By Jonathan Stempel
NEW YORK, June 24 (Reuters) – The former chief operating officer at Tricolor Holdings pleaded guilty on Wednesday to fraud and conspiracy charges in connection with the now-bankrupt subprime auto lender’s collapse.
David Goodgame entered his plea before U.S. District Judge Kevin Castel in Manhattan.
He also agreed to cooperate with prosecutors, including possible testimony against former Tricolor Chief Executive Daniel Chu, Goodgame’s lawyer, Arnold Spencer, said in a phone interview. Goodgame remains free on bail.
Tricolor provided auto loans primarily in lower-income Hispanic communities in the southwestern U.S., before filing to liquidate last September.
Its bankruptcy, and the bankruptcy of auto parts supplier First Brands the same month, highlighted the risk of private credit, where investors provide capital to businesses that receive less regulatory oversight than businesses tapping public markets.
In December, Goodgame and Chu were indicted for allegedly systematically defrauding creditors and lenders, including by falsifying loan data and double-pledging collateral. Both pleaded not guilty at the time.
Goodgame’s guilty plea on Wednesday covers six criminal counts including bank fraud, securities fraud, wire fraud, conspiracy and making false statements.
Prosecutors separately unveiled an expanded eight-count indictment charging Chu with bank fraud, securities fraud, wire fraud, conspiracy and running a continuing financial crimes enterprise. His trial is scheduled for October 19, court records show.
“Daniel Chu is innocent,” his lawyer, Matthew Schwartz, said in a statement. “[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.”
On June 10, a federal judge dismissed a lawsuit by investors who accused JPMorgan Chase, Barclays and Fifth Third of missing “giant red flags” at Tricolor while fraudulently marketing its debt. All three banks have reported nine-figure losses from Tricolor.
(Reporting by Jonathan Stempel in New YorkEditing by Matthew Lewis)
