--- title: "BDO's audits and outside scrutiny of First Brands" language: en canonical: https://dossiertwist.com/dossiers/first-brands-group/auditor-and-oversight/ as_of: 2026-10-15 keywords: ["First Brands Group","Patrick James","Edward James","First Brands Group Holdings","Viceroy Private Capital","Carnaby Capital Holdings","Onset Financial","Point Bonita Capital","Jefferies","Raistone","Katsumi Global","Horizon Global","Brake Parts Inc","Ultinon","Trico","FRAM","Chapter 11","receivables factoring","off-balance-sheet financing","supply chain finance"] --- # BDO's audits and outside scrutiny of First Brands **Question.** Who audited First Brands, what is alleged about the audits and how did BDO respond, and what did Congress ask the company? **Answer.** BDO USA, P.C. audited First Brands' financial statements from 2020 through about the end of 2024. The indictment alleges that Patrick James misled the outside auditors about related-party arrangements, the examiner's interim report relays witness criticism of BDO's work, and funds of Black Diamond Capital Management sued BDO in April 2026; BDO says it was itself deceived and that its audits met professional standards, and none of these claims has been decided. Separately, in September 2024 members of a House select committee and other lawmakers asked First Brands about concerns that its supplier Qingdao Sunsong was circumventing tariffs. ## BDO's audits and the allegations about them - Analysis: BDO USA, P.C. audited First Brands' financial statements from 2020. Testimony at the November 10, 2025 hearing in the estate's suit against Patrick James, quoted in James's motion to dismiss, states that from 2020 through on or around December 31, 2024 BDO provided an audit report for First Brands, and a docket summary of the bankruptcy case lists BDO USA, P.C. as auditor. [src-026] [src-040] - Analysis: The federal indictment alleges that Patrick James misled First Brands' outside auditors by repeatedly certifying that the company had no related-party arrangements, although James knew that First Brands had purportedly sold billions of dollars of inventory to entities wholly owned and controlled by James (the "James Entities") and that those entities had incurred billions of dollars of liabilities using First Brands' inventory as collateral. This is an allegation, not a proven fact: Patrick James pleaded not guilty to all nine counts on February 4, 2026 and is presumed innocent. [src-008] [src-066] - Analysis: The examiner's interim report of April 27, 2026 cites a former executive who said First Brands switched audit firms to BDO because it "was viewed as less rigorous" and had a process that let the business "do what we want with these guys", and says witnesses reported that BDO did not directly access underlying enterprise systems such as Oracle or consistently perform independent verification. These are witness statements in an interim report; the examiner said the investigation was incomplete and that more work was needed to determine whether the auditors complied with generally accepted auditing standards. BDO said the report did not include interviews with BDO personnel or a review of its files and "reaches inappropriate and factually inaccurate conclusions about our audit work based on hearsay from individuals involved in the fraud", and it reaffirmed that its audits were consistent with professional standards. [src-060] ## The Black Diamond suit against BDO - Analysis: On April 29, 2026 funds managed by Black Diamond Capital Management, which said they relied on BDO's audits when buying about $70 million of First Brands' senior debt, sued BDO USA P.C. in an Ohio court of common pleas (Black Diamond Credit Strategies Master Fund et al. v. BDO USA P.C., No. cv-26-137992) for negligence, negligent and fraudulent misrepresentation and tortious interference with contract. They allege that the audits missed risk factors including First Brands' extensive use of factoring and hundreds of millions of dollars of transfers to the founder's personal trust. The suit is pending and the allegations are not adjudicated. A BDO spokesperson said on April 30 that the lawsuit lacks merit, that the independent report and the criminal indictments show the First Brands fraud was conducted to deceive BDO as its auditor, and that professional standards "expressly contemplate the inability of an auditor to detect the kind of collusive fraud perpetrated by First Brands". [src-060] ## Questions from Congress and a customs claim - Analysis: On September 4, 2024 the chairman and ranking member of the U.S. House Select Committee on the CCP, John Moolenaar and Raja Krishnamoorthi, together with Senators Sherrod Brown and Bill Cassidy and Representatives Darin LaHood, Glenn Ivey and Ashley Hinson, wrote to Patrick James as chief executive of First Brands Group. The letter said that public information and a Department of Homeland Security raid raised concerns that the company's supplier Qingdao Sunsong and its U.S. subsidiary were circumventing Section 301 tariffs by transshipping products through Thailand, said the signatories were troubled by First Brands' continued purchases, and asked for written answers on its purchases and supplier due diligence, including forced-labour checks, by September 20, 2024. The letter is a request for information expressing concern, not a finding that First Brands or its supplier broke the law, and no reply from First Brands appears in the retained records. [src-094] - Analysis: In a separate matter, the U.S. government was reported in June 2026 to have asserted a $286 million claim against First Brands in the bankruptcy, alleging that the company had underpaid tariffs for years. The claim is known from press reports; no determination of it and no response by the company were found in the retained record. [src-061] ## Sources - [src-026] Court record source · src-026 - [src-040] Court record source · src-040 - [src-008] Indictment, United States v. Patrick James and Edward James, 26 Cr. 29 (S.D.N.Y.), U.S. Attorney's Office, Southern District of New York, 2026-01-27 - [src-066] Court record source · src-066 - [src-060] Media source · src-060 - [src-094] Letter of the House Select Committee on the CCP and other members of Congress to the CEO of First Brands Group on Qingdao Sunsong, U.S. House of Representatives, Select Committee on the CCP, 2024-09-04 - [src-061] Media source · src-061