The former top operations executive at Tricolor Holdings has pleaded guilty to fraud and conspiracy charges stemming from the downfall of the bankrupt subprime auto lender.
David Goodgame appeared before U.S. District Judge Kevin Castel in Manhattan on Wednesday to enter his guilty plea. He is currently free on bail.
As part of his agreement with prosecutors, Goodgame has consented to cooperate with the government, which could include testifying against former Tricolor Chief Executive Daniel Chu. Goodgame’s attorney, Arnold Spencer, confirmed those details in a phone interview.
Before it filed for liquidation last September, Tricolor operated as an auto loan provider serving primarily lower-income Hispanic communities across the southwestern United States.
The company’s bankruptcy — along with the simultaneous bankruptcy of auto parts supplier First Brands — drew attention to the financial risks associated with private credit markets, where businesses receive capital from investors under less regulatory scrutiny than companies that access public markets.
Back in December, both Goodgame and Chu were indicted on allegations that they systematically misled creditors and lenders by falsifying loan information and pledging the same collateral more than once. At that time, both men entered not guilty pleas.
Wednesday’s guilty plea by Goodgame covers six criminal counts, including bank fraud, securities fraud, wire fraud, conspiracy, and making false statements.
In a separate development, prosecutors announced an expanded eight-count indictment against Chu, adding charges of running a continuing financial crimes enterprise on top of the earlier allegations. Court records show his trial is set to begin October 19.
Chu’s attorney, Matthew Schwartz, issued a statement defending his client: “Daniel Chu is innocent. [He] created a business that enabled thousands of Americans to purchase reliable vehicles, a critical first step in achieving financial independence. We look forward to meeting the government’s case in court, putting the evidence before a jury, and clearing Mr. Chu’s name.”
Earlier this month, on June 10, a federal judge threw out a lawsuit brought by investors who alleged that JPMorgan Chase, Barclays, and Fifth Third overlooked obvious warning signs at Tricolor while fraudulently promoting the company’s debt. All three banks have reported nine-figure financial losses connected to Tricolor.
