Tricolor’s Excel Guy Failed to Fix All Numbers in Alleged Fraud

A Tricolor dealership in Houston Photo by Mark Felix /Photographer: Mark Felix/Bloombe

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(Bloomberg) — It was, according to Daniel Chu, “the stupidest f—-ing thing [he had] ever heard.” 

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That’s how the Tricolor Holdings founder, in a secretly recorded August phone call, described the blunder that ultimately exposed what authorities allege was a more than $1 billion fraud.

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Ameryn Seibold, one of Chu’s top lieutenants, was tasked with manipulating the Excel data that the subprime auto lender regularly sent to its financiers, making thousands of delinquent car loans appear current. But in another column listing the loans’ outstanding balances, Seibold failed to reduce the numbers, leaving a glaring mismatch, according to federal charges unsealed Wednesday.

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How could Seibold “be doing this and not thinking that the balance has to reduce,” Chu said.

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Seibold’s explanation only underscored the extent of the mess. He said he had been carrying roughly 8,000 charged-off loans across multiple financing facilities for “a long time,” and couldn’t shrink them all at once without forcing the already deeply troubled company to book millions of dollars in repayments, according to the indictment. “I’m doing what I thought was what we needed,” he said.

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The discrepancy was ultimately flagged not by regulators or auditors, but by a junior analyst at Waterfall Asset Management, one of Tricolor’s lenders, Bloomberg previously reported, setting off its spiral into bankruptcy just weeks later.

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The 20-page indictment lays out a fraud vast in scope but shockingly crude in its execution, relying on little more than doctored spreadsheets and the hope that no one would look too closely. That the deception lasted as long as it did — prosecutors allege it began around 2018 — and fooled some of the US’s biggest lenders has turned the collapse into one of the cautionary tales circulating on Wall Street lately.

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“It’s astonishing that this allegedly went on for years and only came to light because someone made a dumb mistake,” said Avinand Jutagir, a portfolio manager at Curasset Capital Management. “People may not realize it, but tens of billions of dollars worth of bonds can rely on plain old Excel files.”

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Chu, reached via text, declined to comment. So did an attorney for Seibold, who pleaded guilty to fraud in a separate indictment. Waterfall and other Tricolor creditors, including JPMorgan Chase & Co., Barclays Plc and Fifth Third Bancorp also declined to comment.

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From the moment Tricolor’s lenders flagged the data discrepancies, the crisis set off a flurry of high-stakes calls among the company’s top executives. Some were secretly recorded by one and sometimes multiple participants, capturing a mix of panic, finger-pointing, and frantic strategizing as the scope of the problem came into focus.

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By late August, Chu was plotting with other Tricolor executives, including David Goodgame and Jerome Kollar, on how to settle with JPMorgan, which had already pulled its lending facility, according to the charging document. During the call, Chu likened Tricolor’s meltdown to Enron, the energy giant felled by accounting fraud. He even discussed the idea of pinning the blame on banks for allegedly ignoring red flags, a threat they hoped to wield as leverage.