Earlier this month, CDG News reported on federal charges accusing former Tricolor Holdings executives of running a years-long fraud scheme.
And a batch of secretly-recorded phone calls, exposed in the 20-page federal indictment, provide a clearer picture of what prosecutors say happened internally at the subprime auto lender and used car retailer once things began to unravel.
According to prosecutors: The turning point came last August, when one warehouse lender (identified in the indictment as “Lender-4”) discovered what it believed to be manipulated loan data and collateral that had been pledged to multiple lenders.
As a result of that discovery, then-CEO Daniel Chu allegedly discussed various lies his co-conspirators could tell to explain away the manipulated data.
These conversations were secretly recorded by an "unnamed participant" and at times, multiple unnamed participants, according to the indictment.
For example, Chu proposed creating a fictitious "Trump administration deferment" policy to resolve some of the manipulated, non-paying loans.
On another recorded call, Chu describes a conversation he had with representatives from a lender identified as "Lender-6,” where he recounts blaming the company's financial inconsistencies on a "systems issue.”
Chu went on to tell Lender-6, "Look, if we were trying to commit fraud, we wouldn't be so stupid as to keep the same balances on there... Nobody would be that stupid."
From there: Those conversations culminated in an August 30 call involving Chu, which prosecutors say was secretly recorded.
During that call, Chu allegedly emphasized the reputational sensitivity of large financial institutions and how that concern could influence negotiations.
At one point, prosecutors say he even made a nod to Enron as a comparison lenders would want to avoid.
Per the filings: Chu said Enron-related headlines “raise the blood pressure of the lender” and questioned who would want to be publicly associated with a similar scandal.
Prosecutors allege he viewed the comparison as a way to increase leverage once the alleged misconduct was already known.
And the discussions didn’t stop there…
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Allegedly: Chu suggested using AI to review Enron-related litigation and extract language that could be reused in negotiations.
The idea, according to the indictment, was to equip other executives with arguments designed to strengthen Tricolor’s position in settlement talks with lenders.
Why this matters: All of this, prosecutors argue, unfolded as Tricolor’s broader business was already under strain.
Meaning, lenders were reassessing exposure, funding was tightening, and confidence in the company was already eroding ahead of Tricolor’s eventual bankruptcy and the fallout that followed.
What we’re watching: As the case plays out, lenders are likely to take a harder look at risk controls, oversight, and who they’re willing to extend credit to, especially in fast-growing, higher-risk lending models.
Beyond that, these filings also show how tools like AI are starting to move past underwriting and analytics and into legal strategy and negotiations, which could quietly change how these disputes play out going forward.
All allegations of fraudulent activity remain under federal investigation and unproven in court.
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