two years. The 6 percent

tax rate on income over $9,000

would dr op t o 5.5 percent. House

leaders estimated the tax cut

would cost the state roughly $500

million per year.

An attorney for the National

Conference of State Legislatures

said he knew of no other states

considering using part of the

stimulus money known as budget

stabilization funds to accommo-

dat e a tax cut.

The mo ve was a r ebuke by the

89-member House Republican

Caucus ag ainst the GOP’s leader -

ship. House Speaker Ron Richard

and Budget Chairman Allen Icet

had craftedplanst ospend the fed-

eral money on scor es of pr oject s,

including high-tech equipment, a

BY VIRGINIA YOUNG

vyoung@post-dispatch.com

573-635-6178

Has the golden goose flown

back to Hollywood for keeps?

The imported cast and cr ew

of “Up in the Air,” the comedy

starring George Clooney that

has been filming in St. Louis

since ea rly last month, a re

packing up and leaving town

today. No studio productions

are slated to camp here any-

time soon. Ye t “Up in the Air”

is leaving a legac y behind, both

tangible and intangible.

The Paramount production

spent $12 million to $15 million

in Missouri and generated two

to three times that amount in

total economicacti vit y,accord-

ing t oJ erryJones ,the dir ector of

the Missouri Film Commission.

The producers hired about 90

local trade unionists , and 2,000

star-struck civilians work ed as

extras.

Jus t as important, Jo n es

said, the production put Mis-

souri on the map with the other

Holly wood studios, wh ich

had not based a major release

in the Show-Me State since

20th Century Fox shot a West-

ern called “Jesse James” in the

Ozarks in 1939 .

“Nobody in Hollywood likes

to be the ﬁrst to t ak e a chance,”

Jones said. “Now the w ord has

traveled through the network

‘Up in the Air’ lifts ﬁ l m industry

©MICHAEL KILFOY • www.studiox.us

George Clooney greets fans last month in front of the Maplewood United Methodist Church. The ﬁlm

production spent $12 million to $15 million in Missouri and employed about 90 local trade unionists.

FRIDAY • 04.24.2009 • B1

DISTILLERY GRAND OPENING

The Stable inBenton Park now features itsown rum. They hope

to add whiskeyand gin to the mix laterthis year. See aglimpse of

its new distillery.STLtoday.com/video

JOIN US ONLINE STLTODAY.COM/BUSINESS

Lofts ... and a brewery?

Old Coca-Cola syrup plant in the Patch neighborhood is being

turned into residences and maybe Lemp Brewing’s new home.

More cuts

at GM in

Wentzville

Between 250 and 300 workers could

lose jobs as production is slowed.

BY ANGELA TABLAC• [email protected] > 314-340-8140

George Clooney ﬁlm leaves town as lawmakers weigh expanding tax

BY JOE WILLIAMS • Post-Dispatch Film Critic > joewilliams@post-dispatch.com > 314-340-8344

Philippines

overturns

Marine’s

conviction

Order releasing Daniel

Smith, of O’Fallon, Mo.,

sets off protests.

MANILA, PHILIPPINES • Po-

lice have tight ened security at the

U.S. Embassy after a Philippine

Court of Appe als decision Thur s-

day overturning the rape convic-

tion of a U.S. Marine from the St.

Louis area set o

pr otests.

Lance Cpl.

Daniel Smith, 23,

of O’Fallon, Mo.,

was found guilty

three years ago

of raping a Fili-

pino woman af-

ter a night of drinking and was

sentenced to life in prison. The

emotional cas e turned int o a po-

litical tug-of-war between the

Philippine government — keen

on maintaining smooth r elations

with its k ey ally — and national-

ist, left-wing and w omen’s rights

activists eager to showcase that

the Philippines can do without

U.S. protection.

The 71-page decision by the

appeals court is ﬁnal and orders

the immediate release of Smith

from his detention at the U.S.

Embassy in Manila, where he has

Smith

FROM NEWS SERVICES

.com

A CLOSER LOOK

Get a state by state look

at the stimulus package.

STLtoday.com/politics

.com

YOUR VIEW

Weigh in on legislation

from Jefferson City

and the Legislature’s

decision to table the

AmerenUE plan.

STLtoday.com/

politicalﬁx

See CLOONEY • Page A5

See AMEREN • Page A5

See FIDELIS • Page A8

See SMITH • Page A4

See TAXES • Page A4

Bye,

George

A8 • ST. LO UIS POST-DISPATCH M1• FRIDAY • 04. 24.2009

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FIDELIS

consumers, particularly el-

derly ones.

One such call involved

a confused older woman.

“She thought she was buy-

ing car insurance,” Lucas

said. “I made the sale — I

would have been fired if I

didn’t — but I told her to get

a friend, a relative or some-

one from her church to read

over the paperwork.”

