First Brands Judge Approves Examiner to Probe Fraud Allegations

A federal judge overseeing the insolvency case of First Brands Group approved the appointment of a corporate litigator to lead an investigation of the multi-billion dollar fraud claims that have dominated the auto-parts maker’s reorganization effort.

Martin De Luca, a partner in the law firm of Boies Schiller Flexner, has been asked by the U.S. Trustee to put together a report on the allegations of mismanagement and fraud aimed at First Brands. U.S. Bankruptcy Judge Christopher Lopez in Houston approved the move. De Luca will have a $7 million budget, under an order previously approved by the court.

The appointment comes as First Brands warned that unless it gets new financing, it will run out of cash around the end of the month. First Brands may need to run a quicker-than-normal sale process for its operations, designed to either unload, or wind down various businesses, a company lawyer told Lopez this week. The company is also trying to negotiate a cash infusion from lenders to give it more time to reorganize as part of its Chapter 11 bankruptcy.

First Brands Warns Cash to Run Out by Jan. 31, Force Asset Sales

The U.S. Trustee, which is an arm of the US Justice Department that monitors corporate bankruptcy cases, received more than 70 applications for the examiner job, said Jayson B. Ruff, an attorney with the US Trustee’s office.

Should the company run out of cash, the First Brands case would likely be converted to a Chapter 7 liquidation, which typically means a company’s operations are shuttered and assets are sold as quickly as possible. It is unclear what would happen to De Luca’s investigation in that senario, since examiners are not normally appointed in Chapter 7 cases.

De Luca has worked as a federal prosecutor and represented the social media-platform Rumble Inc. in a lawsuit that the company and Trump Media & Technology Group Corp. filed against a judge in Brazil. The case was filed to stop the Brazilian judge from trying to force Rumble to take down the account of a dissident in that country.

The case is First Brands Group, LLC 25-90399, U.S. Bankruptcy Court for the Southern District of Texas (Houston).

Top photo: Autolite spark plugs at an auto parts store in Oklahoma City. Photographer: Nick Oxford/Bloomberg.