Federal prosecutors in New York charged First Brands Group founder Patrick James and his brother Edward James with fraud, accusing them of misleading lenders out of billions of dollars before the auto parts supplier collapsed into bankruptcy. Prosecutors revealed the indictment Thursday in Manhattan federal court.
Prosecutors Accuse Brothers of Massive Lender Fraud
Prosecutors filed a nine count indictment that includes charges such as:
- continuing financial crimes enterprise
- bank fraud
- wire fraud
- money laundering conspiracy
If a jury convicts them, the brothers could spend decades in prison.
According to prosecutors, Patrick and Edward James carried out multiple schemes to secure financing from lenders and partners. Authorities say they:
- inflated invoices
- pledged the same loan collateral multiple times
- falsified financial statements
- hid major liabilities
Prosecutors say these tactics helped First Brands obtain billions in funding and allowed the brothers to collect millions in proceeds linked to the alleged fraud.
Defense lawyers did not immediately respond to requests for comment.
First Brands Expanded Fast but Relied on Heavy Debt
First Brands launched in 2013 and quickly grew into one of the world’s largest suppliers of auto parts, including brakes, filters, and lighting systems. By last year, the company reported around $5 billion in annual sales.
Prosecutors say the company fueled that growth by borrowing billions of dollars backed by inventory and assets such as factories and equipment. That strategy left the business vulnerable to cash flow pressure and lower asset values, forcing it to depend on fresh funding.
Bankruptcy Triggers Shutdowns and Job Impact in North America
In September, First Brands filed for Chapter 11 bankruptcy protection.
This week, the company said it started winding down parts of its North American operations while it looks for buyers for key assets.
First Brands employs around 17,000 workers in North America. It has already shut down operations at its:
- Brake Parts
- Cardone
- Autolite
Those units employed about 4,000 workers.
Even after borrowing $1.1 billion following the bankruptcy filing, the company reported earlier this month that cash reserves dropped to $190 million.
GM and Ford Offer Short Term Financing Support
During a bankruptcy hearing in Houston on Thursday, the judge allowed First Brands to obtain short term financing from General Motors and Ford. The company will use the funding to support operations while it continues restructuring and pursuing asset sales