US Fidelis says the vast

majority of its customers

are satisfied with the ser-

vice contracts they have

purchased. The company

said mor e than $20 million

in claims was paid in 2008

to vehicle owners wh o

bought service contracts

sold by US Fidelis.

While the Be tter Busi-

ness Bureau says it has re-

ceived 1,100 complaints

about US Fidelis , the com-

pany says that represents a

tiny fr action of it s 250,000

or so current customers.

The BBB acknowledg es US

Fidelis has worked to ad-

dress virtually all of those

complaints.

Although the private

company does not release

revenue figures, the suc-

cess of US Fidelis is evident

in the lavish lifestyle en-

joyed by owners Darain and

Cory Atkinson, who own

several ex pensive man-

sions, vacation homes and

other properties. Darain

At kinson, the company

pr esident, is building a $17

million home on the banks

of Lake Saint Louis.

As previously reported

by the Post-Dispatch, the

prosperity contrasts with

Darain Atkinson’s early life

in western Kansas. He left

the Garden Cit y area after

serving sentences in state

and federal prison after

convictions for theft, bur-

glary, forgery and count er-

feiting. He ﬁ rst relocat ed to

Kansas City, wher e he sold

cars, and, eventuall y, to the

St. Louis area.

Atkinson said last week

he was a changed man af-

ter his 1990 release from

prison. The company’s

chief executive said At-

kinson’s criminal past has

no bearing on the business

practices at US Fidelis .

“If I see anything that

is inconsistent with our

desir e to connect our cus-

tomers with the most ef-

fective extended-service

contract, and treat those

customers with honesty

and integrity, I personally

will step in, look at it and

take correcti ve action,” said

Chris Riley, named CEO

last month.

Denis Phillips, of Fenton,

left his job at US Fidelis in

December, bef ore Riley be-

came CEO. He had worked

there six months but quit

aft er a particularly dicult

sales call.

A woman had called US

Fidelis to ask about a ser-

vice co ntract. Her hus-

band had died re ce ntly,

and she was not sure what

to do about a 2007 vehicle

the couple had purchased,

Phillips, 32, recalled.

“I was trying to pressure

her into a sale,” said Phil-

lips. In line with a prepared

script he said employees

were trained to use, Phil-

lips asked her who she was

going to call when her car

br eaks down since her hus-

band was gone, he said.

The script calls for reps to

paint a pictur e of how the

cust omer would cope with

a large auto repair bill.

Then she began to cry, he

said.

“I just couldn’t for-

give myself,” Phillips said.

“I made her cry because I

had to make her think of

her husband dying … I’ll

be damned if anyone ever

talks to my grandma like

that.”

PUT ON HOLD

Kristin Robbins, 22, of St.

Charles , said she called US

Fidelis on April 7 after she

saw one of the company’s

TV commercials. She

wanted to know ho w much

a service contract would

cost for the 2001 Buick Re-

gal she bought in Sept em-

ber.

Robbins said she told a

US Fidelis employee that

her car had about 130,000

miles on it. The woman

working in the call center

told Robbins the normal

cutoff was 125,000 miles,

but that she would speak

with a manager. Robbins

said the US Fidelis sales rep

returned moments later to

tell her she did qualify.

Robbins sa id the first

sales rep passed her to a

second woman who tried

to get her credit card infor -

mation. She said she told

the second US Fidelis em-

ployee that she wanted to

talk to her boyfriend about

the warr anty. The sales rep

told her she had to buy now

or she would never get an-

other chance at a low rate.

“I sa id absolutely not,”

Robbins said.

Putting a customer on

hold to speak to a manager

is standard practice, say

Lucas , Phillips and several

other former employees

interviewed by the Post-

Dispatch. They say that,

in the script s they received

as call-center workers, it ’s

referred to as F.O.A.M., or

“Freak Out At Mileage.”

Customers are told that

the miles on their vehicles

barely exceed the maxi-

mum allowable for the best

available service contract.

Lucas and Phillips said the

caller is told that the rep

needs to talk to a manager,

then put on hold. Though

no such conv ersation will

take place, the cust omer is

always approved.

While Riley would not

comment on speciﬁc alle-

gations of misconduct, he

did respond to a question

about F.O.A.M.: “In the six

or seven weeks that I have

been CEO, I have not seen

that practice at US Fidelis .”

MADE-UP DISCOUNTS

Phillips and the other em-

ployees said F.O.A.M was

not the onl y way that sales

ag ent s tried to create a false

sense of urgency. If a con-

sumer seemed to be on the

fence, he said, US Fidelis

employees were trained to

oer special discounts that

did not, in fact, exist.

If the customer did not

choose to purchase a full-

price service contract, the

salesman then began ask-

ingwhether he or she wasin

college, in the military, “or

whatev er kind of discount

somebody could come up

with,” Phillips said.

