NEW YORK: A major financier to First Brands Group is accused of orchestrating a kickback scheme with the founder’s brother that loaded the now bankrupt auto-parts supplier with expensive debt.
Onset Financial Inc was “pillaging” the company through usurious financing arrangements approved by Edward James, the brother of founder Patrick James, a group of creditors said in a court filing.
Onset, which advanced the firm no more than US$2.5bil, already has obtained about US$2.9bil and is also seeking an additional US$1.9bil through claims in the bankruptcy case, the filing said on Monday.
The loans, typically maturing in less than a year and structured with upfront payments, generated average internal rates of return exceeding 300%, according to the filing.
As part of the arrangements, Onset agreed to pay Edward James hundreds of millions of dollars through additional fees and by granting him the right to personally invest in the financings, the creditors’ committee alleged.
Moreover, hundreds of millions of dollars “appear to have been diverted to Patrick James personally,” according to the filing.
The committee made the accusations in a brief challenging Onset’s bid to delay depositions of two of its executives.
“The allegations against Onset by the First Brands Creditors’ committee are unsupported and baseless and strategically made as part of a spurious scorched-earth litigation tactic,” a representative for Onset said in an emailed statement.
A spokesperson for Patrick James said accusations against him are baseless and that the creditor committee’s filing “continues to conveniently skip over the fact that hundreds of millions of dollars were reinvested into First Brands by Patrick and related entities over the years”.
Lawyers for Edward, who resigned from the company on Sept 25, didn’t respond to requests for comment, nor did people for First Brands. — Bloomberg
