Hero or Villain? (Part Three)

We conclude our account of the life and career of John Zachary DeLorean.

DeLorean and his ruination (c) cnet.com

The DeLorean Motor Company was, from January 1982, under the control of the receivers. Their job, in the first instance, is to see if a buyer can be found for the company. If none is forthcoming, they are required to dispose of the company’s assets in an orderly manner and raise as much money as possible to repay creditors in order of seniority, either fully or, more usually, in part (cents on the dollar). There is rarely anything left over for shareholders after this is done.

DeLorean’s biggest asset was its large inventory of unsold cars, which was increasing as production continued into the spring of 1982. Deep discounts offered on 1981 stock and exhortations to dealers to buy inventory failed meaningfully to improve the situation, and production at Dunmurry was halted in May 1982.

DMC filed for bankruptcy in October, although a skeleton staff completed around 100 partially built cars before the year end. Consolidated International, a US company based in Columbus, Ohio, acquired the remaining stock from the liquidators at a deep discount and attempted to sell the cars off at bargain prices.

Fire sale: an ignominious end (c) consolidated international

Production records are incomplete but, according to one source, an estimated 8,563 cars were built, of which more than two-thirds are believed to survive(1). Needless to remark, the UK government, DeLorean’s biggest creditor, was apoplectic at the collapse of the company, and more than a little embarrassed.

What of DeLorean himself after his company failed? In a desperate attempt to raise finance to relaunch the business, he became ensnared in an FBI ‘sting’ operation and was arrested and charged in October 1982 with involvement in trafficking cocaine with a street value of $24 million. DeLorean spent ten days in custody while he attempted to raise bail. That was all the time he would ever spend in jail. DeLorean was acquitted of those charges two years later on the grounds of entrapment. He was subsequently indicted but found not guilty of fraud and tax evasion.

Not Guilty! (c) retrokimmer.com

The UK Government attempted to extradite DeLorean to face charges of fraud in connection with the collapse of the company, but was frustrated by the US authorities’ refusal to comply. A judge involved in the extradition case accused DeLorean of a “…barefaced, outrageous and massive fraud.” for which he should serve at least ten years in prison. It was a measure of the anger directed against DeLorean that a judge would speak out in such a way, potentially rendering a subsequent trial and conviction unsound.

DeLorean’s personal fortune remained largely intact, at least initially. He owned a $9 million apartment in New York and a $4 million 434-acre estate in New Jersey. He also owned a ranch in California but had to hand over the deeds to that property to his defence attorney in the cocaine case, Howard Weitzman, in lieu of fees. Even though he succeeded in achieving a ‘not-guilty’ verdict in the case, Weitzman was allegedly left with $2 million in billing unpaid.

DeLorean’s attorney in around forty subsequent fraud and embezzlement cases, Mayer Morganroth, pursued DeLorean for $4 million in unpaid fees for over a decade, winning two judgements against his former client but failing to collect.

Unable to pursue DeLorean, the UK government turned its fire onto Arthur Andersen, the accounting firm that had acted as auditor to his company, accusing the firm of negligence in failing to spot a raft of errors and much evidence of fraud in the accounts. Andersen, fearful of the effect of a court case on its reputation(2), agreed an out-of-court settlement of $35 million in 1997. Two years later, the firm agreed a further settlement with 260 commercial creditors of $27.7 million.

DeLorean’s personal bankruptcy proceedings in the US courts were finally settled in May 2000, following the sale of the New Jersey estate in March. The New York apartment had been sold in 1992 to fund his enormous legal costs. Creditors received a surprisingly good 91 cents on the dollar settlement. With his bankruptcy settled, DeLorean embarked on another venture, selling stainless steel watches branded ‘D=MC2’ on the Internet for $3,495 each. The still-outstanding debt to Morganroth meant that any profits from this venture had to be held by a third-party.

DeLorean’s private life was nearly as colourful as his business dealings.  He was married four times. He divorced his first wife, Elizabeth Higgins, in 1969 after 25 years of marriage and shortly thereafter married 19-year-old Kelly Harmon, 25 years his junior. This upheaval in DeLorean’s life seems to have been provoked by a mid-life crisis: he began dying his greying hair jet black and even had plastic surgery to (over?) correct what he thought was a weak jawline.

His second marriage ended in divorce after just three years and he then dated Ursula Andress and Tina Sinatra before marrying again in 1973. His third wife was Cristina Ferrare, a successful model and aspiring actor who was, again, 25 years his junior. Ferrare and DeLorean had two children, an (adopted) son and a daughter.

In 1979, while was preparing for production of the new car, DeLorean settled some old scores by publishing an exposé of his time at GM, titled On a Clear Day, You Can See General Motors. The highly partisan account would go on to sell over 1.5 million copies.

