David Goodgame, the former Chief Operating Officer of Tricolor Holdings, is expected to plead guilty to charges stemming from his involvement in the alleged fraudulent activities that led to the subprime auto lender's bankruptcy. This development marks a significant step, as Goodgame is now the third former Tricolor executive to cooperate with federal prosecutors in a case that has implicated multiple high-ranking officials at the company.
Goodgame, alongside Tricolor founder Daniel Chu, was initially indicted on charges last month, including conspiracy to defraud lenders and investors. The allegations against them involved a scheme to "double-pledge" auto loan collateral, manipulate loan descriptions, and classify "near-worthless" assets as meeting lender requirements. These actions are believed to have contributed to the company's downfall, which saw Tricolor file for bankruptcy in September after closing over 60 locations across Texas and the U.S. Southwest.
The unsealing of Goodgame's expected guilty plea follows similar actions by Jerome Kollar, Tricolor's former CFO, and Ameryn Seibold, a former finance executive, who both previously pleaded guilty to fraud charges and are cooperating with the government. Chu, however, has pleaded not guilty to the charges. The broader investigation has revealed that lenders were owed more than $900 million due to the alleged fraudulent schemes. Chu himself is accused of unjustly enriching himself by directing Kollar to pay him $6.25 million in bonus installments shortly before the company's bankruptcy, some of which he allegedly used to purchase a multi-million dollar property in Beverly Hills.
Bondholders of Tricolor have also initiated legal action, suing Wilmington Trust NA, the trustee for the securities, alleging failures in its oversight duties. This ongoing legal battle underscores the widespread impact of the alleged fraud, which saw Tricolor pledge approximately $2.2 billion in assets to lenders, despite internal records indicating only about $1.4 billion in real, eligible collateral. The alleged mechanisms of the fraud included pledging the same auto loans twice and manipulating loan data to make ineligible loans appear current and compliant. Chu has, however, secured court approval to use company insurance policies, specifically $5 million in directors and officers insurance, to cover his legal defense costs.
