By Chris Dolmetsch and David Voreacos | Bloomberg First Brands Group founder Patrick James and his brother Edward, a former executive at the company, were indicted in New York following the collapse of the bankrupt auto-parts maker last year. The duo engaged in a series of schemes to defraud the com pany’s lenders and financing partners, according to the federal indictment. The brothers faked and inflated invoices for accounts receivable, double- and triple-pledged loan collateral, falsified financial statements and hid liabilities from lenders, the US alleged. Patrick, 61, and Edward, 60, were arrested in Ohio this morning and are expected to appear in federal court later on Thursday, authorities said. “Patrick James, together with his brother, Edward James, perpetrated a staggering fraud at First Brands Group,” Jay Clayton, the US Attorney in the Southern District of New York, said in a statement. “The James brothers obtained billions for First Brands – and millions for themselves – by presenting their lenders with the impression of a successful, growing international business.” In reality, Clayton said, First Brands was a “business run through fraud, fake documents, and false financials.” Clayton also revealed that a former company executive, Peter Brumbergs, pleaded guilty to his role in the scheme and is cooperating with prosecutors. First Brands lenders now face “billions in losses” as a result of the alleged schemes, according to the indictment. The company filed Chapter 11 with just $12 million in its corporate accounts and more than $9 billion in liabilities, court papers say. The brothers were each charged with nine counts, including continuing financial crimes enterprise, wire fraud, bank fraud, conspiracy to commit wire fraud and conspiracy to commit money laundering. The top charge, operating a continuing financial crimes enterprise, carries a maximum punishment of life in prison. “Patrick James is presumed innocent and denies these charges,” his spokesman said in an emailed statement. “He built First Brands from nothing into a global industry leader and has always been devoted to the success of the company. Mr. James looks forward to presenting his case in court.” The indictment depicts a series of complex financial maneuvers, including the use of false invoices and deceiving financers to send money to a bill-processing intermediary. While financers believed the money would pay First Brands’ suppliers, it actually went to the company itself, the US alleges. “Their purpose was to inject additional cash into First Brands at moments when the company was unable to meet its payment obligations with legitimate cash on hand,” the indictment alleged. “Rather than paying suppliers, ‘round trip’ funds went toward paying interest on debt, rent, leases, or other operating costs.” Related Articles Former OC judge convicted in fraud scheme appears to be practicing law again Ex-USC linebacker Abdul-Malik McClain of Orange County dodges prison in COVID benefits scheme Shop supervisor admits to embezzling more than $1 million from the Claremont Colleges Don’t get scammed! Shop smart and give wisely this holiday season $90 million tax fraud relied in part on undocumented immigrant hiring, prosecutors allege ...read more read less