DeLorean and his wife became Born-Again Christians after the collapse of the company in 1982. Ferrare stood by DeLorean through the subsequent court case but the couple divorced in 1985. His fourth and final marriage was to Sally Baldwin in 2005, who survived him and by whom he had a daughter. DeLorean died at the age of eighty on 19th March 2005 and is buried in Troy, Michigan, just 25 miles from Detroit, the city where he was born.

More drama: Lee Pace, who played DeLorean in the 2018 film ‘Driven’ (c) goseetalk.com

Was John DeLorean no more than a fraudster and DMC a giant scam, designed to enrich DeLorean at the expense of an enthusiastic but gullible UK government(4) and its taxpayers?  I do not believe so or, at least, not initially. DeLorean was a highly talented and ambitious man, but hopelessly overreached himself with DMC. In papers released by the UK government in December 2012 under the thirty-year rule(2), DeLorean admitted to an enquiry that he had “hopelessly underestimated” the difficulties of establishing a car plant in Northern Ireland.

DeLorean appeared to be genuinely remorseful for the failure of his life’s great ambition. Tellingly, in a memorandum contained in the released papers, DeLorean was described as being “in a disturbed state, and possibly not wholly rational” in a meeting with NIDA officials in January 1982. There was certainly fraud uncovered in the ruins of the company and his subsequent life was dominated by further such accusations and litigation, which drove him to bankruptcy.

One allegation made against both DeLorean and Colin Chapman was that they conspired illegally to move $34 million out of DMC into a Geneva based shell company. Chapman’s untimely death at the age of 54 in December 1982 prevented his trial on these charges. It is likely that both DeLorean and Chapman were driven to crime by the prospect of seeing the companies in which they had invested so much energy and personal reputation in ruins.  This is not offered as an excuse, but an explanation.

Before anybody thinks I am in any way excusing or exonerating DeLorean, I will conclude with one nugget that I came across in researching this story: the DMC company receivers uncovered a lunch receipt from the Beverly Wilshire Hotel in Los Angeles which DeLorean had submitted for reimbursement. The amount on the receipt had allegedly been altered from $17 to $191.50. Perhaps his impoverished childhood left more of a mark on DeLorean than he could ever understand or acknowledge?

(1) This is partly because the DeLorean found unlikely posthumous fame as the automotive star of the ‘Back to the Future’ movie franchise which began in 1985. The story of the DeLorean Motor Company was dramatised in the 2018 film ‘Driven’ which starred Lee Pace as John DeLorean.
(2) Arthur Andersen was dissolved in 2002 following its culpable role in the Enron scandal, one of the largest accounting frauds in US corporate history.
(3) UK Government papers that are adjudged to be commercially or politically sensitive, or might have implications for national security, are not released until thirty years after their internal circulation. In this case, the rule appears to have been applied merely to save individuals from embarrassment.
(4) The total cost to the taxpayer of the collapse of DeLorean was put at £77 million. It is not known if any UK civil servants or government advisors suffered any reprimands or sanctions in light of this loss.

 

Author: Daniel O'Callaghan

Shut-line obsessive...Hates rudeness, loves biscuits.

24 thoughts on “Hero or Villain? (Part Three)”

  1. I believe he was a fraud solely on the fact he only gambled with other people’s money, never his own. Astronomical legal fees set aside, the fact he could keep estates in the tens of millions means he must’ve had several millions secretly stashed to run them and his expensive jet set lifestyle. The tell tale of a talented fraud is his ability to use other people and their assets as his own until the well is empty and he has sucked them dry. What we’re left with is an extremally talented engineer that let his vanity and pride go before his fall…

    1. Unless I have missed something, the picture above titled “In better times (c) goseetalk.com” is a from the film Driven. That’s Lee Pace who played John. A good film worth watching.

    2. Good morning Stacey, and well spotted! I would love to claim it was a deliberate error on my part, to see if everyone was paying attention, but no, unfortunately, it was I who wasn’t paying attention. (I remember thinking that Delorean looked remarkably well in the photo!)

      I’ll leave the picture in, but re-caption it. Here’s the movie poster:

    3. I must say that CC article you linked to the other day was an eye-opener for its final paragraph. The FBI after him in 1948 for issuing false invoices for Yellow Pages advertisements in the telephone directory … Hmm. Mail Fraud is a federal offence in the USA. I bet his Curriculum Vitae was a masterpiece as well.

