MATAMOROS, Tamaulipas - Thousands of workers in Matamoros and more than 40 in Harlingen have lost their jobs due to a giant Ponzi scheme, reports from federal prosecutors indicate.
The workers were employed by aftermarket parts maker Cardone Industries, which operated as Tridonex in Matamoros. Cardone is one of a number of companies that have ceased trading due to the bankruptcy of parent company First Brands Group.
First Brands Group founder and former president Patrick James and his brother Edward, a former senior executive in the company, both from Ohio, have been indicted by federal prosecutors on charges of defrauding lenders ahead of the auto-parts company’s collapse into bankruptcy, which occurred last September.
Prosecutors say the brothers deceived multiple banks and direct lenders through fake collateral, double- and triple-pledged assets and misleading financial statements.
The United States Attorney for the Southern District of New York, Jay Clayton, unsealed the indictment on Jan. 29.
As alleged in the indictment, Patrick James, together with his brother, Edward James, perpetrated a staggering fraud at First Brands Group,” said U.S. Attorney Jay Clayton.
“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. The indictment and the guilty plea unsealed today describe a very different reality: a business run through fraud, fake documents, and false financials. Together with our law enforcement partners, we will continue working tirelessly to uncover every aspect of this fraud and vindicate the rights of every victim.”
Kareem Carter, executive special agent in charge of the IRS-CI Washington, D.C. Field Office, is part of the team that has investigated the alleged fraud.
“The defendants operated First Brands as a ‘Ponzi’ scheme in which new loan proceeds were used to pay back old lenders and to fund their extravagant lifestyle,” Carter said.
“Today’s announced indictment of defendants Patrick James and Edward James demonstrates IRS-CI special agents’ and our law enforcement partners’ commitment to investigate, prosecute, and hold accountable criminals who allegedly defraud banks and lenders out of billions of dollars.
“IRS Criminal Investigation special agents are specially equipped to follow the complex financial trail left by criminals, and I would like to thank our Global Illicit Financial Team for their vigilant, professional, and dedicated pursuit of those who attempt to enrich themselves through fraudulent means.”
Both Patrick and Edward James say they are innocent. The charges contained in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
Another former First Brands executive, Peter Andrew Brumbergs, also from Ohio, has pled guilty to playing a role in the scheme and he is cooperating with the government, the unsealed indictment states.
Last Monday, First Brands said it has started winding down Cardone, along with sister companies Brake Parts and AutoLite. Charles Moore, interim CEO at First Brands, said the company “explored all available options to secure funding and advance the sale process,” the Wall Street Journal reported, but found no viable solution to keep these parts of the business going.
On Thursday, Moore issued this statement:
“The criminal charges relate to alleged historical actions by certain former executives who are no longer with First Brands Group or involved in the management, governance, or day-to-day operations of the Company. While these matters concern past conduct, their impact is being felt now by thousands of people.
“This is a tragic situation that has disrupted the lives of employees, families, and communities who depend on this business. We recognize the very real human toll of these events and the uncertainty many are facing.
“The Special Committee of the Board of Managers continues to conduct an independent review of historical business practices, and the Company intends to continue pursuing all available claims and causes of action against Patrick James, Edward James, and others to maximize value for the estate.
“First Brands Group is fully cooperating with law enforcement and remains focused on advancing its ongoing sale process during this time.”
First Brands Group, acquired Cardone Industries from Brookfield Business Partners L.P. in June 2023.
Cardone Industries was co-founded by Michael Cardone, Sr. and son, Michael Cardone, Jr., in Philadelphia in 1970. Cardone, Sr., was inducted into the Automotive Hall of Fame in 1994, for his pioneering excellence in remanufacturing.
The company announced plans to open a $50 million, 920,000-square-foot distribution center in the Harlingen Industrial Park in 2017 with the promise of hiring between 500 and 750 new workers, but this never materialized. It maintained sorting centers in Harlingen and Brownsville but the Brownsville center shuttered during the coronavirus pandemic.
At its height, Tridonex employed nearly 4,000 workers at its Matamoros plant. Hundreds of employees at Tridonex in Matamoros, at the request of their union, have been standing at the maquiladora’s gates to ensure no equipment is removed from the plant. They are seeking government assistance.
Mexican President Claudia Sheinbaum has said the closure of Tridonex and other maquiladoras on the northern border has nothing to do with U.S tariffs and everything to do with “a bankruptcy in the United States.”
