# Case File — Video 7: First Brands Group Fraud Collapse

Title (LOCKED) — split across thumbnail + YouTube title field (long-title
technique: since YouTube truncates titles ~60-70 chars, the hook splits
across both instead of getting cut off):
- **Thumbnail text overlay:** "The FRAM Trico Financial Kingpins:"
- **YouTube title field:** "How Two Brothers Created a $9B Ponzi Scheme
  Out Of Your Garage" (63 chars, fits cleanly)
- Combined, these read as one continuous hook when a viewer sees the
  thumbnail+title together in a feed. Design note for whoever builds the
  thumbnail graphic: the overlay text is a bit long for standard
  thumbnail legibility (usually best at 3-6 punchy words at small mobile
  size) — consider trimming at build time if it doesn't read clearly at
  thumbnail scale.
Status: research locked, ready to script
Lane: Primary Beat (government/financial fraud, "follow the money not the
politics") — real federal criminal case, real bankruptcy docket, real
dollar figures, zero partisan-politics surface area
Target format: 8-12 min deep dive (8:00 hard mid-roll-ad threshold per
`NLR_house_style`)
Structural format (new for this video, locked with the user): open on an
**evidence-file cold open** — case-stamp title card, quick montage of
real outlet coverage, then a **plain-English TL;DR before any evidence**,
then a transition line into the deep dive. See "Cold open — locked copy"
below.

**Title accuracy note:** "Kingpins" (plural) is independently verified
accurate — both Patrick AND Edward James were each charged with all nine
counts, including the rare 18 U.S.C. §225 "continuing financial crimes
enterprise" count (colloquially the "financial kingpin" statute), not
just Patrick. Source: [CBS News](https://www.cbsnews.com/news/patrick-james-first-brands-indictment-fraud/), corroborated across multiple outlets.
**Do not use "cold case" anywhere in the script, title, or delivery
notes** — this is an active, ongoing federal prosecution (trial set
2027-02-09, two co-defendants already cooperating), not a dormant/
unsolved case. That word was flagged and removed for accuracy — see
prior open item below, now resolved.

## Mandatory honesty check — read this before writing a single line of script

1. **The cold-open device is presentational, not a claim of exclusive
   access.** This channel did not independently obtain the sealed
   examiner's-report exhibit or any non-public document. Every fact in
   this case file is either (a) pulled from a primary document we
   actually hold (see "Documents we have" below), or (b) attributed
   reporting from named outlets (Bloomberg, Bloomberg Law, DOJ, IRS,
   CNBC). **Never let the script imply we obtained something we didn't.**
   Where the source is secondary reporting rather than a primary
   document, the script should say so — e.g., "Bloomberg reported that
   the examiner found..." not "the examiner's report shows..." unless
   we're citing the three documents we actually hold.
2. **Two findings are legally and factually distinct — do not flatten
   them into one:** the bankruptcy examiner (a civil, court-appointed
   investigator) found **no proof Patrick James personally directed** the
   invoice-fabrication scheme — that piece is specifically pinned on
   former CFO Stephen Graham and VP Peter Brumbergs, who both pleaded
   guilty and are cooperating witnesses against the James brothers. The
   **separate criminal indictment** charges Patrick James with running
   the broader fraud enterprise (the rare 18 U.S.C. §225 "continuing
   financial crimes enterprise" charge). Both are real, sourced findings
   — they are not the same claim, and the script must not say "James
   faked the invoices himself."
3. **Patrick James disputes the personal-enrichment allegations.**
   His team has called the characterization "baseless and speculative."
   Include the denial on screen wherever the personal-spending
   allegations are used — this is a live criminal case with a trial date
   (2027-02-09, not yet resolved), not a closed matter.
4. **Precision corrections already made from an earlier AI-research
   pass this session** (do not revert to the less precise versions):
   - The CFCE charge is confirmed as the first Section 225 case charged
     in the **Second Circuit in a decade** — not "first in the US in 30
     years" (an inflated framing from an earlier research draft).
   - Jamie Dimon's "cockroaches" quote responds to **both the Tricolor
     and First Brands bankruptcies together** (Tricolor failed first, in
     September 2025) — not a First-Brands-specific reaction.
   - Patrick James's alleged personal spending is **$700 million**, not
     $720 million.
   - The tariff-fraud whistleblower claim is **$285.5 million**, not a
     round $286 million.

