Feds: Brothers ran an alleged multibillion-dollar scheme. Now 1,000 Matamoros workers are paying the price.

Federal prosecutors say two brothers who led a major U.S. auto parts manufacturer ran a multi-billion dollar scheme that triggered a corporate collapse — a move that is now leaving at least 1,000 workers in Matamoros without jobs or access to their savings.

On Thursday, federal prosecutors in New York unsealed an indictment against Patrick James, the founder and former CEO of First Brands Group, and his brother Edward James, a former senior executive. They allegedly used fake and inflated invoices, pledged the same collateral to multiple lenders, and concealed mounting debt as part of a scheme that lasted for several years.

Prosecutors allege the years-long fraud ultimately bankrupted the company and left lenders and creditors facing billions of dollars in losses.

The fallout is now rippling across factories in northern Mexico and the Rio Grande Valley as the company restructures under bankruptcy protection and winds down operations across North America, including in plants located in Matamoros and Harlingen.

The bankrupt company operates in the U.S. under brands such as Cardone and Brake Parts Inc., which correspond to the Tridonex and BPI Manufacturing subsidiaries in Mexico.

At the time of its bankruptcy filing in September, the company reported roughly $5 billion in annual revenue but had about $12 million in cash and more than $9 billion in liabilities, according to court documents.

Workers caught in the collapse

At least 1,000 workers in Matamoros were notified Monday that their jobs had been cut, Susana Prieto Terrazas, legal representative for workers at Tridonex, Cardone, and BPI Manufacturing in Matamoros, said.

“They left 1,000 families without jobs. They took their savings funds and their employee savings accounts,” she said.

In many Mexican maquiladora plants, savings funds are built through payroll deductions that are managed by employers, meaning workers can lose access when companies shut down or enter bankruptcy before balances are settled.

The news triggered protests outside affected plants in Matarmoros and left workers uncertain about whether they would be reinstated or permanently dismissed. 

The impact, however, goes well beyond Tamaulipas, Prieto Terrazas said. 

“There are 1,000 workers in Matamoros, 1,000 in Juárez, others in Mexicali, in Los Reyes, State of Mexico, in the Bajío, and another plant affected in Reynosa,” she said.

Taken together, she estimated the total number of affected workers could approach 3,000.

Who has been charged

Patrick James, 61, was charged with conspiracy to commit wire fraud and bank fraud, conspiracy to commit money laundering, multiple counts of wire fraud and bank fraud, and managing a continuing financial crimes enterprise.

Edward James, 60, was charged with conspiracy to commit wire fraud and bank fraud, conspiracy to commit money laundering, and multiple counts of wire fraud and bank fraud.

Prosecutors say the alleged schemes were used to obtain billions in financing while masking the company’s true financial condition.

A third former First Brands executive, Peter Andrew Brumbergs, has already pleaded guilty in the case and is cooperating with federal authorities, according to prosecutors.

Rio Grande Valley Business Journal reporters Anayancy Ulloa and Kristen Mosbrucker-Garza contributed to this report.