Here is the statement from the United States Attorney’s Office for the Southern District of New York:
Former CEO of First Brands Group, LLC, Patrick James, and Former Senior Executive, Edward James, Deceived Multiple Banks and Direct Lenders Through Fake Collateral, Double- and Triple-Pledged Assets, and Misleading Financial Statements
United States Attorney for the Southern District of New York, Jay Clayton, United States Attorney for the Northern District of Ohio, David M. Toepfer, Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), James C. Barnacle, Jr., Executive Special Agent in Charge of the Internal Revenue Service - Criminal Investigation (“IRS-CI”) Washington, D.C. Field Office, Kareem Carter, and Special Agent in Charge of the Detroit Field Office of Homeland Security Investigations (“HSI”), Jared Murphey, announced today the unsealing of an indictment charging PATRICK JAMES, the founder and former CEO of First Brands Group, LLC (“First Brands”), and his brother EDWARD JAMES, a former senior executive at First Brands, with conspiracy to commit wire fraud and bank fraud, conspiracy to commit money laundering, and multiple counts of wire fraud and bank fraud, in connection with various schemes to defraud lenders regarding the liabilities and financial condition of First Brands. PATRICK JAMES was charged in an additional count of managing a continuing financial crimes enterprise in connection with the charged schemes.
As alleged in the indictment, PATRICK JAMES and EDWARD JAMES perpetrated a yearslong fraud at First Brands, eventually bankrupting the global automotive company in September 2025. At the time of its bankruptcy, First Brands—a company that reported approximately $5 billion in net annual sales worldwide—declared just $12 million in cash in its corporate bank accounts and over $9 billion in liabilities. As a consequence of the defendants’ fraudulent schemes, FIRST BRANDS’ lenders and creditors now face billions in losses.
PATRICK JAMES and EDWARD JAMES were arrested in Ohio this morning and are expected to be presented later today in the Northern District of Ohio. The case has been assigned to U.S. District Judge Analisa Torres.
Also unsealed today is the guilty plea of PETER ANDREW BRUMBERGS in connection with his role in the scheme. BRUMBERGS pled guilty pursuant to an Information before U.S. District Judge Analisa Torres on January 26, 2026. BRUMBERGS is cooperating with the Government.
“As alleged in the indictment, Patrick James, together with his brother, Edward James, perpetrated a staggering fraud at First Brands Group,” said U.S. Attorney Jay Clayton. “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. The indictment and the guilty plea unsealed today describe a very different reality: a business run through fraud, fake documents, and false financials. Together with our law enforcement partners, we will continue working tirelessly to uncover every aspect of this fraud and vindicate the rights of every victim.”
“Individuals who lie about the financial health of their company for the purposes of greed create shockwaves across the business sector that endanger the economic wellbeing of others,” said U.S. Attorney David M. Toepfer. “The fallout from selfish and deceptive actions—such as those alleged in this case—can cascade down to honest and hardworking company employees based right here in Ohio. Their jobs and livelihoods are at stake due to the corrupt actions of a few individuals. Together with our federal partners, we will seek justice on behalf of all victims affected by this travesty.”
“These executives allegedly inflated invoices, double- and triple- pledged collateral, and falsified financial statements to unlawfully trick lenders into giving them billions of dollars,” said FBI Assistant Director in Charge James C. Barnacle, Jr. “Not only did their alleged deceit exploit the integrity of our financing system, they also betrayed the trust of the companies funding First Brands by mis-presenting their business’s financial position. The FBI will never cease its pursuit of fraudsters seeking to manipulate financial institutions for greedy gains.”
“HSI remains ever vigilant to detect money laundering and financial fraud schemes that undercut fair and honest business practices, especially one like this, which allegedly contributed to billions in losses,” said HSI Detroit Acting Special Agent in Charge Jared Murphey. “HSI special agents, alongside our FBI and IRS partners, remain committed to enforcing the rule of law and ensuring justice for victims. As law enforcement, we have a solemn responsibility to protect the integrity of our financial system and to hold violators accountable.”
“The defendants operated First Brands as a ‘Ponzi’ scheme in which new loan proceeds were used to pay back old lenders and to fund their extravagant lifestyle,” said Executive Special Agent in Charge of the IRS-CI Washington, D.C. Field Office Kareem Carter. “Today’s announced indictment of defendants Patrick James and Edward James demonstrates IRS-CI special agents’ and our law enforcement partners’ commitment to investigate, prosecute, and hold accountable criminals who allegedly defraud banks and lenders out of billions of dollars. IRS Criminal Investigation special agents are specially equipped to follow the complex financial trail left by criminals, and I would like to thank our Global Illicit Financial Team for their vigilant, professional, and dedicated pursuit of those who attempt to enrich themselves through fraudulent means.”
According to the allegations in the Indictment unsealed today in Manhattan federal court:
From at least in or about 2018 through in or about 2025, PATRICK JAMES and EDWARD JAMES, the defendants, built and bankrupted First Brands Group, LLC (“First Brands”). First Brands operated as an automotive aftermarket parts supplier that developed, marketed, and sold replacement parts such as brakes, filters, wipers, and lights under various brand names. PATRICK JAMES, the defendant, founded First Brands and served as its Chief Executive Officer. EDWARD JAMES, the defendant, was First Brands’ former Senior Vice President and is PATRICK JAMES’s brother. As alleged, the defendants perpetrated multiple fraud schemes to fake and falsely inflate invoices for accounts receivable and payable; double- and triple-pledge loan collateral; falsify corporate financial statements; and conceal substantial liabilities from lenders. These schemes yielded billions of dollars in financing to First Brands and enabled PATRICK JAMES and EDWARD JAMES to reap millions of dollars in fraud proceeds.
