U.S. prosecutors have filed a criminal indictment against auto parts supplier First Brands Group’s founder, Patrick James, and his brother Edward James, alleging a series of fraud schemes that contributed to the company’s collapse into bankruptcy.
The indictment — unsealed on January 29, 2026 by the U.S. Attorney’s Office for the Southern District of New York — accuses the James brothers of defrauding lenders by inflating invoices, double‑ or triple‑pledging loan collateral and concealing liabilities from creditors in order to secure billions in financing for the company. Patrick James and his brother both deny the charges and have yet to be tried in court.
Allegations Behind the Indictment
According to federal prosecutors, Patrick James — who founded First Brands and served as CEO until shortly before the company’s bankruptcy filing — and his brother Edward engaged in “a series of schemes” aimed at misleading the company’s financing partners. These schemes involved creating false or inflated accounts receivable, falsifying financial statements, and hiding large liabilities, which prosecutors say misled lenders into extending credit under false pretenses.
The charges stem from First Brands’ dramatic bankruptcy in September 2025, when the Cleveland‑based supplier — owner of well‑known aftermarket automotive brands like Trico, FRAM and Raybestos — disclosed that it held nearly $12 billion in debt against far fewer assets and was forced into Chapter 11 protection amid a liquidity crisis.
Separate civil actions previously brought by First Brands’ new management and creditors had already alleged that the company’s finances were riddled with irregularities, including multibillion‑dollar misstatements and improper transfers of funds to Patrick James and family‑affiliated entities — claims the company founder has called unfounded.
Broader Financial Fallout and Ongoing Restructuring
The indictment adds to a complex bankruptcy proceeding that has shaken parts of the auto parts supply chain and raised questions about risk management in private credit markets. Creditors and restructuring advisors continue to work through First Brands’ Chapter 11 case, with some business segments being wound down due to lack of financing, while others pursue sales or continued operations under court supervision.
Additionally, major automakers and financial institutions are involved in negotiations or emergency financing packages to keep certain operations afloat, underscoring the ripple effects of First Brands’ troubles on broader manufacturing and supply‑chain ecosystems.
What’s Next
With the indictment now public, prosecutors and defense attorneys will proceed through pre‑trial and potentially trial proceedings, where the allegations of fraud — if proven — could lead to significant criminal penalties. Meanwhile, First Brands’ bankruptcy restructuring continues in federal court in Texas, with lenders, creditors and potential buyers all watching closely as the company’s assets are evaluated and reorganized.
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Staff Report
Dan Craft
Staff Report
