First Brands accuses former CEO of misappropriating millions, perhaps billions

Audio By Carbonatix

Enlarge

By Devika Madhusudhanan Nair

(Reuters) -Bankrupt First Brands on Monday sued its former chief executive and founder Patrick James, accusing him of orchestrating frauds that left the U.S. auto parts maker insolvent.

James enriched himself and his family by “misappropriating hundreds of millions (if not billions) of dollars from First Brands,” the company said in a lawsuit filed with the U.S. Bankruptcy Court for the Southern District of Texas.

A lawyer and a separate representative for James did not immediately respond to a Reuters request for comment.

Its bankruptcy has raised concerns about opaque financing in the private credit market and cast a spotlight on the exposure of some of the world’s top financial institutions.

First Brands said James caused the company to incur at least $2.3 billion in liabilities based, at least in significant part, on non-existent or doctored invoices. It also accused him of engaging in financing transactions involving special-purpose vehicles that double-pledged collateral.

James transferred hundreds of millions of dollars from the company to himself or entities affiliated to him between 2018 and 2025, with most of the transfers taking place from 2023 to 2025, First Brands added.

James stepped down as CEO last month.

The Ohio-based company, which makes filters, brakes and lighting systems, has appointed a special committee of independent directors to probe its off-balance-sheet financing.

Earlier on Monday, James filed a legal motion supporting the appointment by the court of a fiduciary who would investigate the company’s financial practices leading up to the bankruptcy filing.

First Brands filed for bankruptcy protection in September after its lenders began investigating irregularities in the company’s financial reporting.

(Reporting by Devika Nair in Bengaluru; Editing by Miyoung Kim and Edwina Gibbs)