First Brands Group sued founder Patrick James for allegedly misappropriating hundreds of millions of dollars from the US automotive supplier that collapsed into bankruptcy in September.
Lawyers for the company — now run by restructuring consultants at Alvarez & Marsal — alleged that James borrowed funds on fraudulent terms, only to “routinely and regularly” divert cash for himself and his family, according to a Southern District of Texas filing dated Nov. 3. More than $700 million was funneled from First Brands directly to James and his affiliated entities from 2018 to 2025, they claimed.
James “secretly pilfered some of the Company’s assets to fund his and his family’s lavish lifestyle. In short, he lined his pockets at the expense of First Brands and its creditors,” according to the document. The plaintiffs drew on data from more than seven million documents, as well as bank records and a collection of devices from employees.
In the 35-page document, lawyers paint a picture of James’ luxuriant spending habits, pointing to a fleet of at least 17 “exotic cars” and a celebrity personal trainer. In some cases, payments to James and his family were made directly from First Brands accounts, including at least $3 million in rent paid over 2019 to 2024 for a New York townhouse and about $500,000 paid to a private chef in 2025.
First Brands’ lawyers asked the court for relief to freeze “any and all assets” belonging to James and the other defendants. First Brands didn’t respond to requests for comments sent outside business hours.
The allegations expand the web of intrigue around James himself, who had a relatively low public profile until First Brands shook credit markets amid concern over its complex financing structure. The implosion of First Brands, alongside other high-profile bankruptcies such as subprime auto lender Tricolor Holdings, has prompted nervousness across Wall Street about further “cockroaches” lurking in investor portfolios.
James’ spokesperson said the company founder “categorically denies the baseless and speculative allegations contained in the First Brands complaint” and said he intends to immediately challenge the suit.
“Mr. James has always conducted himself ethically and is committed to doing everything he can to support First Brands’ stakeholders during the restructuring process,” the spokesperson said.
In a separate court filing on Monday, a lawyer for James said that he “categorically refutes 23 allegations of wrongdoing and will address them at the appropriate time.” The attorney added that James welcomed the appointment of an independent examiner to investigate the off-balance sheet financing and factoring transactions, though he wants the scope of the inquiry to include claims against the third parties that provided the funding.
The former CEO had aggressively built up the auto-parts conglomerate via a series of debt-fueled deals. Part of the company’s financing was secured on “non-existent or doctored invoices,” the documents alleged, and in other cases special-purpose vehicles raised debt backed by assets that First Brands had seemingly already borrowed against.
Lawyers for First Brands highlight one example of a package of invoices submitted to Katsumi Global for factoring. The documents had been tweaked to show net values and purchase prices higher than the value originally given. As a result, the factoring company purchased a package of invoices at a cost of about $11.2 million, when the true value of the invoices was around $2.3 million.
James also allegedly pocketed the proceeds of financing accrued by First Brands’ special purpose vehicles. Lawyers for the company describe how certain vehicles would undertake sale-and-leaseback transactions, which were followed by transfers to entities affiliated with James on the same day.
The investigation by First Brands shows that of the more than $1 billion in total financing received between April 2024 and March 2025 from equipment financier Onset Financial, more than $200 million was paid to James or his affiliated entities.
“Mr. James induced third-party lenders to lend to First Brands irrespective of its true financial condition to bring more money into First Brands only so that portions of it could be siphoned away,” they claimed in the filing.
Spokespeople for Onset and Katsumi didn’t immediately respond to a request for comment outside of usual business hours.
At the time of the bankruptcy filing on Sept. 28, the company had $6.1 billion of funded debt obligations, at least $2.3 billion off-balance sheet financings through special purpose vehicles and about $800 million in unsecured supply chain financing liabilities. It also had at least $2.3 billion in factoring liabilities, according to the filing.
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