## Cold open — locked copy

**[HIT — black screen, red case-stamp effect]**
CASE FILE
UNITED STATES v. JAMES
NO. 26 CR. 29

**VO (deadpan, evidence-file/investigative-file cadence):**
"Two brothers. A car parts empire — the brand in your oil filter, your
wiper blades, your brake pads. And a scheme federal prosecutors gave a
name usually reserved for organized crime."

**[Montage — quick cuts: Bloomberg headline, WSJ front page, FT, a CNBC
chyron, Law360]**
"Bloomberg called it a multibillion-dollar fraud. The Wall Street Journal
called it one of the largest corporate collapses in years. Prosecutors
called it something else entirely: a continuing financial crimes
enterprise."

**[BOARD — clean TL;DR stat card, tone shift, no more montage energy]**
"Here's what actually happened. Two brothers ran a car-parts company —
FRAM, Trico, the stuff in every mechanic's garage — and used fake
invoices to borrow billions they never earned. Hundreds of layoffs hit
plants in three states when the company couldn't find a buyer. The
federal government had to step in and guarantee pensions for 1,630
retirees so they wouldn't lose a dime. That's the whole story in one
breath."

**[Beat — pause, tone shift]**
"Everything after this is the how. Not the theatrics. Not the politics.
Just the money, and where it actually went."

## The company

First Brands Group, LLC — an automotive aftermarket parts roll-up
operating well-known consumer brands: **FRAM** (oil filters), **Trico**
(wiper blades), **Autolite** (spark plugs), **Carter**, **Champion
Laboratories**, **Centric Parts**, plus dozens of other absorbed brands
under ~99 affiliated debtor entities. ~17,000 employees in North America,
~$5 billion in reported net annual sales at its peak. Grew through
aggressive debt-fueled acquisitions (absorbed Centric Parts and Champion
Laboratories in 2020, Horizon Global in 2023). Supplied critical
components directly to OEMs including Ford.
Sources: [Bloomberg, 2026-01-29](https://www.bloomberg.com/news/articles/2026-01-29/first-brands-founder-patrick-james-indicted-by-us-prosecutors), [CNBC, 2026-01-29](https://www.cnbc.com/2026/01/29/first-brands-founder-patrick-james-and-his-brother-indicted-for-fraud.html)

## The collapse

An attempted **$6.2 billion refinancing** failed in August 2025; cash
reserves evaporated within weeks. First Brands Group, LLC and affiliated
entities filed Chapter 11 on **September 28, 2025** — Case No.
**4:25-bk-90399**, U.S. Bankruptcy Court, Southern District of Texas
(Houston), Judge **Christopher M. Lopez**. At filing: liabilities
reported in the **$10B-$50B range**, assets **$1B-$10B** (standard
bankruptcy-petition check-box ranges). The precise later figure,
independently confirmed via DOJ/IRS: **$12 million in cash against over
$9 billion in liabilities.**
Sources: [IRS Criminal Investigation](https://www.irs.gov/compliance/criminal-investigation/first-brands-executives-charged-with-multibillion-dollar-fraud), [DOJ SDNY](https://www.justice.gov/usao-sdny/pr/first-brands-executives-charged-multibillion-dollar-fraud)

## The fraud mechanism

First Brands relied on **third-party factoring** — selling accounts
receivable to financiers at a discount for immediate cash. The scheme,
per the indictment: fabricating and inflating invoices for accounts
receivable/payable, and **double- and triple-pledging the same loan
collateral** to multiple lenders simultaneously — the same inventory
represented as unencumbered to several different financiers at once.

