Here’s what you need to know:
- An examiner appointed by the U.S. Bankruptcy Court for the Southern District of Texas has filed a preliminary report in the First Brands case.
- E. Martin De Luca, the examiner, alleges Patrick James, the founder and former CEO of First Brands, who has been indicted by federal prosecutors diverted money from acquisitions to his own accounts.
- Patrick James' lawyers hit back, saying the report is unfair and that the level of the examiner's cooperation with federal prosecutors is inappropriate.
First Brands Group, the U.S. bankruptcy court examiner says, was not a business. It was a mechanism for executives to gorge on wealth, sucking the company dry.
E. Martin De Luca was appointed examiner by the U.S. Bankruptcy Court for the Southern District of Texas's U.S. Trustee in the First Brands case. His appointment was confirmed by Judge Christopher Lopez, and De Luca and his team set to work on a $7 million investigation that, owing to First Brands' catastrophic liquidity crisis earlier this year, came to a halt before it was complete.
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"This is an interim report," De Luca wrote in a redacted Examiner's Report filed with the court on April 27. "The investigation was paused because the court-approved budget was exhausted while significant work remained. If modest additional funding is approved, the examiner believes that targeted additional discovery, witness interviews and forensic tracing can materially refine and strengthen these findings within approximately 90 days."
Though preliminary in nature, De Luca's report doesn't look good for former First Brands executives.
Patrick James' role
Patrick James, founder and former CEO of First Brands, orchestrated a web of acquired companies, financing vehicles and other entities that were operated not as a for-profit business, but as "a liquidity generating and value extracting enterprise," the report says.
First Brands Group, headquartered in Ohio, amassed more than 25 auto brands in a 15-year run of acquisitions of companies that manufactured, distributed and sold automotive and some commercial vehicle components in categories such as brakes, filters, wipers, lights, pumps and towing solutions. Its portfolio included familiar names such as Fram, Luber-finer and Trico. Facilities circled the globe and, at the time it filed bankruptcy, it had more than 26,000 employees.
As First Brands snapped up companies, De Luca makes a case that James directed money and assets from acquisitions into his own coffers. He identifies more than $700 million of transactions from First Brands to Patrick James or entities controlled by him, alleging he "used financing not simply to sustain operations but to create and move liquidity while facilitating the movement of goods and value across borders through a commingled structure that obscured ownership, control and creditor rights."
Patrick James, who has been indicted on bank and wire fraud charges by federal prosecutors in New York, denies De Luca's claims. He says the report "mostly ... summarizes the vague allegations made against Patrick James by the debtors and the government in the amended complaint and the indictment (respectively)." His retort to De Luca's report, also filed April 27, called the report one-sided and states De Luca inappropriately cooperated with U.S. prosecutors.
"The report does not evaluate all relevant facts and parties evenhandedly as it should," Patrick James' motion says. "(It) pays to attention to other targets like First Brands' financing and factoring counterparties. ... Ultimately, no final conclusions can be reached about Mr. James and the related entities based on the report."
Acquisitions allegations
A new allegation in De Luca's report is First Brands' acquisitions were masks for transfers of cash and valuable assets to Patrick James or his controlled companies. He cites $720 million in 36 transfers from 2021-2025 to Patrick James or controlled entities. Furthermore, some of those transfers were routed through other companies in what De Luca says is an attempt to obscure the true source and destination of the funds.
"The scale and pattern of these transfers ... are consistent with the use of FBG and its affiliated non-debtor entities as vehicles for extracting cash for the benefit of Patrick James, rather than as profit-seeking operating businesses in the traditional sense," De Luca's report says.
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He claims some of First Brands' acquisitions from 2011-2024 "appear to lack a valid business rationale," involving companies in economic distress with outdated technologies. For his part, Patrick James says the companies had large operation and headcounts and that any acquisitions were, in First Brands' opinion, sound business judgment.
De Luca raises questions about several acquisitions specifically. Fram was acquired by First Brands in 2019 for a stated purchase price of $306 million. In 2021, Fram made a $2.3 million payment in connection with repurchasing Fram brand rights.
"Evidence reflects that although the purchase price was $2.3 million, the transaction was structured so that additional funding — approximately $9 million — was obtained and transferred directly to Patrick James," the report says.
First Brands acquired UCI in 2020. De Luca says real estate in that transaction in Illinois was conveyed to Bleecker Group, owned by Patrick James, rather than remaining with UCI. Bleecker then leased the properties to First Brands entities Champion Laboratories and Airtex Products. The real estate was then deeded to another Patrick James company, Albion Realty. In 2021, Albion sold some of the properties and Fram became the tenant under a leaseback arrangement.
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De Luca's investigation also reported First Brands transferred intellectual property (IP) after an acquisition to Alester Technologies, who shared staff with First Brands Group. Alester then entered into licensing agreements with First Brands operating companies to use the IP. Internal conversations show that, before the Cardone acquisition in 2023, First Brands employees discussed the transfer of IP to Alester with "a desire to minimize the valuation attributed to that IP."
Alleged Novares diversion
Global Technologies S.à.r.l. of Luxembourg, owned by Patrick James but outside the First Brands umbrella, acquired Novares Group S.A.S. in 2025. In connection with that transaction, De Luca says First Brands paid around $31 million for the sale of Novares' subsidiaries and assumed certain liabilities.
"The plan was for Novares' North American operations to reside within (First Brands Group)," De Luca says. However, Global Technologies' counsel says no transfer documentation existed. First Brands' counsel told De Luca the transactions were intended to be "back to back" with Global Technologies' acquisition, but negotiations collapsed after the bankruptcy filing. However, the $31.1 million De Luca says First Brands paid was not returned.
On Sept. 17, 11 days before First Brands filed for bankruptcy, one of its European companies, Cequent Nederland, paid about $1.2 million to Novares, labeled as an "advance payment," De Luca says, repeating the transaction on Sept. 19.
"(First Brands) employees reported that these transfers lacked valid justification and that an invoice was created after the fact to justify them," De Luca's report says, adding the CFO of Global Technologies says there was an intention to enter into some kind of service contract with Novares.
De Luca also cites other payments between Novares and First Brands, including transfers in August totaling about $1.63 million; $10-$11,000 per month for corporate vehicle leases for Novares executives and more.
"These preliminary findings raise concerns about transfers of estate value to non-debtor entities owned and operated by Patrick James and warrant further investigation," De Luca says.
Patrick James' motion says De Luca "insinuates" wrongdoing in the Novares acquisition, but "lacks detail to support that supposition." The filing acknowledges First Brands provided, indirectly, millions for the transaction, most of the funding was provided by a third-party financier.
"Consisted with the high-level business principle agreed at the time of the Novares purchase, certain Novares Americas entities were operationally treated as part of the First Brands enterprise following the acquisition, and Global Technologies and the Novares parent entity worked in good faith with First Brands, even after its Chapter 11 filing, to try to work through the documentary and regulatory steps to finalize the transfer," Patrick James' rebuttal says. "Notwithstanding these good-faith toward an amicable solution that would comply with applicable corporate and regulatory requirements, the debtors [First Brands Group] abruptly discontinued discussions in late October 2025, saying they had been directed to spend no further effort or money to document the transfer."
Patrick James resigned from First Brands on Oct. 13. He and his brother, Edward James, also a former executive at First Brands, were indicted in January. Two other executives have plead guilty and are cooperating with prosecutors.
