BULL STREET - The art of the Con

The DeLorean, Cars, Coke, and Con

John DeLorean was the heir apparent at General Motors, then the largest company in the world. He was the perfect executive, highly respected, an excellent manager and socially accepted by one and all. Things didn’t quite work out the way John wanted at General Motors for a number of reasons, and when he saw the top spot was not going to be his, he determined to open a company that would compete toe to toe with GM’s most profitable line, the Corvette, a car that had taken the upscale yuppie market by storm and a niche which DeLorean thought could stand a lot more competition.

DeLorean wasn’t much of a historian of the automobile business. He should have known that the odds were very much against a new, independent automobile company succeeding. It may well be that DeLorean didn’t care a lot one way or the other whether his venture was successful, and may have only been looking for a method of maintaining a lifestyle appropriate to a person of his social charms. The fact that Tucker, Crosley, Bricken, Cimarron Corvair, Kaiser-Frazer, American Motors, Studebaker, Edsel and LaSalle had bitten the dust along with a list that is too long to count had nothing to do with Delorean’s decision. Ego and greed were the compelling factors.

DeLorean determined to build a gull-winged, stainless steel sports car in Northern Ireland where the British government was interested in making a substantial investment to alleviate persistent unemployment linked to social unrest. Many have compared DeLorean to his predecessor Preston Thomas Tucker, who in 1948 built a rear-engined sedan with disc brakes, seat belts and an independent suspension system. What the two had in common is that they were both charismatic, they were both indicted by the United States Government for fraud on numerous counts, they were both ultimately found to be not guilty ([50]) and both were way ahead of their times in terms of what they tried to produce. ([51]) They differed in the Tucker was trying to build a sports car that would appeal to the masses and saves lives whereas DeLorean was attempting to deliver an overpriced automobile that not only couldn’t be properly produced and whose bugs had bugs.

DeLorean raised money from anyone and everyone. His presentations were public relations dreams. Like Ponzi’s schemes, everyone wanted to get in on Delorean’s good thing. DeLorean was well prepared for them. He set up a Panamanian Company, which was to do work for DeLorean but basically wound up being a conduit leading to a Swiss post office box. It seems that over seventeen million dollars found their way from DeLorean Motors to Panama, then to Switzerland and from there to Swiss and Dutch banks. The next step in this highly sophisticated money laundering operation said to be right back to DeLorean’ s personal account in the Untied States.

DeLorean went first class in everything he did and in line with that, he hired the prestigious accounting firm of Arthur Anderson to do his books. Anderson saw DeLorean as a super-charged customer who would always be in the public view. Because of their anxiety to please DeLorean, they were not as careful in auditing the books, as they perhaps should have been.

Courts in both Great Britain and the United States found Anderson’s audits overlooked what appeared to be a number of instances of fraud but particularly the Panamanian fiasco. In addition, an Anderson memorandum was found that indicated that some were on to DeLorean and that the whole project would collapse if the sensitive material involved ever became public. Anderson, for its part, lamely explained the memo away with the strange story that it involved something else relative to DeLorean that had been solved and had nothing to do with the point in question. Whether it was or was not, the memo itself would certainly indicate that in order to protect the public trust, Anderson should have gone deeper into the books. When they didn’t, they ultimately got hammered for their failure to follow “good accounting principals” and to make appropriate public disclosures.

All of these things became almost secondary when the U.S. Government took some pictures of DeLorean making a huge drug buy. If anybody had any doubts before about the fact that something strange was going on with the ex-General Motors honcho, this certainly should have put the matter into clearer focus. However, John DeLorean was not just making a drug buy. He was making a world-class drug buy that probably set the standard for that era. This spelled the death knoll for DeLorean Motors and certainly didn’t do their accounts any good either.

The DeLorean experience probably has cost Anderson $100 million ([52]), including both the American and British settlements along with a decade of attorneys’ fees and costs. The courts both here and abroad did not seem even to think twice about the question of Anderson’s dereliction. When this number is put into perspective, it becomes even larger. Probably $160 million was the total that was raised for DeLorean by all sources. The fact that Anderson paid over 60 percent of the total amount raised is probably a record even within the world of accounting litigation where conflicts and lawsuits seem to be as normal as a walk in the park.

DeLorean fought tooth and nail to avoid jail and bankruptcy. While he was successful in the former because of an entrapment defense, he was declared bankrupt several years ago. In a fitting end to the strange tale of John DeLorean, his home of many years is becoming a golf course and little of his empire remains.

 

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