Oncesucha discount was

determined, the salesman

told the customer, “We just

qualified your vehicle for

a lower cost,” Phillips re-

called telling cust omers.

Lucas said workers were

trained to look for wh at

the co mpany called “hot

butt ons.” For instance, she

said, sales agents would

listen for crying children,

which could form the ba-

sis for a family discount, or

make a not e if a caller men-

tioned she was married to a

serviceman.

US Fidelis spokesman

Ken Fields, of the Fleish-

man-Hillard public rela-

tions firm, said discounts

are available to customers

but would not discuss de-

tails. Phillips and Ford con-

ﬁ rm allegations in the class

action suit that say the

company offers discounts

“when, in fact, no such

pr ograms exist.”

BUY, THEN READ

After seeing a US Fidelis

commercial, William Roth

called the company April

15 for information for a

service contract for his 10-

year-old Mercury Sable

with about 130,000 miles.

Roth, 62, of O’Fallon,

Mo., said he initially was

told the mileage was too

high to qualify for the best

coverage, then he was ap-

proved after a sales agent

go t permission from a

manag er.

But Roth wasn’t ready

to buy. He wanted to get all

the details in writing bef ore

buying a contr act.

“I was actually going to

get a warrant y — until they

wouldn’t se nd me a copy

of it,” Roth said. “I think

they’ re holding back. They

want to co nv ince you to

buy it on the phone.”

Eventually, the sa les

agent said Roth wo uld

have to come in person to

the company’s Wentzville

oce to see the ﬁ ne print.

The call ended without a

sale. Two days later Roth’s

phone rang. It was US Fi-

delis; he didn’t answer the

call.

Riley said US Fidelis em-

ployees do not send con-

tracts to consumers until

they have made a down

payment. He would not

elaborate on this policy be-

cause, he said, that would

“get into specifics of how

our business model is set

up.”

COVERAGE CLAIMS

Since they do not know the

terms of their service con-

tract when they sign up,

many consumers do not

realize it s limitations — or

even that US Fidelis is not

the provider of the cover-

age — until their cars and

trucks break down.

Scott Friend, 36, of Eu-

reka, bought an extended

aut o-s er vice contr act from

US Fidelis on Sept. 8, 200 7,

when the company was

called National Auto War-

ranty Service.

Friend said he had prob-

lems with his 2004 Ford

F-250 diesel pickup, which

had 106,953 miles on it

when he bought the con-

tract. Friend said he asked

the sales rep on the phone if

it matt ered that he used his

truck for his construction

business, and the agent

told him that would not be

a pr oblem.

A couple of months lat er,

the truck broke down.

The repair bill was $9,250 .

Friend thought he was

covered, but Vehicle Care

— the provider of the ser-

vice contract that National

Auto Warranty sold to

Friend — denied his claim.

The policy was void, Friend

said, because the truck was

a work vehicle.

“I was so disgusted af-

ter I got home, I don’t

think I could even talk,”

said Friend, who called the

company several times and

ultimat ely got a full refund.

Many consumers do not

realize that US Fidelis does

not pay out claims. The

company’s TV co mmer-

cials repeatedly state that

the company does pay for

repair costs: “Yo u even pick

the repair shop, and we

pick up the bill. And we’ll

pay the shop directl y so you

don’t have to pay upfront

and wait to be reimbursed

… The choice is yours: You

can pay your repair bills

yourself or you can let us

pay them for you.”

In realit y, claims are han-

dled by separate companies

that provide the serv ice

contracts US Fidelis sells.

The cost of contracts vary

depending on the age of the

vehicle, mileage and the

breadth of coverage. Rob-

bins said the contract she

wasoeredwould have cost

$300 up front and $600 per

year for ﬁ ve year s.

SEEKING REGULATION

On Wednesday, the Mis-

souri Department of In-

surance sued the Atkinson

brothers and their com-

pany, demanding that they

comply with a subpoena.

In its petition, the depart-

ment asks for answers

— and an extensive list of

documents — about com-

plaints against the com-

pany and its sales tactics .

Amid such investiga-

tions and criticism, US Fi-

delis maintains that it is an

industry leader in treating

customers fairly and hon-

estly.

Riley, the chief executive,

said in a recent interview

that US Fidelis supports

increase d re gulation of

the extended aut o-service

contract industry because

rogue operators were giv-

ing US Fidelis a bad name.

The company says its

call-center employe es

stopped making unsolic-

ited, outbound calls last

July. Those phone calls

led to allegations that the

company was breaking

state and federal telemar-

keting laws, an underpin-

ning of the multistate at-

torneys general investiga-

tion. US Fidelis says it now

only returns calls to those

who have called the com-

pany requesting informa-

tion or who have requested

information online.

Now, Rileysaid,the com-

pany wants the rest of the

service-contract industry

to follo w what he described

as US Fidelis’ lead in con-

sumer-protection reforms .

