Former First Brands Group CEO Patrick James and his brother, Edward James, were indicted on federal fraud charges and arrested Thursday in Ohio, the U.S. government said.
The indictment, issued by the U.S. Attorney’s Office for the Southern District of New York, alleges that the James brothers “perpetrated a yearslong fraud” to obtain billions of dollars for First Brands and millions for themselves by duping investors and banks with fake documents and false financial reports.
The charging documents cited in the indictment say First Brands filed for bankruptcy protection in September after having more than $9 billion in debt and only $12 million in cash. The indictment also describes how, after changing its name to First Brands from Crowne Group about five years ago, the Cleveland company began buying and cobbling together aftermarket auto parts manufacturers through debt-financed deals, including brands such as Fram filters, Autolite sparkplugs and Anco windshield wiper blades.
Prosecutors allege the James brothers falsely inflated invoices for accounts receivable and then borrowed against them two and three times, unbeknownst to lenders and investors. The government says the financing produced billions of dollars for the company and that the James brothers used it to finance a lavish lifestyle.
Kareem Carter, an agent with the Internal Revenue Service, 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,” according to the indictment.
A spokesperson for James said “Patrick James is presumed innocent and denies these charges,” adding that Patrick James “built First Brands from nothing into a global industry leader” and has “always been devoted to the success of the company.” The spokesperson also said James “looks forward to presenting his case in court.”
A lawsuit filed in November accused Patrick James of securing billions of dollars in debt financing based in part on fraudulent invoices and of transferring hundreds of millions of dollars to himself and other affiliates to “fund his and his family’s lavish lifestyle.” The suit described the lifestyle as including seven homes and 17 cars, and alleged transfers including $8 million to his son-in-law’s wellness company, $2 million for a family office, at least $3 million for the rent of his New York City townhouse, $500,000 to his personal chef and $150,000 for a “celebrity personal trainer,” with most transfers occurring between 2023 and 2025.
The indictment released Thursday also said former First Brands executive Andy Brumbergs entered a guilty plea for his role in the alleged scheme and is cooperating with the government.
Patrick James, 61, and Edward James, 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, while the indictment says Patrick James also faces a potential life sentence. The brothers are scheduled to appear before a judge in Ohio later Thursday, according to the indictment.