James “misrepresented First Brands’ financial position to secure billions in debt financing”, the suit claims. — Bloomberg
NEW YORK: At first, the sales invoice said US$179.84. Later, the bill said US$9,271.25. That is 50 times more.
It was one more trick in a series of alleged ruses, from fudged numbers and questionable collateral, to off-balance-sheet financing and a company slush fund, at First Brands Group, company advisers now claim.
Directing it all, First Brands’ bankruptcy lawyers alleged on Monday, was founder Patrick James.
The Malaysian-born businessman persuaded prominent Wall Street firms to lend vast sums to his auto-parts company and then misappropriated millions, if not billions, of that money, their lawsuit claims.
A total of 17 “exotic cars”, “lavish” homes in Malibu and the Hamptons, six-figure bills for a “celebrity” chef and a personal trainer – those are just some of the allegations involving James’ supposed big-spending lifestyle.
The September collapse of First Brands, a midsize manufacturer that normally wouldn’t draw much attention on Wall Street, has exposed cracks in today’s turbo-charged credit market.
But Monday’s civil lawsuit, which cited the allegedly doctored invoice and dozens of others like it, adds new layers to the financial drama. It also tells a darker story – one of high living financed by years of outright fraud.
The suit claims James siphoned hundreds of millions of dollars from First Brands, all while the company doctored its accounts and promised the same collateral to different lenders to secure private loans and off-balance sheet financing.
James “misrepresented First Brands’ financial position to secure billions in debt financing”, the suit claims. He then “secretly pilfered some of the company’s assets to fund his and his family’s lavish lifestyle”.
A spokesman for James vigorously denied creditors’ allegations on Tuesday, characterising the suit as “baseless” and “speculative”.
“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 statement to Bloomberg News.
James’ lawyers said in court papers filed on Tuesday that claims about funds being transferred out of First Brands are not supported by evidence or documented asset tracing and instead, “appear to be based entirely on the unsupported mental leap that, if funds were transferred within time frame roughly close to personal expenditures by Mr James, such funds must have been used for that personal expenditure”.
Among the most surprising allegations in the lawsuit is the claim that James directed First Brands to raise funds by selling non-existent or doctored invoices to so-called factoring firms, which provide immediate cash to businesses by purchasing their receivables.
First Brands is also accusing James of commingling corporate and personal accounts and draining more than US$700mil from the business.
According to James’ lawyers, this allegation lacks accounting and other documentary evidence.
By the time it filed for Chapter 11 on Sept 28, First Brands had just US$12mil in the bank, according to court papers.
Among the allegations in Monday’s lawsuit, James was said to have used money from First Brands accounts to pay US$500,000 for a private “celebrity chef” this year and at least US$3mil for rent on a New York City townhouse. (The name of the chef wasn’t disclosed.)
James is also accused of directing others to submit invoices that were reimbursed by Battery Park Holdings LLC, an entity he owns.
First Brands transferred more than US$10mil to Battery Park between 2018 and 2025 to pay for his and his family’s personal expenses, according to court papers.
Over the years, according to the suit, First Brands made other substantial transfers to entities controlled by James, transactions that occurred “in close proximity to his acquisition of various real estate properties and cars.”
It included disbursements from First Brands prior to James purchasing a home in Malibu in 2019 and the Hamptons in August 2021, the lawsuit said.
In addition to the fleet of exotic cars, the suit claims James owns at least seven properties.
The situation is now so urgent that First Brands advisers have asked a Texas bankruptcy judge to freeze James’ bank accounts.
Charles Moore, First Brands’ interim chief executive officer, said in a court filing that the company is concerned James, a resident of Ohio, could flee the United States, calling him a “Malaysian national” with “hundreds of millions of dollars at his disposal.” — Bloomberg
