Around 750 First Brands employees are getting a temporary reprieve.
The parts company collapsed as a bankruptcy filing unleashed a slew of fraud allegations, billions in missing money and indictments of former executives. It owned more than 20 brands, including iconic names such as Fram, Luber-Finer, Trico and Raybestos, and employed 6,000 in the U.S. alone.
[RELATED: Court-appointed examiner reveals findings in First Brands bankruptcy]
Workers in the Cleveland, Ohio, corporate office as well as facilities affiliated with Toldeo Molding & Die in Ohio, Champion Labs in Illinois, as well as some other Illinois locations were notified recently their last day would be moved back to May 31 as First Brands continues to pursue a sale of its businesses.
It recently completed a sale of some of its intellectual property, including those for wipers, filtration and more to Premium Guard Inc. A sale of Walbro — which makes solutions for small engine fuel systems, carburetors, fuel pumps, ignition systems, electronic fuel injection, plastic injection molding and related components across power equipment, powersports, marine and specialty engines — to Overdrive Capital, owned by shareholders and officers of the Active Dynamics Group, closed earlier this year.
The Walbro sale saved 600 jobs, court filings say.
BDO lawsuit
BDO, the company that audited First Brand's financial records since 2021, has been sued by Black Diamond Credit Strategies Master Fund, part of Black Diamond Capital Management (BDCM).
Black Diamond alleges BDO should have caught on to financial mismanagement at First Brands if it, as it says, complied with generally accepted auditing standards (GAAS) and generally accepted accounting principles (GAAP). BDO's last audit of First Brands was in March. The company filed for bankruptcy in September.
[RELATED: Jeffries Financial Group sued over First Brands exposure]
"First Brands' creditors are among those left holding the bag in the wake of this collapse," Black Diamond's suit says. "Dozens of supposedly 'first lien' term lenders — including plaintiffs — will almost certainly recover nothing from the company it loaned billions of dollars to. Such financial carnage would have been prevented if only First Brands' outside auditor, Defendant BDO, had done its job."
Black Diamond's complaint lists several risk factors of fraud that it says should have triggered closer attention from BDO and, furthermore, it says BDO has a reputation for performing audits that did not conform to applicable audit standards. In fact, Black Diamond alleges, First Brands chose BDO specifically because it was viewed as less rigorous than other accounting firms and had the most unsophisticated auditing process.
Had BDO done its job, Black Diamond says, it wouldn't have invested in shares of First Brands' debt, nor would it have held those shares year after year.
"Defendant BDO deceived Plaintiffs into believing that First Brands was financially sound when in fact it was not," the suit says. "Because BDCM and Plaintiffs were not told the true financial condition of First Brands by Defendant BDO, Plaintiffs did not take a variety of actions, including loan sales, that would have reduced if not completely prevented or avoided the harm Plaintiffs have now suffered."
The suit was filed in Cleveland on April 29.