Riley acknowledged

that the company is trying

to negotiate a settlement

with the state attorneys

general investigating the

company, but he would not

say whether those negotia-

tions were the same as the

industry-ref orm talks.

“With the assist anc e and

the help of government

oversight, we see this in-

dustry going in a direction

where US Fidelis can lead

with those companies that

want to share our commit-

ment to treating customers

withhonest yandintegrit y,”

Riley said.

Shane Anthony of the Post-Dispatch

contributed to this report.

Customers, ex-employees recount ﬁ rm’s tactics for selling auto-service contracts

SOME DO’S AND DON’TS

The Better Business Bureau encourages consumers to contact

the watchdog group if they think they have been misled by

any company selling extended auto-service contracts. The

group offers this advice for people interested in purchasing

the coverage.

• Never give personal information — including Social

Security, bank or credit card numbers — over the phone to an

unknown telemarketer.

• Insist on getting a contract that clearly explains all terms

and conditions before signing up or providing payment

information.

• Read your manufacturer’s warranty and contact your

dealer or manufacturer to ensure you are not purchasing

duplicate coverage.

Wentzville-based company says last year it paid more

than $20 million in claims to vehicle owners.

PHOTOS BY LAURIE SKRIVAN • lskrivan@post-dispatch.com

Employees work inside the call center Thursday afternoon at U.S. Fidelis. Former sales

agents claim they were trained to create a false sense of urgency for potential customers.

Riley

Named CEO

last month

D. Atkinson

Company

president

FIDELIS •FROM A1

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FINAL EDITION

WEATHER • TODAY 82° • TONIGHT 73° • TOMORROW 76° • FORECAST A21

Mentor • Kim Simon shows a scrapbook to Kendy Valdez and her daughter

Yulkendy at their home in Berkeley. Simon’s daughter LaNae lost in the

regional ﬁnals in 1998 to George Thampy, who went on to the national title.

Once a barrier, English

is now a booster in bee

Berkeley girl who came from Dominican Republic

3 years ago has spelled her way to national contest.

FERGUSON • During lunchtime in the

cafet eria, a group of girls chatted, giggled

and played with their food — except for

one.

Her head bowed in co ncentration,

eighth-grader Yulkendy Valdez stud-

ied her workbook in preparation for the

Scripps National Spelling Bee while her

ﬁ v e friends gushed about seeing the movie

“Twilight.” Inste ad of eating a meal during

her lunch br eak at Ferguson Middle School

— she w asn’ thungry— Yulkend yde voured

words like “mesdames” and “t estamur.”

Yulkendy , 14, was the regional winner of

the St. Louis Post-Dispatch Spelling Bee in

Mar ch, which qualiﬁed her for the national

competition in Washingt on.

When she w on,she had onlybeenspe ak -

ing English for about three years .

Today, Yulkendy has an appetite for

words like“vitiate”and “oblivisc enc e.” But

in 2005, she was plucked from a childhood

in the Dominican Republic t o a ﬁfth-grade

classroom without kno wing the languag e,

much less its idiosyncr asies, grammatical

rules or pr onunciations.

Back then, her diet of words consisted of

naming the colors and conjugating “to be.”

In a sense, spelling bees embody the

American Dream. It may be in the way that

a child of wor king-clas s par ent s like Yulk-

endy can hold her o wn on st age next to a

STORY BY CORINNE LESTCH • clestch@post-dispatch.com > 314-340-8042

PHOTOS BY J.B. FORBES • jforbes@post-dispatch.com

Concentration • Yulkendy Valdez asks for a deﬁnition while studying with

her tutor, Kim Simon, for the Scripps National Spelling Bee this week in

Washington. Yulkendy won the Post-Dispatch regional spelling bee in March.

School • Yulkendy Valdez (center) talks with Andria Standridge before the

start of a physics class recently at Ferguson Middle School. Next year, she will

attend Mary Institute and St. Louis Country Day school on a full scholarship.

2009 Scripps National Spelling Bee

Tuesday • All 293 spellers take a

written test.

Wednesday • All spellers par ticipate

in Rounds 2 and 3 onstage, 7 a.m. to

5:15 p.m. St. Louis time, online at 12:15

p.m. at ESPN360.com..

Thursday • Semiﬁnals onstage, 9

a.m. to noon St. Louis time, on ESPN.

Championship round begins at 7 p.m.

St. Louis time, on ABC.

Warranty

sales skim

top proﬁt

Firms that sell such contracts

may pocket more than half

of the consumer’s money.

St. Louis became the national capital of the auto

warranty sales business because local entr epre-

neurs grasped an important fact: Selling auto

service contracts yields extr emel y high commis-

sions. The resulting boom in warranty sales has

spawned chagrin among consumer protection

gr oups.

If you buy an aut o warranty from a brok er, it’s

likel y that less than half the amount y ou pay will

go to the company that actually provides the

warranty, and onl y part of that amount g oes t o

pay for car rep airs.

