00:00The founder of First Brands, Patrick James, as well as his brother, Edward James, a former executive at the same company, have now been indicted by federal prosecutors in New York.
00:10And this follows the collapse of First Brands, the bankrupt auto parts maker, last year.
00:14Let's bring in Eliza Ronalds-Hannon for more on this.
00:18Eliza has been covering the story from the very beginning.
00:20Eliza, what do we know so far?
00:23Well, these two brothers were charged with nine counts by federal prosecutors in New York.
00:28One of the counts carries a maximum sentence of life in prison.
00:33And what they're basically being charged with is defrauding investors.
00:38And lenders have, of course, made the same claims and accusations in bankruptcy court.
00:42But what the U.S. prosecutors are saying is that these two inflated their earnings in order to convince financiers to lend more money and keep afloat a business that was, in fact, struggling.
00:57And that contributed to how they ended up in bankruptcy.
01:01Right.
01:02And, of course, the unexpected collapse of First Brands, along with another auto-related company, Tricolor, last year, did set off concern in the credit markets that perhaps there are more problems there,
01:14causing Jamie Dimon, the CEO of Jamie Dimon, to talk about how there might be more cockroaches out there.
01:18Eliza, where are we at in terms of the restructuring of First Brands, the negotiations taking place between lenders and creditors?
01:26Well, it's been one of the most difficult and messy bankruptcies I've ever seen.
01:32We had a story out just yesterday about how creditors are now considering giving up on keeping the company alive as a going concern and, in fact, just selling parts of the business off for parts.
01:43Partly because there are so many conflicting claims over certain assets as a result of bad record keeping and alleged fraud that there's no guarantee that creditors,
01:55even the most super senior creditors in the bankruptcy, actually have valid claims on certain assets that they would need to monetize or at least come to own in order to get any recovery on their loans.
02:07So, likely some of those proceedings in bankruptcy court will, in fact, be paused now and stayed while the government pursues its federal investigation and federal case.
02:19So, that's only further problematic for the creditors who are waiting to try to find a recovery.
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