By Jeffrey A. Newman
According to the US attorneys office, Former CEO of First Brands Group, LLC, Patrick James, and Former Senior Executive, Edward James, Deceived Multiple Banks and Direct Lenders Through Fake Collateral, Double- and Triple-Pledged Assets, and Misleading Financial Statements. As alleged in the indictment, PATRICK JAMES and EDWARD JAMES perpetrated a yearslong fraud at First Brands, eventually bankrupting the global automotive company in September 2025. At the time of its bankruptcy, First Brands—a company that reported approximately $5 billion in net annual sales worldwide—declared just $12 million in cash in its corporate bank accounts and over $9 billion in liabilities. As a consequence of the defendants’ fraudulent schemes, FIRST BRANDS’ lenders and creditors now face billions in losses.PATRICK JAMES and EDWARD JAMES were arrested in Ohio this morning and are expected to be presented later today in the Northern District of Ohio. The case has been assigned to U.S. District Judge Analisa Torres. Here is a copy of the indictment: https://www.justice.gov/usao-sdny/media/1425811/dl
From at least in or about 2018 through in or about 2025, PATRICK JAMES and EDWARD JAMES, the defendants, built and bankrupted First Brands Group, LLC (“First Brands”). First Brands operated as an automotive aftermarket parts supplier that developed, marketed, and sold replacement parts such as brakes, filters, wipers, and lights under various brand names. PATRICK JAMES, the defendant, founded First Brands and served as its Chief Executive Officer. EDWARD JAMES, the defendant, was First Brands’ former Senior Vice President and is PATRICK JAMES’s brother. As alleged, the defendants perpetrated multiple fraud schemes to fake and falsely inflate invoices for accounts receivable and payable; double- and triple-pledge loan collateral; falsify corporate financial statements; and conceal substantial liabilities from lenders. These schemes yielded billions of dollars in financing to First Brands and enabled PATRICK JAMES and EDWARD JAMES to reap millions of dollars in fraud proceeds.
To sustain First Brands’ growth-through-acquisition strategy, PATRICK JAMES and EDWARD JAMES misled various counterparties to fraudulently inject cash into First Brands. First, PATRICK JAMES and EDWARD JAMES deceived First Brands’ factoring partners, that is, financing counterparties that purchased First Brands’ accounts receivable (invoices) and the right to payment thereunder, in exchange for advancing a portion of the value of those invoices upfront. At the direction and with the approval of PATRICK JAMES and EDWARD JAMES, the defendants, First Brands obtained billions in invoice-based financing from factors through a series of fraudulent schemes. As part of those schemes, and under the defendants’ direction and supervision, First Brands employees routinely submitted fake invoices, fraudulently inflated invoices, and double-pledged invoices for the purpose of selling and pledging them to factoring counterparties as if they represented valid, collectible receivables from customers. In some instances, invoices were generated for transactions that had never occurred, while in others the dollar amounts on invoices were altered to make them appear more valuable. Through the defendants’ fraud schemes, First Brands sold its factoring partners billions of dollars of purported customer receivables that did not exist. Second, First Brands defrauded factoring partners to whom it sold accounts payable (amounts owed to First Brands’ suppliers). At the direction and with the approval of PATRICK JAMES and EDWARD JAMES, the defendants, First Brands submitted false and misleading invoice information and false and misleading information about First Brands’ financial position to induce financers to increase the funds advanced, a portion of which First Brands diverted to itself to cover cash needs. At First Brands, these self-payments were referred to as “round trips” or, euphemistically, as “corporate initiatives.” PATRICK JAMES and EDWARD JAMES, the defendants, closely monitored and managed these “round trip” transactions as part of First Brands’ daily cash-management process.
Unbeknownst to First Brands’ lenders, PATRICK JAMES and EDWARD JAMES also incurred massive off-balance-sheet debt through inventory-financing arrangements involving entities wholly owned and controlled by PATRICK JAMES (the “James Entities”). The James Entities were nominally separate from First Brands. In fact, they had no independent business operations. Through the James Entities, PATRICK JAMES entered financing arrangements with at least three inventory financers (the “Off-Sheet Lenders”), whereby the lenders advanced funds to the James Entities to purchase inventory from First Brands. The James Entities, in turn, pledged that inventory purchased from First Brands back to the Off-Sheet Lenders as collateral for their loans. At the direction of PATRICK JAMES, the defendant, the inventory financing arrangements with the James Entities were maintained outside the First Brands corporate balance sheet and thereby concealed from First Brands’ senior lenders, who routinely requested and received First Brands’ financial statements. To further obscure the Off-Sheet Lenders as a source of funds to First Brands, PATRICK JAMES routed the loan proceeds from the Off-Sheet Lenders through a customer collections entity maintained outside the First Brands corporate structure, then disbursed the proceeds to First Brands subsidiaries before sweeping the funds into First Brands’ operating account. The defendants designed this flow of funds so that the funds appeared to be ordinary customer receipts from retail subsidiaries rather than loan proceeds from related-party financing arrangements with the James Entities.
Finally, at the direction of PATRICK JAMES and EDWARD JAMES, First Brands made false and misleading representations to the Off-Sheet Lenders to fraudulently induce them to extend and expand financing. The James Entities pledged inventory that PATRICK JAMES and EDWARD JAMES, the defendants, purported to be unencumbered but in fact was already subject to liens by, or otherwise pledged to, First Brands’ senior lenders and remained on First Brands’ balance sheet.
By 2025, after years of acquisitions and expansion using fraudulently obtained financing, First Brands faced overwhelming liabilities and unsustainable cash requirements. In 2025, PATRICK JAMES and EDWARD JAMES, the defendants, led efforts to refinance First Brands’ debt or to sell the company, including through last-ditch attempts to deceive lenders and potential acquirers by disseminating false financials. These efforts failed when First Brands was unable to provide the prospective counterparties with the financial diligence they sought. On September 28, 2025, First Brands filed for bankruptcy.
Jeffrey Newman is a whistleblower lawyer whose national firm in Boston represents whistleblowers of violations of export controls, tariff evasions, money laundering, healthcare fraud and other kinds of WB cases. The firm represents individuals both in the United States and other countries. Mr. Newman and his firm staff also represent many physicians across the country who become whistleblowers in healthcare fraud cases. Whistleblower laws in the U.S. allow individuals anywhere with information about export control violations or tariff fraud to reveal the information under The False Claims act or through the Securities and Exchange Commission’s Whistleblower Program. The Firm’s website is at www.JeffNewmanLaw.com and attorney Newman can be reached at Jeff@Jeffnewmanlaw.com or at 978-880-4758. FOR OTHER ARTICLES LIKE THIS ONE IN ADDITION TO WHISTLEBLOWER INFO PLEASE SEE MY BLOGS AT https://jeffnewmanlaw.com/utm_source=GMB&utm_medium=organic&utm_campaign=Marblehead