To sustain First Brands’ growth-through-acquisition strategy, PATRICK JAMES and EDWARD JAMES misled various counterparties to fraudulently inject cash into First Brands. First, PATRICK JAMES and EDWARD JAMES deceived First Brands’ factoring partners, that is, financing counterparties that purchased First Brands’ accounts receivable (invoices) and the right to payment thereunder, in exchange for advancing a portion of the value of those invoices upfront. At the direction and with the approval of PATRICK JAMES and EDWARD JAMES, the defendants, First Brands obtained billions in invoice-based financing from factors through a series of fraudulent schemes. As part of those schemes, and under the defendants’ direction and supervision, First Brands employees routinely submitted fake invoices, fraudulently inflated invoices, and double-pledged invoices for the purpose of selling and pledging them to factoring counterparties as if they represented valid, collectible receivables from customers. In some instances, invoices were generated for transactions that had never occurred, while in others the dollar amounts on invoices were altered to make them appear more valuable. Through the defendants’ fraud schemes, First Brands sold its factoring partners billions of dollars of purported customer receivables that did not exist.
Second, First Brands defrauded factoring partners to whom it sold accounts payable (amounts owed to First Brands’ suppliers). At the direction and with the approval of PATRICK JAMES and EDWARD JAMES, the defendants, First Brands submitted false and misleading invoice information and false and misleading information about First Brands’ financial position to induce financers to increase the funds advanced, a portion of which First Brands diverted to itself to cover cash needs. At First Brands, these self-payments were referred to as “round trips” or, euphemistically, as “corporate initiatives.” PATRICK JAMES and EDWARD JAMES, the defendants, closely monitored and managed these “round trip” transactions as part of First Brands’ daily cash-management process.
Third, PATRICK JAMES and EDWARD JAMES defrauded First Brands’ lenders by disseminating materially false and misleading financial information about the company and secretly encumbering assets subject to the lenders’ borrowing base and priority liens. At the direction and with the approval of PATRICK JAMES, First Brands employees made unsupportable financial statement adjustments to meet financial benchmarks set by PATRICK JAMES. To implement these directives, First Brands employees maintained internal “bridge” files that juxtaposed accurate corporate financials with the manipulated versions.
Unbeknownst to First Brands’ lenders, PATRICK JAMES and EDWARD JAMES also incurred massive off-balance-sheet debt through inventory-financing arrangements involving entities wholly owned and controlled by PATRICK JAMES (the “James Entities”). The James Entities were nominally separate from First Brands. In fact, they had no independent business operations. Through the James Entities, PATRICK JAMES entered financing arrangements with at least three inventory financers (the “Off-Sheet Lenders”), whereby the lenders advanced funds to the James Entities to purchase inventory from First Brands. The James Entities, in turn, pledged that inventory purchased from First Brands back to the Off-Sheet Lenders as collateral for their loans. At the direction of PATRICK JAMES, the defendant, the inventory financing arrangements with the James Entities were maintained outside the First Brands corporate balance sheet and thereby concealed from First Brands’ senior lenders, who routinely requested and received First Brands’ financial statements. To further obscure the Off-Sheet Lenders as a source of funds to First Brands, PATRICK JAMES routed the loan proceeds from the Off-Sheet Lenders through a customer collections entity maintained outside the First Brands corporate structure, then disbursed the proceeds to First Brands subsidiaries before sweeping the funds into First Brands’ operating account. The defendants designed this flow of funds so that the funds appeared to be ordinary customer receipts from retail subsidiaries rather than loan proceeds from related-party financing arrangements with the James Entities.
Finally, at the direction of PATRICK JAMES and EDWARD JAMES, First Brands made false and misleading representations to the Off-Sheet Lenders to fraudulently induce them to extend and expand financing. The James Entities pledged inventory that PATRICK JAMES and EDWARD JAMES, the defendants, purported to be unencumbered but in fact was already subject to liens by, or otherwise pledged to, First Brands’ senior lenders and remained on First Brands’ balance sheet.
By 2025, after years of acquisitions and expansion using fraudulently obtained financing, First Brands faced overwhelming liabilities and unsustainable cash requirements. In 2025, PATRICK JAMES and EDWARD JAMES, the defendants, led efforts to refinance First Brands’ debt or to sell the company, including through last-ditch attempts to deceive lenders and potential acquirers by disseminating false financials. These efforts failed when First Brands was unable to provide the prospective counterparties with the financial diligence they sought. On September 28, 2025, First Brands filed for bankruptcy.
Even as the frauds unraveled and First Brands’ financial issues mounted, PATRICK JAMES, the defendant, continued to enrich himself as the owner of First Brands. Through the series of frauds he directed, PATRICK JAMES caused billions of dollars in gross proceeds to flow into First Brands from counterparties and received at least hundreds of millions of dollars in gross proceeds into his personal accounts.
Editor’s Note: Click here to read the indictment in full.
Editor's Note: Veteran broadcaster Ron Whitlock contributed to this story from Harlingen, Texas.