**The three dollar figures, reconciled (do not confuse these):**
- **$9B+** — total liabilities at bankruptcy (the whole picture)
- **$2.3B** — off-balance-sheet/factoring liabilities specifically (the
  "hidden debt" category, not previously reported on the balance sheet)
- **$1.4B** — the bankruptcy examiner's specific finding of invoices that
  were **completely fabricated** (a subset within the $2.3B)

A structural vulnerability enabled it: unlike European supply-chain
finance (where regulated banks get direct ERP system access for
real-time verification), North American factoring let First Brands
manually submit receivable spreadsheets *and* collect customer payments
itself before remitting to factors — control of both data and cash flow.
Sources: [funderintel.com](https://www.funderintel.com/post/the-2-3-billion-vanishing-act-first-brands-and-the-factoring-fraud-that-shocked-wall-street), [restructuringnewsletter.com](https://restructuringnewsletter.com/p/off-balance-sheet-factoring)

## The examiner

**Martin De Luca** (Boies Schiller Flexner LLP, former SDNY federal
prosecutor) appointed examiner **2025-11-19** with a **$7 million**
court-approved budget, tasked with investigating the off-balance-sheet
financing. Filed an **interim report** with findings on **2026-04-27**
(cover Notice filed 2026-04-17, bankruptcy Docket #1650) — confirmed:
**$1.4 billion in completely fabricated invoices**, company characterized
as a "wealth extraction tool." The investigation was paused when its
budget ran out; the court denied additional funding in June 2026.
**We do not hold this document — see "Documents we have" below.** All
findings here are attributed to Bloomberg Law's reporting.
Source: [Bloomberg Law](https://news.bloomberglaw.com/bankruptcy-law/first-brands-examiner-runs-out-of-budget-as-fraud-probe-grows)

## The auditor — BDO USA

BDO signed off on First Brands' financials 2020-2024. A former senior
employee told the examiner the company chose BDO specifically because it
was seen as **"less rigorous"** — letting the company "do what we want
with these guys." BDO did not directly access underlying ERP systems
(Oracle/SAP) and skipped standard verification steps (customer
confirmations, manual journal-entry testing). **BDO's defense:** the
examiner's team never interviewed BDO personnel or reviewed its
workpapers, and the report "reaches inappropriate and factually
inaccurate conclusions... based on hearsay from individuals involved in
the fraud." A lender has separately **sued BDO directly** over the missed
red flags.
Sources: [Bloomberg, 2026-04-30](https://www.bloomberg.com/news/articles/2026-04-30/first-brands-creditor-sues-auditor-bdo-over-missed-red-flags), [Crain's Chicago Business](https://www.chicagobusiness.com/finance-banking/bdo-says-impossible-detect-fraud-bankrupt-client-first-brands/)

## The lenders — who got burned, who got paid

- **Onset Financial** — provided ~$2.5B, collected ~$2.9B in repayments,
  still claims $1.9B more owed. Creditors' Committee calls Onset a **"net
  winner"** of the fraud. A 2022 internal First Brands message joked the
  Onset rep who sold them a **179%-IRR** inventory loan would be
  "employee of the year" (one account says "employee of the century").
  Broader Onset financing averaged IRRs **exceeding 300%**.
  Source: [Bloomberg, 2026-01-06](https://www.bloomberg.com/news/articles/2026-01-06/first-brands-creditors-allege-kickbacks-on-deals-returning-300)
- **Jefferies (Point Bonita trade-finance fund)** — ~$715M in
  uncollected, allegedly fabricated invoices.
- Other exposed institutions per reporting: Katsumi Global (~$1.75B),
  Bank of America (~$250M primary ABL), Evolution Credit (~$230M).

## The criminal case

**United States v. Patrick James and Edward James** — Case No. **26 Cr.
29 (AT)**, U.S. District Court, S.D.N.Y., Judge **Analisa Torres**. Nine
counts unsealed **2026-01-29**: **18 U.S.C. §225** (continuing financial
crimes enterprise — the "financial kingpin" statute, confirmed as the
first Section 225 case in the Second Circuit in a decade), plus bank
fraud, wire fraud, and money laundering conspiracy. Trial set for
**2027-02-09**. Both brothers pleaded not guilty, released on bond ($50M
for Patrick, secured partly by his Hamptons home; $25M for Edward).

