Former First Brands Group chief executive Patrick James was indicted on federal fraud charges and arrested Thursday in Ohio along with his brother Edward, a former senior executive at the company, according to the U.S. Attorney’s Office in the Southern District of New York.
Prosecutors allege the James brothers “perpetrated a yearslong fraud” to obtain billions of dollars for First Brands, and millions for themselves, by deceiving investors and banks with fake documents and false financial reports. When First Brands filed for bankruptcy protection in September, officials said the company had more than $9 billion in debt and only $12 million in cash, according to the charging documents.
After changing its name from Crowne Group about five years ago, the Cleveland-based company bought and combined several aftermarket auto parts makers, such as Fram, Anco Autolite and others, through debt-financed deals.
The government said the brothers falsely inflated invoices for accounts receivable and then borrowed against them two and three times without lenders’ and investors’ knowledge. Prosecutors allege the scheme produced billions in financing that the brothers used to fund a lavish lifestyle.
“The defendants operated First Brands as a ‘Ponzi’ scheme in which new loan proceeds were used to pay back old lenders and to fund their extravagant lifestyle,” said Kareem Carter, an agent with the Internal Revenue Service, according to The Associated Press.
A spokesperson for Patrick denies the charges and is presumed innocent, according to AP.
“He built First Brands from nothing into a global industry leader and has always been devoted to the success of the company. Mr. James looks forward to presenting his case in court.”
A lawsuit filed in November accused Patrick of securing billions in debt financing based in part on fraudulent invoices, then transferring hundreds of millions of dollars to himself and affiliates to “fund his and his family’s lavish lifestyle,” including seven homes and 17 cars. The lawsuit claims he and unnamed conspirators moved $8 million to his son-in-law’s wellness company, $2 million to his family office, at least $3 million toward rent for his New York City townhouse, $500,000 to his personal chef and $150,000 for a “celebrity personal trainer.” The majority of the transfers occurred between 2023 and 2025, the suit says.
The indictment also disclosed a guilty plea from former First Brands executive Andy Brumbergs for his role in the scheme. Prosecutors said Brumbergs is cooperating with the government.
First Brands comments
First Brands Group issued a statement following the indictment its former executives. This is the statement in full:”
“The criminal charges relate to alleged historical actions by certain former executives who are no longer with First Brands Group or involved in the management, governance, or day-to-day operations of the Company. While these matters concern past conduct, their impact is being felt now by thousands of people.
This is a tragic situation that has disrupted the lives of employees, families, and communities who depend on this business. We recognize the very real human toll of these events and the uncertainty many are facing.
The Special Committee of the Board of Managers continues to conduct an independent review of historical business practices, and the Company intends to continue pursuing all available claims and causes of action against Patrick James, Edward James, and others to maximize value for the estate. First Brands Group is fully cooperating with law enforcement and remains focused on advancing its ongoing sale process during this time.”
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