WASHINGTON (AP) — The management team that took over First brands as well as debtors of the once fast-growing Cleveland…
WASHINGTON (AP) — The management team that took over First brands as well as debtors of the once fast-growing Cleveland auto parts supplier have sued its founder and CEO, saying that they now know where at least some of the more than $2 billion in missing funds went before the company sought bankruptcy protection in September.
In a lawsuit this week, they say Patrick James, who acquired numerous auto suppliers to form what became First Brands, went on a spending spree, buying exotic cars, expensive homes and this year, spent a half million dollars on a “private celebrity chef.”
The managers that have taken over First Brands allege that James secured billions of dollars in debt financing based in part on fraudulent invoices, then transferred 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. Other payments included $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 claims.
The majority of the transfers occurred between 2023 and 2025, according to the lawsuit.
The plaintiffs allege that in 2024 alone, James moved more than $100 million out of First Brands and into his trust and other of his personal businesses not affiliated with First Brands.
“Mr. James categorically denies the baseless and speculative allegations contained in the First Brands complaint,” a spokesperson for James said Wednesday. “Mr. James was given no opportunity to respond before the complaint was filed and he intends to immediately challenge it.”
James, who founded the company in 2013, resigned from First Brands last month, two weeks after the company filed for bankruptcy protection. In that bankruptcy filing, the company listed between $10 billion and $50 billion in debt and less than $10 billion in assets. At the bankruptcy hearing, a lawyer for the company said it had only $12 million in cash remaining.
Charles Moore was named First Brand’s interim CEO after being appointed as chief restructuring officer last month to sort out the company’s financial troubles and prepare it for a possible sale.
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 brands like Fram filters, Autolite sparkplugs and Anco windshield wiper blades.
In a common business practice known as “factoring,” First Brands would borrow money against accounts receivables from retail customers including Walmart, AutoZone and Napa.
The lawsuit accuses James of “double pledging” those invoices to the tune of $2.3 billion.
A spokesperson for James said Wednesday that he has “has always conducted himself ethically and is committed to doing everything he can to support First Brands’ stakeholders during the restructuring process.”
One of First Brands’ lenders was Jeffries Financial Group, a publicly-traded Wall Street firm. Jeffries lent funds to the auto parts company through investment manager Point Bonita, which would collect on the invoices. Jefferies said that First Brands stopped relaying payments to Point Bonita on Sept. 15.
Jeffries, whose shares have lost more than 20% of their value since First Brands filed for bankruptcy in late September, has downplayed its exposure to the auto parts company’s collapse.
The First Brands bankruptcy has raised concerns about the transparency of the private credit market and whether lenders are doing enough due diligence on borrowers.
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