First Brands founder Patrick James pleads not guilty to fraud

By Jonathan Stempel NEW YORK, Feb 4 (Reuters) – Patrick James, the founder of auto parts supplier First Brands, pleaded not guilty on Wednesday to charges he defrauded lenders out of billions of dollars before the company collapsed into bankruptcy. The nine-count indictment accused James, who was also chief executive of Cleveland-based First Brands, of leading an eight-year scheme to deceive lenders into financing the company's growth by double- and triple-pledging loan collateral, faking invoices and hiding substantial amounts of debt. James entered his plea before U.S. Magistrate Judge Robyn Tarnofsky in Manhattan to nine criminal counts including running a continuing financial crimes enterprise, bank fraud, wire fraud and money-laundering conspiracy. His brother Edward James, a former top First Brands executive, was charged with eight criminal counts, excluding the financial-crimes enterprise charge.  He also pleaded not guilty on Wednesday. The brothers were arrested on January 29 in Ohio. A judge there allowed Patrick James to be freed on a $50 million bond and Edward James to be freed on a $25 million bond, subject to home confinement and electronic monitoring. Tarnofsky lifted a requirement that the Jameses wear monitoring bracelets, and said they could instead be monitored through their cellphones. While both defendants could face decades in prison if convicted, the judge eased bail conditions after defense lawyers assured that their clients would not flee. Patrick James and Edward James are Malaysian-born U.S. citizens. "It is very much Mr. James' intent to go into court and proclaim his innocence," Patrick James' lawyer,  Scott Hartman,  said. Seth DuCharme, a lawyer for Edward James, said his client is not going to "run off to Southeast Asia where he allegedly has all this money." FIRST BRANDS' COLLAPSE AFFECTED FINANCIAL FIRMS, AUTOMAKERS First Brands' implosion in September alarmed Wall Street, in part because major financial services companies including BlackRock, Jefferies and Switzerland's UBS helped fund its growth. The company's Chapter 11 filing on September 28 also disrupted the supply chain of automakers including Ford and General Motors. Founded in 2013, First Brands supplied auto parts including brakes, filters and lighting systems and had about $5 billion in annual sales. Prosecutors allege the defendants' fraud lasted from 2018 to 2025.  Another former First Brands executive, Vice President of Finance Andy Brumbergs, entered a related guilty plea and is cooperating with prosecutors. In December, federal prosecutors in Manhattan unveiled criminal fraud charges against top executives of subprime auto lender Tricolor, which filed to liquidate in bankruptcy 18 days before First Brands sought protection from its creditors. Last week, First Brands began winding down its Brake Parts, Cardone aftermarket parts and Autolite spark-plug units. It is trying to sell other assets to maximize value for creditors. (Reporting by Jonathan Stempel in New York; Editing by Matthew Lewis)

(The article has been published through a syndicated feed. Except for the headline, the content has been published verbatim. Liability lies with original publisher.)