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Auto Parts Giant Faces Fraud Probe
20 Nov
Summary
- A bankruptcy judge ordered a $7 million investigation into First Brands.
- Allegations include fraud and double-selling customer invoices.
- The probe will examine transfers to affiliates and related companies.
A significant independent investigation has been ordered into auto parts manufacturer First Brands, with a $7 million budget allocated to probe allegations of financial misconduct. U.S. Bankruptcy Judge Christopher Lopez in Houston mandated the probe into the company's use of third-party financing for customer invoices. This move highlights concerns surrounding opaque private credit markets and potential exposure for major financial institutions.
The investigation will specifically examine claims that First Brands engaged in invoice factoring, potentially selling some customer invoices to multiple buyers. It will also scrutinize whether the company improperly withheld customer payments that should have been transferred to invoice purchasers. Furthermore, the examiner will investigate any transfers of funds from First Brands to its affiliates or related entities.
This judicial order follows accusations that the company's founder and former CEO, Patrick James, misappropriated substantial sums. While First Brands is conducting its own internal review, the need for an independent examination was deemed critical by parties involved in the bankruptcy proceedings. The judge emphasized the importance of a timely and targeted investigation.
