James was educated by the De La Salle Brothers. He went to the College of Wooster, a liberal arts college, in the 1980s. The institution is famous for producing educators and not corporate leaders.
The founder of First Brands has built an US$5 billion auto-parts empire. The “secret sauce” behind his ascent has been the roll-up strategy. He formed a holding company called Crowne Group. He acquired a series of auto-parts makers and rebranded them as First Brands Group.
The company became a serious player in the global aftermarket. It supplies the car parts that a driver does not usually notice until they stop working. James prefers the same kind of invisibility.
He has managed to stay off the radar. In an age when some CEOs livestream their gym routines, James has no internet presence.
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The First Brands scandal unfolded in the last two months. It was revealed that the company was funded by pledging the same set of receivables on multiple occasions. In one case, the same invoice was allegedly pledged to six separate lenders.
There are allegations of hidden related-party deals. Overstated profits led to restatements. Over US$2 billion in cash appears to have vanished.
James may have lived large despite his low profile. He reportedly used over US$60 million in related-party loans to fund luxury homes and private jets. He collected US$8 million a year in “consulting fees”, while corporate debt ballooned.
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Investigators believe complex inter-company transfers concealed these outflows. It worsened First Brands’ liquidity crisis and exposed serious governance failures.
Is a similar scandal brewing in James’s home region? The flaws that doomed First Brands are not unique. Across Asean, several companies have shown the same warning signs — weak working capital, hidden debt, and manipulated earnings. These red flags often precede collapse.
There was a scandal in Singapore in 2018 involving a similar set of working capital issues. It involved Hyflux, a water treatment company. Hyflux was once valued at US$1.5 billion. It collapsed after masking liquidity stress. It had reported profits of US$50 million, but operating cash flow had turned negative.
Receivables ballooned while payables were extended to conserve cash. Its current ratio stayed above 1.0. Most assets were tied to long-term desalination projects that produced little cash. When lenders withdrew credit, the liquidity illusion ended.
Lion Group was a major steel and retail conglomerate in the 1990s in Malaysia. There was a mismatch between capex and depreciation. It fell into crisis during the late 1990s after the Asian Financial Crisis. Its annual capex dropped below US$30 million even as depreciation exceeded US$100 million. This created the illusion of strong free cash flow. Auditors later forced asset revaluations, triggering US$400 million in impairments. The group’s decision to cut investment for short-term survival led to long-term decline.
Transmile Group, once valued at over US$1 billion, was a case of inflated invoices. It fabricated more than US$120 million (or RM500 million) in revenue using fake invoices. The company claimed ebitda margins of above 20%, but cash flow showed the opposite. When the fraud was revealed in 2007, its share price fell by over 80%, wiping out investor confidence.
First Brands did wave red flags. It had poor cash collection. The receivables shot up by 40% even as cash evaporated. It net profits were high, but operating cash flow fell off a cliff. The net debt ballooned to 2.8 times equity. The consulting fees to insiders quietly drained reserves.
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The auditors chased numbers that kept changing shape. It was like a hall of mirrors in a balance sheet. The end came swiftly for a company once worth US$3 billion. When cash vanishes and footnotes grow, there is already trouble already on the books.
James left this region four decades ago. The accounting issues that the scandal brought to light may be lurking.
Nirgunan Tiruchelvam is head of consumer and internet at Aletheia Capital and author of Investing in the Covid Era