Quite often, most of the money goes to the

sales compan y that sold you the contract.

In the mid-1990s, a small St. Louis compan y

pioneer ed the idea of marketing aut o w arranties

directly to consumers by mail and telephone.

The lur e of big commissions pr ov ed contagious ,

and dozens of imitators popped up, turning St.

Louis into a major center for independent aut o

warranty sales operations.

BY JIM GALLAGHER • jimgallagher@post-dispatch.

com > 314- 340-2390

Cheney emerges

as voice of GOP

He has been aggressively attacking

president where others wouldn’t.

At a time when the Republican Party is at its low-

est point in a generation, Dick Cheney has elec-

triﬁed conser vatives with a principled stand and

a deﬁant addr es s.

The former vice president is emerging as a

voice the part y can rally around as it begins to try

to rebuild itself. He has accomplished something

that Republicans ha ve seldom been able to do:

directly challenge President Barack Obama in

real time on a major policy issue.

In a nationally televised speech delivered just

minut es after Obama had spoken on how t o pro-

tect the U.S. against terrorism, Cheney delivered

a rebuttal t o the president’s plans and defended

the decisions he and former President George

W. Bush made after the Sept. 11, 2001, attacks,

FROM NEWS SERVICES

McKee

starts to

build new

bridges

ST. LOUIS • WhenPaulMcKee

pit ched revamping a roadway

that could serve as the en-

trance for his massive north

city redevelopment proposal,

the state’s transport ation czar

did mor e than just list en.

“Here’s the pen,” McKee re-

called the transport ation chief

saying. “You tell me how the

str eet should look.”

Whether it’s paving the w ay

to a new pr oject or getting fac e

time with the public ocials

whose approval he needs —

access has never been a pr ob-

lem for McKee.

But as the developer, based

in St. Charles County, pushes

his plan to transform a large

swath of north St. Louis dev-

astated by disinvestment, he

must overcome suspicion in

the neighborhoods he’s pro-

posing to reinvent. McKee is

pledging transparency as he

seeks public funding for the

idea that dr ove his purchases:

NorthSide, a $5.4 billion for-

mula for the city’s rebirth,

BY JAKE WAGMAN

jwagman@post-dispatch.com

314-622-3580

READY…

SET…

READ!

IN A&E • D1

Just in time for the

kickoff of summer

reading programs,

we round up 30

ﬁ c tion and nonﬁction

titles waiting for the

hammock or beach

bag.

ONLINE

See what area

booksellers are

eagerly awaiting this

summer.

STLtoday.com/

books

HONORING THE FALLEN

IN COMMUNITY • B1

Architects who plan war memorials

must balance the need to honor

those lost with the need of survivors

to process their grief.

ONLINE

Check our database for photos and

biographies of soldiers killed in

Afghanistan and Iraq.

STLtoday.com/nation

An ‘A’

in bees

Veteran developer is

cultivating supporters

and investors for

massive city project.

See BEE • Page A7

Former US Fidelis executive was warned that

tactics appeared to break the law. Story, E1

See CHENEY • Page A12

See WARRANTIES • Page A8

See MCKEE • Page A12

DIGEST

Two U.S. contractors

killed in Baghdad

Two Americans have been

killed in separate incidents

inside Baghdad’s fortiﬁed

Green Zone, U.S. and Iraqi

ofﬁcials said Saturday,

raising concerns about its

security as Iraq’s forces

assume more control over

the sprawling district.

The body of an American

contractor was found

Friday in a vehicle in the

Green Zone, and another

contractor was killed by a

rocket attack that night near

the American Embassy, a

U.S. military ofﬁcial said.

German president

re-elected • The German

president, Horst Koehler,

was re-elected as head

of state by a single vote

on Saturday, eking out a

narrow victory that spared

Chancellor Angela Merkel

a serious political blow just

four months before she faces

her own elec tion day. Though

the German presidency is a

largely ceremonial position,

chosen by members of

the German parliament

and state representatives,

analysts view the secret

ballot as an important test of

party solidarity.

Voodoo used to enslave

Nigerian women •

Ringleaders of a human

trafﬁcking ring that brought

Nigerian women to Spain

and forced them into

prostitution by threatening

them with Voodoo curses

were brought before a judge

on Saturday. Many of the

23 suspects were charged

with human trafﬁcking and

extortion at the court in the

city of Huelva, police said.

10 family members die in

plane crash • A British-born

Brazilian businessman and

nine family members were

among the 14 people killed

when their plane crashed

and exploded near a coastal

resort in Brazil, a spokesman

for his company said.

German prince marries

American • A German prince

has married an American

woman in a ceremony that

drew Sweden’s king and

queen to the Bavarian town

of Coburg. Hereditary Prince

Hubertus of Saxony-Coburg

and Gotha, 33, a lawyer,

married Florida native Kelly

Rondestvedt, 34.

