The founder and former CEO of First Brands, Patrick James, has been indicted on charges of defrauding lenders out of billions of dollars, leading to the auto parts supplier’s bankruptcy. The nine-count indictment includes charges of financial crimes, bank fraud, wire fraud, and money laundering conspiracy. His brother, Edward James, a former senior vice president at First Brands, faces similar charges. A former First Brands executive, Andy Brumbergs, has pleaded guilty and is cooperating with prosecutors.
First Brands, which filed for bankruptcy protection with over $9 billion in liabilities, has disrupted the supply chain for major automakers like Ford and General Motors. The company is a major supplier of auto parts such as brakes, filters and lighting systems. Founded in 2013, First Brands grew to have approximately $5 billion in annual sales. Prosecutors allege that the James brothers obtained billions in funding by presenting lenders with a false impression of a successful and growing business.
According to the indictment, the Jameses manufactured this growth through fraudulent schemes, including double- and triple-pledging loan collateral, faking invoices, and concealing liabilities. U.S. Attorney Jay Clayton stated that the indictment describes a business run through fraud, fake documents, and false financials. The Jameses allegedly prevented creditors and auditors from seeing the company’s true financial state as cash dried up and debts mounted.
First Brands has begun winding down some businesses while seeking buyers for other assets. The company has received short-term financing from Ford and GM to continue operations, employing around 17,000 people in North America. Patrick James’ spokesperson stated that he denies the charges and looks forward to presenting his case in court, while Edward James’ lawyer expressed confidence in his client’s integrity.
