Patrick James, the former CEO of bankrupt auto parts supplier First Brands Group, was indicted on federal fraud charges and arrested Thursday in Ohio with his brother Edward, a former senior executive with the company, the government said.
The indictment from the U.S. Attorney’s Office in the Southern District of New York said the James brothers “perpetrated a yearslong fraud” to obtains billions of dollars for First Brands — and millions for themselves — by duping investors and banks with fake documents and false financial reports.
When it filed for bankruptcy protection in September, officials representing First Brands said the company had more than $9 billion in debt and only $12 million in cash, according to Thursday’s charging documents.
After changing its name to First Brands from Crowne Group about five years ago, the Cleveland company began buying and then cobbling together a number of aftermarket auto parts manufacturers through debt-financed deals. Acquisitions by First Brands included well-known industry brands like Fram filters, Autolite sparkplugs and Anco windshield wiper blades.
The government alleges that the James brothers falsely inflated invoices for accounts receivable and borrowed against them two and three times, unbeknownst to lenders and investors. This yielded billions of dollars of financing for the company, which the James brothers used to finance a lavish lifestyle, the indictment said.
“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.
A spokesperson for James said “Patrick James is presumed innocent and denies these charges. 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 brought against Patrick James in November accused the former First Brands CEO of securing billions of dollars in debt financing based in part on fraudulent invoices, then transferring hundreds of millions of dollars to himself and other affiliates to “fund his and his family’s lavish lifestyle,” which includes seven homes and 17 cars.
The lawsuit claims that James, with the help of unnamed conspirators, transferred $8 million to his son-in-law’s wellness company, $2 million for James’ family office, at least $3 million toward the rent of his New York City townhouse, $500,000 to his personal chef and another $150,000 for a “celebrity personal trainer,” the lawsuit claimed.
The majority of the transfers occurred between 2023 and 2025, according to the lawsuit.
The indictment released on Thursday also revealed a guilty plea from former First Brands executive Andy Brumbergs for his role in the scheme. Brumbergs is cooperating with the government.
Patrick James, 61, and his brother Edward, 60, each face nine counts, including wire fraud, bank fraud and conspiracy to commit money laundering. Most of the charges carry a maximum sentence of 30 years if convicted. Patrick, the former CEO, is also facing a potential life sentence.
They are scheduled to appear before a judge in Ohio later Thursday, according to the indictment.
By MATT OTT
AP Business Writer
