Federal prosecutors in Manhattan unsealed a nine‑count indictment Thursday accusing Patrick James, the founder and former CEO of auto‑parts supplier First Brands Group, and his brother Edward James of running an elaborate fraud that allegedly bilked banks and financing partners out of billions of dollars.
The charges — which include running a continuing financial crimes enterprise, bank fraud, wire fraud and a money‑laundering conspiracy — paint a picture of a company that grew fast on borrowed money and, prosecutors say, hid the cracks underneath the growth. If convicted, the two men face decades behind bars.
The allegations in plain language
Prosecutors say the Jameses "perpetrated a series of fraudulent schemes" to extract financing from lenders who thought they were lending against real inventory and assets. The indictment, made public in Manhattan federal court, alleges tactics such as inflating invoices, double‑ and triple‑pledging the same collateral to different lenders, falsifying financial statements and concealing large liabilities.
According to the filing, those schemes "yielded billions of dollars in financing to First Brands and enabled Patrick James and Edward James to reap millions of dollars in proceeds derived from their fraud." The exact flow of funds and the mechanics of the alleged shell game are laid out in the charging documents; the government will have to prove those claims at trial.
Lawyers for the James brothers were not immediately available for comment after the indictment was released.
From rapid growth to sudden collapse
First Brands launched in 2013 and by 2025 had become a major global supplier of brakes, filters, lighting systems and other parts — reporting roughly $5 billion in annual sales at its peak. Prosecutors and court filings describe a financing model built on asset‑based lending: lenders extended credit secured by inventory, plants and equipment.
That model can work — until it doesn’t. When cash flow wobbles or asset values fall, the company’s access to capital can dry up fast. First Brands imploded in September when it filed for Chapter 11 bankruptcy protection, setting off a scramble to keep key operations running while searching for buyers for parts of the business.
Even after the filing, the company continued to lean on outside financing, borrowing about $1.1 billion post‑petition. But that cushion dwindled: on recent filings the company said cash on hand had fallen to about $190 million.
The bankruptcy has already led to closures. First Brands said it shut operations at its Brake Parts, Cardone and Autolite units — facilities that together once employed about 4,000 people — while roughly 17,000 people across North America were tied to the company’s remaining businesses.
Automakers step in, for now
At a recent hearing in a Houston bankruptcy court, First Brands received permission to accept short‑term financing from General Motors and Ford. The automakers agreed to prepay roughly $48 million for parts deliveries in the coming week, a stopgap meant to keep critical supply lines open as First Brands works through the bankruptcy process.
The involvement of OEMs highlights how a major supplier’s distress can ripple across the industry. Automakers are pragmatic about protecting assembly lines and parts flows; some are willing to provide limited, short‑term financing to keep production running. For a sense of how automakers juggle aftermarket and parts strategies in public programs, look at Ford’s SEMA Maverick initiatives and similar OEM efforts such as Dodge’s refreshed product pushes, which underscore how closely parts makers and car companies are tied together in the broader ecosystem (Ford's SEMA Maverick program, Dodge's Sixpack Charger).
Why lenders say this matters
The indictment is a sharp reminder of the risks in asset‑backed lending. When collateral documentation or inventory verification is unreliable, lenders can be exposed on a large scale. Prosecutors allege that First Brands’ borrowing practices left lenders — and through them, pension funds and other institutional investors — holding the bag for sums measured in the billions.
Beyond banks, the case has human consequences: thousands of workers whose paychecks depended on First Brands’ factories and distribution centers have already felt the effects. Buyers and potential acquirers are watching closely; a cloud of litigation and the prospect of clawbacks or creditor challenges make transactions harder to close.
The legal road ahead
The indictment opens a criminal track alongside the company’s bankruptcy. Federal prosecutors must present their evidence in court; the James brothers will have the opportunity to defend themselves. The case could involve lengthy discovery, witness testimony from former employees and financing partners, and complex financial forensics to map alleged schemes across years of transactions.
For stakeholders — from creditors and automakers to workers and suppliers — the coming months will be about disentangling corporate failure from alleged criminality. Regulators and lenders may also reassess oversight and verification practices for asset‑backed loans to parts suppliers and other businesses where inventory is a primary collateral.
The indictment puts a sharp, public spotlight on one of the most dramatic supplier collapses in recent years. As the bankruptcy continues and the criminal case proceeds in Manhattan federal court, the wider auto industry will be watching how both courts and markets sort out responsibility, recovery and the practical steps needed to steady supply chains.