**Cooperating witnesses (both pleaded guilty, both will testify against
the James brothers):**
- **Peter Andrew Brumbergs** (VP of Finance) — pleaded guilty
  **2026-01-26** via Information (waived indictment), S.D.N.Y. Case No.
  1:26-cr-00025. **We hold three of his actual court documents — see
  below.**
- **Stephen Graham** (CFO, 68) — pleaded guilty **2026-03-02** before
  Judge Torres to four counts (two wire fraud, bank fraud, conspiracy),
  covering conduct 2018-2025. Sentencing set for **2026-08-03**.
  Source: [Bloomberg, 2026-03-05](https://www.bloomberg.com/news/articles/2026-03-05/first-brands-ex-cfo-is-second-executive-to-plead-guilty-to-fraud)

## The personal-enrichment allegations (disputed — include the denial)

First Brands' own lawsuit against its founder alleges Patrick James
diverted **~$700 million** via shell entities (e.g., "Bowery Finance II"
as an intermediary "cutout") to fund: **17 "exotic" cars**, homes in
Malibu and the Hamptons (including an **$18.75M Hamptons house** bought
2021 — the same property partly securing his $50M bond), a private chef,
a personal trainer, and horse-racing stables in Ohio (bought in the
2010s, predates the fraud window — be precise that these specific farms
aren't necessarily fraud proceeds). **James's spokesman calls the
allegations "baseless and speculative."**
Sources: [Fortune, 2025-11-05](https://fortune.com/2025/11/05/first-brands-bankruptcy-founder-allegations-patrick-james/), [Yahoo Finance](https://finance.yahoo.com/news/bankrupt-first-brands-sues-founder-193603074.html), [Bloomberg, 2026-02-03](https://www.bloomberg.com/news/articles/2026-02-03/first-brands-founder-uses-hamptons-home-for-50-million-bond)

## The tariff angle (separate case, same company)

A **$285.5 million** government claim alleges First Brands underpaid
duties on Chinese-imported brake parts — based on a whistleblower
complaint (**"Alder Wood"**) originally filed under seal in **March
2022** (years before the bankruptcy), alleging First Brands cut declared
import prices to U.S. Customs by roughly **32%** after acquiring the
China-based supplying division in 2020.
Source: [Bloomberg, 2026-05-26](https://www.bloomberg.com/news/articles/2026-05-26/first-brands-hit-by-286-million-claim-for-alleged-tariffs-fraud)

## Human impact — the "why it matters to you" beat

- **Layoffs:** hundreds of workers affected across plants in Kansas,
  Illinois, and Texas after a buyer search collapsed; a separate,
  smaller batch of planned layoffs in Ohio was **halted** days before
  taking effect.
- **Pensions:** the **Pension Benefit Guaranty Corporation (PBGC)** —
  the actual federal agency that insures private pensions — formally
  assumed **three** terminated pension plans (the FRAM Plan, the Cardone
  Plan, the Dalton Plan), covering **1,630** current and future retirees,
  effective 2026-04-30. PBGC guarantees **zero reduction** in benefits
  for any of them.
  Sources: [PBGC press release](https://www.pbgc.gov/news/press/pr26-005), [PLANSPONSOR](https://www.plansponsor.com/pbgc-guarantees-full-pensions-for-first-brands-workers/), [Newsweek](https://www.newsweek.com/first-brands-group-layoffs-halted-ohio-brankruptcy-11889896)

## Market contagion — the "this could happen again" beat

JPMorgan CEO **Jamie Dimon**, responding to the combined **Tricolor**
(auto lender, failed September 2025, cost JPMorgan ~$170M) and **First
Brands** bankruptcies together: "When you see one cockroach, there are
probably more." Private-credit executives from Apollo, Ares, and
Blackstone were summoned to testify before the UK Parliament's House of
Lords Financial Services Regulation Committee. The Fed's October 2025
FOMC minutes discussed nonbank credit failures explicitly.
Sources: [Fortune](https://fortune.com/2025/10/15/jamie-dimon-issues-private-credit-warning-when-you-see-one-cockroach-there-are-probably-more/), [PitchBook](https://pitchbook.com/news/articles/jamie-dimon-warns-of-more-cockroaches-after-tricolor-first-brands-failures)