Nepal elects prime

minister • Lawmakers

elected a communist party

leader as Nepal’s new prime

minister in a move aimed

at ending weeks of political

turmoil. Madhav Kumar

Nepal of the Communist

Party of Nepal (United

Marxist Leninist) was elected

unopposed, parliament

speaker Subash Nemwang

announced.

Quake site a tourist

attraction • Sections of

streets, schools and bridges

destroyed by last year’s

massive earthquake in

southwestern China will soon

be open to tourists, state

media said. Ruins from the

May 12 quake centered in

Sichuan province that left

almost 90,000 people dead

or missing have become a

draw for visitors.

Belfast woman has

sextuplets • A woman in

Belfast, Northern Ireland,

has given birth to sextuplets.

The babies, four girls and

two boys, are the ﬁ rst

sextuplets born in the United

Kingdom in more than 20

years.

Pope2You is working • Web

surfers can now send virtual

postcards of Pope Benedict

XVI to their Facebook friends

or follow the pontiff’s travel

on their iPhones. In its

ﬁ rst day of operation, the

Pope2You portal gathered

some 45,000 contacts and

500,000 page views, while

a Facebook application that

sends postcards with photos

of Benedict and excerpts

from his messages was used

about 10,000 times, the

head of the project said.

Man threatening suicide

gets help • A man in stood

on a bridge in Guangzhou,

China, shouting he was

heavily in debt and had

nothing to live for. After ﬁ ve

hours, Lai Jiansheng, 66,

walked up, shook his hand

— and pushed him off.

From news services

A8 • ST. LO UIS POST-DISPATCH M2• SUNDAY • 05. 24.2009

Now, at least 32 companies

based locallysell a shareof the es-

timated 10 million auto warran-

ties sold each year by auto deal-

er s and independent sales ﬁ rms.

Buyers often pay between $2,500

and $3,000 for the contracts.

The industry is lightly regulated,

and some of its sales tactics have

drawn attack s from U.S. senat ors

and the Better Business Bureau,

lawsuits and investigations by

state and federal agencies .

The pressure has industry in-

sider s scrambling to reform their

practices and avoid a government

crackdown. “I think the industry

must act quickly before percep-

tion gets out of hand,” said Larry

Hecker, dir ector of the Automo-

bile Warranty and Service Con-

tract Association, which rep-

resents auto warranty brokers,

warranty providers and compa-

nies that ﬁ nance them.

HEFTY COMMISSIONS

The system of fat commissions

was described in a 2005 deposi-

tion given in a civil suit by Darain

Atkinson, president of Wentz-

ville-based US Fidelis, the largest

of the companies to face investi-

gations and the target of at le ast

1,200 consumer complaints at

the Bett er Business Bureau.

In that 2005 case, US Fidelis

sued a warranty administration

company for failing to pay US Fi-

delis its sales commissions. Out

of a $2, 700 extended service war-

ranty sold to a typical cust omer,

$1,000 covered the actual cost of

the warr anty, Atkinson testiﬁed.

US Fidelis’ sales commission was

$1,700.

Other people in the industry

say such large commissions are

common among warranty sales

companies.

Doug Hartz learned the math

when he was appointed deputy

receiver for Ultimate Wa rranty,

whose failure in late 2007 left

137,000 aut o warranties in doubt.

If the cost of the warranty was

$1,000, sales companies often

sold it to the public for $2,300 to

$2,400, he said, pocketing the

dierence.

By Hart z’s count, 11 St. Louis-

based warranty sales companies

sold Ultimate Warranty co n-

tracts.

Such high sales commissions

leav e relatively little to cover the

actual warranty: Less than half

the buyer’s money goes to the

actual warr anty company, which

pockets some of that as profit.

That partly explains why the

Better Business Bureau warns

that extended warranties are not

worth the money.

“They provide little coverage at

a hug e cost,” says Michelle Corey,

pr esident of the St. Louis BBB.

Industry ocials say the war-

ranties can save consumers fr om

major unexpected repair bills. “ At

the end of the day, (the warranty

providers) do pay on the policy.

They ar e good,” says Mike Cart er,

general counsel at National Deal-

er s Wa rrant y, a sales company in

St. Peters.

PIONEERED HERE

The auto warranty business has

undergone a major transforma-

tion in the past few years, and

much of that change happened

in St. Louis. For decades, such

warranties were sold through car

dealerships to their customers.

The last decade has seen the

rise of independent warranty

sales companies, hawking war-

ranties through direct mail and

telephone sales under contract

with warranty providers.

People in the business tr ace the

switch back to a ﬁ rm called Con-

sumer Automotive Consultants.

Formed in 1995, the St. Louis city

firm was a pioneer in the direct

marketing of warranties. Em-

ployees of the firm learned the

business, saw the proﬁts and set

out on their own. Until recently,

when legal costs beg an rising, it

was a cheap business to get int o.

