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Former Tricolor COO Pleads Guilty to Fraud Charges
David Goodgame Says He Would Cooperate With Prosecutors and Possibly Testify Against Used-Car Dealer Founder Daniel Chu
Key Takeaways:
- Former Tricolor Holdings Chief Operating Officer David Goodgame pleaded guilty June 24 in federal court in New York to fraud charges.
- Banks including JPMorgan Chase, Barclays and Fifth Third face hundreds of millions in losses after Tricolor's bankruptcy and alleged collateral misrepresentations.
- Goodgame said he would cooperate with prosecutors, while founder Daniel Chu faces additional charges and an Oct. 19 trial.
Former Tricolor Holdings Chief Operating Officer David Goodgame pleaded guilty to fraud charges stemming from the used-car dealer and lender’s collapse last year.
Goodgame, 49, entered his plea at a hearing June 24 in federal court in New York, leaving Tricolor founder Daniel Chu alone facing charges that he orchestrated a “systemic fraud” of its banks. Goodgame said he would cooperate with prosecutors and possibly testify against Chu.
“I knew that Tricolor was deceiving and defrauding the banks,” Goodgame told U.S. District Judge Kevin Castel. Goodgame said he said he knew executives at the company were manipulating data and that he raised concerns with Chu.
JPMorgan Chase & Co., Barclays Plc and Fifth Third Bancorp. have said they are facing hundreds of millions of dollars in losses from providing revolving lines of credit to Tricolor, which filed for bankruptcy in September after shutting down more than 60 locations across the U.S. southwest.
Tricolor is among a rash of business failures that have raised questions about whether financial institutions are properly assessing risk in their loan portfolios. Tricolor’s collapse preceded a much larger one at First Brands Corp., an auto parts maker that also went bankrupt amid fraud allegations and similarly resulted in criminal charges.
Prosecutors claim Tricolor executives acting at Chu’s direction repeatedly defrauded banks by “double-pledging” or counting “near-worthless” assets as collateral for its loans. A month before its bankruptcy, Tricolor allegedly held $1.4 billion in collateral even though it told the banks it had $2.2 billion.
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Ex-Tricolor Chief Operating Officer David Goodgame pleaded guilty to six fraud and conspiracy counts. (Bob Van Voris/Bloomberg)
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Goodgame pleaded guilty to six fraud and conspiracy counts, the most serious of which carry a maximum sentence of 30 years in prison. Two other former Tricolor executives previously pleaded guilty in the case and are cooperating with federal prosecutors in New York.
Chu, who has pleaded not guilty, is scheduled to go on trial Oct. 19. Prosecutors filed additional charges against Chu on June 24.
The case is U.S. v. Chu, 25-cr-00579, U.S. District Court, Southern District of New York.