## Documents we have (real, downloaded, verified)

Located via a live CourtListener/RECAP API pull (2026-07-11), all free,
all confirmed real by content/metadata match:
- `source_documents/brumbergs_information_felony_sealed.pdf` — the actual
  charging document Brumbergs pleaded to (filed 2026-01-30)
- `source_documents/brumbergs_notice_of_intent_to_file_information.pdf`
  (filed 2026-01-30)
- `source_documents/brumbergs_waiver_of_indictment.pdf` (filed
  2026-01-30 — confirms he pleaded via Information, not grand jury
  indictment, standard for a cooperating defendant)

Full retrieval status for every other document (downloaded, free-source,
PACER-gated, or sealed/unobtainable) is tracked in
`DOCUMENT_CHECKLIST.html` in this same folder — check it before claiming
any additional primary-source access in the script.

## Patrick James photo — verification trail (read before using any image of him)

Finding a usable, correctly-identified photo of Patrick James took four
attempts, three of them wrong or unusable. Documenting the full trail so
a future session doesn't repeat the misses:

1. **A Bloomberg/Claims Journal photo, credited Michael Nagle/Bloomberg**
   — real, but genuinely copyrighted (RIGHTS-RESTRICTED, no license).
2. **A second Claims Journal photo** (same photographer, same street
   scene) — turned out to depict First Brands' **former chief strategy
   officer**, not Patrick James. The article it ran with ("Ex-First
   Brands Officer Says He Was Kept in the Dark About Fraud," Jonathan
   Randles, 2026-04-14) is about a different person entirely, with an
   opposite exculpatory narrative. **Do not use this photo captioned as
   Patrick James.**
3. **An AI (Gemini) visual guess** identifying a photo as "Patrick and
   his brother" — rejected. No independent verification possible from
   pixels alone, and the second man's apparent age didn't match Edward
   James (60). Treat unsourced AI image-identification claims about named
   real people as unverified by default.
4. **A WSJ Instagram post** (@wsj, 2025-10-22, captioning their own
   article "Behind the Collapse of an Auto-Parts Giant: A $2 Billion Hole
   and a Mysterious CEO") — **this one holds up.** First-party caption
   directly naming Patrick James, with biographical details (Malibu +
   Hamptons homes, Ohio college ties, roll-up-by-acquisition history)
   matching everything independently verified elsewhere in this case
   file. Still a copyrighted WSJ photo — "we're basically the press too"
   does not create a reuse right; commercial/monetized use if anything
   cuts against fair use, not toward it.

**The usable asset**: a **1983 high school yearbook photo**, sourced from
[The Edge Malaysia](https://theedgemalaysia.com/node/774736) ("The
secretive First Brands founder, his US$12 bil debt and the future of
private credit"). Confirmed by two convergent, independent details: the
school (De La Salle Brothers, Petaling Jaya, Selangor) and his move to
**The College of Wooster in Ohio** — the exact "small college in Ohio"
the WSJ caption also references. The same article notes James had
"employed professionals to remove his photos and information from the
internet," which explains why every other lead this session was either
wrong or a dead end — this yearbook photo likely predates that scrub.

**Confirmed beyond doubt**: The Edge Malaysia's own photo caption on this
exact image reads, verbatim: *"Patrick in his high school yearbook. He is
said to have had professionals remove his photos and information from
the internet."* This is first-party, explicit, unambiguous — not an
inference from matching biographical details, an actual caption
identifying the photo as him. Strongest evidence of any image checked
this session, by a wide margin.

Risk profile is meaningfully lower than the wire photos: 40+ years old,
non-commercial (school yearbook, not licensed press photography), and
The Edge Malaysia already used it for the identical biographical/
illustrative purpose this video would use it for. Not zero-risk, but the
most defensible option found. **On-screen treatment, as decided:** show
a screenshot of The Edge Malaysia article itself (masthead, headline,
byline, and original caption visible) alongside an AI-upscaled version of
the photo, captioned:

> "The only photo we could find of Patrick James — a 1983 high school
> yearbook photo from Malaysia, verified by The Edge Malaysia —
> AI-upscaled here from the original."