“It was pr etty easy to mimic,”

said Cart er. “If you had $10,000,

$20,000 or $100 ,000, you could

send out mailers and that was

about it,” he said. Newer firms

trained employees , who then quit

and formed their own ﬁ rms.

“If you don’t care about what

it is you’re doing, you can make

a lot of unearned money pretty

quickly,” sa id Carter. He says

those people’s bad actions are

now tarring the reputations of

the bett er companies.

The Be tter Business Bureau

now counts 32 auto warranty

marketing companies active in

St. Louis, with the biggest con-

centr ation in St. Charles County.

Another dozen firms operated

her e at one time, but ar e no lon-

ger at their last addr es sesin BBB

ﬁ les.

St. Louis probably hosts the

most such firms in the country,

says Tim Meenan, director of

the Service Contract Industries

Council, which represents com-

panies providing warranties on

a variety of products, including

cars. “Yo u’re the industry ther e,”

he said.

All but two of those compa-

nies were formed since 2000, and

two-thirds are five years old or

less, according to BBB files. No

one knows how many jobs they

have generated. US Fidelis alone

employs mor e than 1,000 people

at its Wentzville office. Carter’s

ﬁ rm employs 150.

THE PLAYERS

There are three main players in

the warranty business: First,sales

companies send out mailers and

sell warranty contracts over the

phone. Second,warranty compa-

nies actuall y write the contract s

and pay the claims (a minority of

companies do both). Third, fi-

nance companies fr ont money to

the other two gr oup s. St. Louis is

the main base for the indepen-

dent sales end of the business.

The warranty provider sets

its price for its warranty. But

sales companies are free to sell

that warranty at any price they

choose. Sales people who spoke

to the Post-Dispatch say they

routinel y oer a high price ﬁ rst,

then begin offering discounts if

the cust omer resists.

Many consumers cancel their

contracts and demand refunds.

The law entitles them to full or

partial refunds, depending on

how long the contract has been

in e ect.

When that happens, both the

warranty provider and the sales

company have to surr ender cash.

The Bett er Business Bureau says

about half of co nsumer com-

plaints involve diculty getting

refunds . “I just went thr ough 200

complaints, and I didn’t see one

that got a full refund,” said Corey.

People in the business say the

size of the commissions doesn’t

reflect the actual profits to the

br ok erag e owner s. Marketing and

per sonnel costs dr ain much of the

money away. Cart er, for instance,

says his company’s bottom-line

pr oﬁts run 4 to 10 per cent of the

price a consumer pays.

But the business can certainl y

provide a good income. US Fi-

delis, perhaps the best-known

sales company, promotes sales

thr ough national TV ads. Atkin-

son, its president, is building a

$17 million, 20,752-square-foot

mansion in Lake Saint Louis.

He and his wife also own four

other homes in the county, a

50-foot yacht and luxury cars,

including a 2006 Bentley Con-

tinental GT worth $144,000.

Atkinson and his wife also own

a 6,561-square-foot waterfront

home on Grand Cayman in the

Cayman Islands, wh ich they

bought in 200 7 for $4.5 million.

Customers generally pay an

up-front fee, often about $500,

then make monthly payments

on their contract. In an e-mailed

statement to the Post-Dispatch,

US Fidelis said its oper ating costs

were so high it didn’t make a

proﬁt until a customer had paid

for 15 to 20 months.

Thetelephonesalespeoplewho

pit ch warranties work mainly on

commission. “My commissions

were about $3,000 a month,

and the beneﬁts were awesome,”

said Tami Lucas, who worked for

US Fidelis for seven months. “If

you were in top sales, you could

make anyw here from $15,000 to

$20,000 a month.”

A former sales manager at

another firm, who contacted

the Post-Dispatch, said he had

earned more than $165,000 per

year before quitting to start his

own sales compan y.

LIKE INSURANCE, BUT NOT

To a consumer, an extended war-

ranty can look a lot like insur-

ance: It pays when something

goes wrong. But technically, it’s

an extended service contr act. It

is not considered insur anc e, and

the warranty business has suc-

cessfully resisted eort s to clas-

sify it as such. Insurance compa-

nies are heavily regulat ed. Not so

with aut o warranty sellers.

In that case, st ate laws attempt

only to assur e that ther e’s enough

money backing the warranties

to pay claims. To meet state re-

quir ement s, most companies buy

an insurance policy. If the war-

ranty company fails, insurance

would pay the claims. Unfortu-

nately, sometimes the insurance

company fails, too.

That’s what happened with

Ohio-basedUltimate Warrantyin

lat e 2007. Ultimate and it s ali-

at es owned mor e than 80 per cent

of the co mpany that provided

its insurance, Capit al Assurance

Risk Retention Group. In eect,

Ultimat e was insur ed by itself .

