First Brands founder Patrick James and his brother Edward were indicted in New York on Thursday, accused of orchestrating a sweeping fraud that prosecutors say siphoned billions of dollars from lenders in the years leading up to the auto parts supplier’s collapse into bankruptcy.
The indictment, unsealed in federal court in Manhattan, charges the brothers with nine criminal counts, including running a continuing financial crimes enterprise, bank fraud, wire fraud and conspiracy to commit money laundering. If convicted, both men could face decades in prison.
Patrick James founded First Brands in 2013 and served as its chief executive, while Edward James held the role of senior vice president. Prosecutors allege that together they carried out what they described as “a series of fraudulent schemes” aimed at deceiving the company’s lenders and financing partners.
According to the indictment, those schemes included inflating invoices, pledging the same collateral multiple times to different lenders, falsifying financial statements and concealing significant liabilities from creditors. As a result, prosecutors say, First Brands was able to secure billions of dollars in financing, while the brothers personally reaped millions in proceeds tied to the alleged fraud.
Lawyers for Patrick and Edward James were not immediately available to comment.
At its peak, First Brands had grown into one of the world’s largest suppliers of automotive components, including brakes, filters and lighting systems. By last year, the company reported roughly $5 billion in annual revenue and employed tens of thousands of workers, largely across North America.
Prosecutors argue that this rapid expansion came at a cost. First Brands allegedly financed much of its growth by borrowing heavily against inventory and physical assets such as factories and equipment. That structure, they said, left the company acutely vulnerable to cash-flow disruptions and shifts in asset values, effectively tying its survival to continued access to fresh capital.
That fragility became evident in September, when First Brands filed for Chapter 11 bankruptcy protection after a sudden financial implosion. Even after securing $1.1 billion in post-bankruptcy financing, the company disclosed earlier this month that its available cash had fallen to about $190 million.
In an effort to keep key operations running, First Brands has turned to its largest customers. During a hearing on Thursday in Houston bankruptcy court, a judge approved short-term financing arrangements involving Ford Motor Co and General Motors. Under the plan, the automakers will prepay $48 million for parts deliveries over the next week, with the possibility of additional week-to-week financing.
The company has already begun winding down portions of its North American business and is seeking buyers for various assets. Several divisions, including Brake Parts, Cardone and Autolite, have shut down, affecting roughly 4,000 jobs. Other operations that continue to supply Ford and GM employ about 17,000 people.
The criminal case now casts a long shadow over the bankruptcy proceedings of First Brands Group, as prosecutors pursue what they describe as one of the most significant corporate fraud cases in the auto parts sector in recent years.