American auto parts company First Brands Group, which is currently undergoing bankruptcy restructuring, has filed a lawsuit against its founder and former CEO.
The details: The lawsuit, filed in federal court on November 3, alleges that Patrick James “fraudulently secured billions of dollars of financing for First Brands,” citing a host of examples of how the former CEO mishandled the company’s finances, reports Yahoo Finance.
The suit claims that James obtained billions of dollars in financing for First Brands by misrepresenting its financial condition.
He then diverted hundreds of millions (if not billions) of dollars from the company to himself, his trust, and related entities.
The suit also alleges that James left First Brands (which claimed about $5 billion in annual sales and roughly $11.6 billion in total liabilities) with about $12 million in cash when it filed for bankruptcy in September 2025.
From the suit: “After having secured this financing, Mr. James did not use all of those funds for the benefit of Debtors. Rather, Mr. James—aided and abetted by the other Defendants… 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.”
Why it matters: The lawsuit seeks to claw back funds and assign accountability for First Brands’ collapse—key steps in protecting creditors, stabilizing operations, and restoring confidence among lenders, suppliers, and employees as the company navigates bankruptcy.
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Between the lines: The lawsuit is a pivotal step in the company’s restructuring plan as the restructuring team tries to turn around the company.
When the auto supplier filed for bankruptcy, it listed $1 billion to $10 billion in assets and $10 billion to $50 billion in liabilities, according to court documents.
The company has $1.1 billion in bankruptcy financing approved to keep operations running and meet obligations to suppliers and partners, including an additional $600 million approved in November.
What they’re saying: “This is an important step toward stabilizing First Brands’ operations and securing a long-term future for the company’s world-class portfolio,” interim CEO and chief restructuring officer Chuck Moore said in a statement (via Yahoo Finance).
Also worth noting: A U.S. bankruptcy judge on Wednesday ordered an independent investigation into First Brands, allocating a $7 million budget to probe the allegations of fraud involving the company's use of third-party financing for customer invoices, report Reuters.
Bottom line: The outcome of the lawsuit and independent investigation will help determine how much value can be recovered, who bears responsibility for the alleged misconduct, and whether First Brands can emerge from bankruptcy as a viable supplier, or become a cautionary tale in corporate governance and leveraged finance.
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