Assets, both in hand: `03_broll_assets/AI_Yearbook_Patrick.png`
(upscaled photo) and `03_broll_assets/TheEdgeMalaysia_ArticleScreenshot.png`
(the source article page, masthead and caption visible, matches the
quote above verbatim). Citation pairing is fully resolved — ready to
author into the section 07 composition as-is.

## Numbers table (for on-screen graphics)

| Figure | Value | Source |
|---|---|---|
| Total liabilities at bankruptcy | $9B+ (against $12M cash) | IRS/DOJ |
| Off-balance-sheet/factoring liabilities | $2.3B | funderintel.com, restructuringnewsletter.com |
| Fabricated invoices found by examiner | $1.4B | Bloomberg Law |
| Onset Financial repayments collected vs. provided | $2.9B collected / $2.5B provided | Bloomberg |
| Onset's still-claimed balance | $1.9B | Bloomberg |
| Jefferies (Point Bonita) exposure | ~$715M | Bloomberg |
| Alleged personal enrichment (Patrick James) | ~$700M | Fortune, Yahoo Finance |
| Tariff-fraud whistleblower claim | $285.5M | Bloomberg |
| Examiner's budget | $7M | multiple |
| Bond amounts | $50M (Patrick) / $25M (Edward) | Bloomberg |
| Pension plan retirees covered by PBGC | 1,630 | PBGC |
| Failed refinancing attempt (Aug 2025) | $6.2B | multiple |
| Employees at peak | ~17,000 | Bloomberg/CNBC |
| Onset loan IRR (the "employee of the year" loan) | 179% | Bloomberg |
| Broader Onset financing average IRR | 300%+ | Bloomberg |

## Open verification items (do not fabricate — confirm before scripting)

- **Examiner's report cover Notice (Docket #1650) and the original
  Chapter 11 petition** — confirmed NOT obtainable free anywhere (Kroll
  returns "No Record(s)," no outlet embedded the raw PDF, RECAP/
  PacerMonitor/DocketAlarm all index but don't serve it free). Needs
  either a PACER purchase (account pending activation as of 2026-07-11)
  or a direct request to Jayson B. Ruff (U.S. Trustee's Office) or Boies
  Schiller Flexner LLP media relations. Script around this using
  attributed Bloomberg Law reporting until/unless the primary document
  is obtained.
- **Sealed Exhibit A to the examiner's report** — sealed by court order,
  not obtainable through any channel. Do not reference its contents as
  if independently confirmed.
- **Original Chapter 11 petition** — a candidate PDF link was found via
  a docketalarm.com mirror but has not been opened/confirmed as the
  authentic document. Verify before citing anything from it specifically
  (the headline liability/asset ranges used in this case file come from
  secondary reporting, which is independently reliable).
- **Schedules of Assets & Liabilities** — reportedly delayed until
  ~2026-01-20 given the SPV complexity; exact docket entry not yet
  located.
- **Liquidating plan / final settlement outcome** — only loosely
  confirmed via Yahoo Finance coverage (chapter 7 conversion for most
  debtors, three liquidating trusts). Re-check current status before
  scripting the ending/resolution beat, since this is still an active
  case.
- ~~Title still open~~ — **RESOLVED.** Title locked, split across
  thumbnail + YouTube title field (see top of file) to avoid truncation
  on the long-title technique: thumbnail "The FRAM Trico Financial
  Kingpins:" + title "How Two Brothers Created a $9B Ponzi Scheme Out Of
  Your Garage." Chosen after a live YouTube Data API
  competitor-title pull (2026-07-11): best existing coverage (Patrick
  Boyle, 435,720 views) uses insider "credit markets" framing with no
  brand-name hook; nobody has combined a real recognizable brand name
  with a reconciled, non-inflated dollar figure yet. Cautionary
  counter-example found in the same pull: a low-performing channel
  ("Titan Downfall," 335 views) used an unsourced "destroyed 20,000
  lives" claim — confirms inflated/unverified figures are both a
  credibility risk and don't even perform better. "Kingpins" (plural)
  independently verified accurate — both brothers charged under the
  CFCE count, not just Patrick.