In Ultimate’s case, two things

went wrong. First, the company

failed to keep $40 million in re-

serves to pay on claims. Then,

when Ultimatefailed,the respon-

sibility for the claims fell to its in-

surance company — which also

failed. The result: 137,000 auto

warranties of doubtful value.

“These are such poorly run

companies that they are also poor

at reserving properly,” says Ed

Arnum,edit orof the tradejournal

Warranty Week. Arnum counts

at least ﬁ ve companies that have

failed in recent year s.

“When the warranty company

fails, it almost always leads to the

failur e of the insurer,” said Hartz.

Another example: National

Warranty Insurance Risk Reten-

tion Group of Nebraska failed in

2003. It was one of the nation’s

biggest insurers of auto war-

ranty serv ice contracts, and it

left 67,000 car owners holding

warranties of doubtful value. Na-

tional’s failure helped bring down

Warranty Gold, a Texas ﬁ rm that

sold its contracts.

In Ultimat e’s case, Hartz is try-

ing to persuade the dealers and

sales companies to cover cus-

tomers’ repair costs. Paying for

repairs will cost them less than

covering customers’ demands

for refunds, he says. US Fidelis

has agreed, he says, but others

haven’t. A US Fidelis spokesman

said it had paid $2 million to cover

Ultimat e claims over two years.

COMPLAINTS LEVELED

The BBB in St. Louis has been

sharply critical of warranty sales

operations. The agency reports

receiving more than 3,000 com-

plaints against St. Louis-based

companies over the past three

years. Consumers complained of

unwanted sales calls, deceptive

sales pitches, warranty compa-

nies that refused to pay for repairs

and diculty getting refunds.

The Federal Trade Commis-

sion is suing two robo-dialing

companies, neither in St. Louis,

for making perhaps a billion nui-

sance calls hawking aut o warran-

ties. Typically, robo-dialers troll

for people who seem amenable

to a warranty pit ch, then transfer

the calls to warranty sales ﬁ rms.

Gov. Jay Nixon, while attor-

ney general, ﬁ led suits ag ainst six

such ﬁ rms last year alleging that

they misled buyers. A national

task force of stat e att orneys gen-

eral is investig ating the industry.

The warranty sales industry,

meanwhile, confesses to past

sins but says it is cleaning up its

act. “Most are operating legally

and ethically, ” says Hecker, of the

warranty sales tr ade group .

He says the organization has

adopt ed a code of conduct, which

it hasn’t yet made public. “There

ar e some companies that are try-

ing to deceive customers. But

those that follow our guidelines

ar enot doing that,” he said.“They

are explaining to the customers

what they ar e getting.”

Meanwhile, the industry con-

tinues to irritate consumers. Ar-

num, the Warranty Week editor,

recalls being on a playground

with a 7-year-old who had just

been given his first cell phone.

“The first or second call he got

was to tell him his warrant y had

expired,” said Arnum.

Matthew Hathaway and Elizabethe Holland of

the Post-Dispatch contributed to this report.

FROM A1

WARRANTY VS. SERVICE CONTRACT

If you buy an auto “warranty” over the phone, chances are you’re

not getting a real warranty in the legal sense of the word. Instead,

it’s an “extended service contract.”

Here’ s the distinction, as explained by the Federal Trade

Commission on its website:

“A service contract is a promise to perform (or pay for) certain

repairs or services. Sometimes called an ‘extended warranty,’

a service contract is not a warranty as deﬁned by federal law. A

service contract may be arranged at any time and always costs

extra; a warranty comes with a new car and is included in the

original price. The separate and additional cost distinguishes a

service contract from a warranty.”

STEALS & DEALS

Look before you shop. Check out our Steals and Deals and Savvy

Consumer blogs. STLtoday.com/spendsmart

$52 monthly

payments from the

buyer go to the

finance company

over 48 months.

The finance company

keeps $200 of the

total cost as profit

and $100

in reserve.

After several

months, the

finance

company

sends the

$100

reserve to

the sales

company.

After

mont

vera

the

Electronic

funds transfer

By phone, buyer

agrees to buy a

$3,000 warranty

policy, paying

$500 up front

to the sales

company. Sales

company keeps

the $500 as

commission.

AUTOWORLD

SALES | WARRANTIES

Sixty days af ter

the sale, the

finance company

sends $1,200 to

the warranty

company and

$1,000 to the

sales company

as commission.

ETTER

UTO

ARRANTY

FINANCE

RRANTY

SOURCE: Post-Dispatch research

Darryl Swint | Post-Dispatch

WARRANTY MONEY MERRY-GO-R OUND

Here’ s how the money ﬂ ows when someone buys an auto warranty.

Criticism has industry insiders scrambling to reform their practices and avoid a government crackdown

WORLD

WARRANTIES •FROM A1