  2. Thank you Daniel for shedding light on DeLorean.
    Several parts of the story conjured up in my mind scenes from Martin Amis’s Money, despite the different personalities of the lead characters. There are of course the extravagant transatlantic lifestyle, the almost personified role of money and the ambition to overcome humble beginnings. But also a sense of inevitable failure, such gambling and then fraud becoming the only possible conclusion as the lead character realises he’s trapped in a project, in fact, he hopelessly underestimated.
    The connection with Colin Chapman is quite dramatic too.

    1. Good morning Bill. I managed a small branch of an American bank in Belfast between 1984 and 1986, and I still recall the chancers and fantasists that came to see me, looking for backing for their barmy schemes. They believed that having a major US bank on board would give them a leg-up with NIDA. Needless to remark, they were politely shown the door.

    2. May I add the LearFan fiasco to the other far fetched schemes the extract money from a gullible British government trying to bring employment to Northern Ireland. I was friendly with some of the American consular staff at the time and they were certainly embarrassed by some of the business propositions arriving here. JZD did bring some hope to deprived West Belfast and developed a factory with a completely mixed and peaceful work force. For many it was the first time they had met someone from the other side of the politico-religious divide. The cars however, well ……

  3. As I said previously I am still amazed at the gullibility of Government Officials – then and now – who are prepared to gamble with taxpayers money as though it was their own.

    1. Good morning Mike. I agree, and its the lack of accountability and, in this case, the use of the ‘Thirty Year Rule’ merely to protect reputations and save blushes that is, in my view, indefensible.

  4. JZD unquestionably was a crook. The greed-posing-as-philanthropism that served him so well post-GM (‘the ethical sports car’) is as old as the concept of the entrepreneur. The money laundering scheme he and Chapman seemingly employed to skim government funding had, if I remember correctly, been established by the latter well before Lotus and DMC started doing business, in order to ‘optimise’ F1 drivers’ compensation. These people weren’t just flawed, they were criminals.

    Having said that, to me, the tragedy of both men is that they shouldn’t have needed resorting to fraudulent behaviour in order to embark on a career and enjoy a decent lifestyle in the first place. But greed got the better of both of them. In JZD’s case (I’m far less acquainted with Chapman’s personal history), I got the feeling that all it might’ve taken was a truly close friend or a wife (who wasn’t mainly acting as a trophy: Kelly Harmon was not only very young, but also part of Californian nobility, whereas Cristina Ferrare was a social climber just like DeLorean) to haven taken DeLorean to the side at a particular juncture and tell him to go easy. He wasn’t untalented by any means, but his greed meant he disregarded his own existing qualities in the pursuit of capabilities he just didn’t possess to a sufficient extent. He could’ve been another Arkos-Duntov, but he was hellbent on becoming another William Durant instead.

  5. As well as persuing Arthur Anderson, the UK government also went after Lotus accountant Fred Bushell, who did serve prison time and lost some of his pension fund…. Some contemporary reports claimed he was the “mastermind” !

    1. Considering that DeLorean’s acquittal on the trafficking charges is one of a very few successful modern uses of the ‘entrapment’ defense at the federal level, perhaps DeLorean should have done more to pay his counsel on time.

      Bob Lutz, writing in 2019, also did not have a high opinion of DeLorean’s ethics. However, Lutz has frequently been accused of revisionist history – one wonders what the GM executive meetings in the 196os were really like, with both Lutz and DeLorean pushing their schemes for their respective divisions to the old-guard leadership.

      https://www.roadandtrack.com/car-culture/a28309491/bob-lutz-the-shadiest-people-i-ever-worked-with/

  6. Bonjour à tous 😉
    Que c’est passionnant !
    Quelqu’un saurait pourquoi le FBI a cherché à le compromettre dans une affaire de drogue ?
    C’était quoi l’intérêt pour les USA ??

    Translate :
    Hello everyone 😉
    How fascinating!
    Anyone know why the FBI sought to compromise him in a drug case?
    What was the interest in the USA ??

  7. Here’s an article about Chevrolet’s xp-898, an experimental program which DeLorean oversaw, employing a urethane-foam plastic monocoque. Apparently it performed exceptionally well in crash tests*.

    http://www.deansgarage.com/2011/chevrolet-xp-898-inspiration-for-two-unique-designs/

    * “safety car” «…saw off just the damaged section and glue on a new part » Sacré Bleu! So did Chapman break out into a fit of laughter, or was he overcome with fear?

  8. Ho !, en cherchant sur le net, je viens de trouver ça :
    https://www.gatsbyonline.com/automobile/la-saga-delorean-lillusion-inoxydable-346485/

    Tout y est expliqué, des origines du projet jusqu’à la chute … il y a même les plans complets de la voitures !
    En utilisant google translate, vous devriez apprendre beaucoup de choses …

    Translate :
    Ho !, while searching on the net, I just found this:
    https://www.gatsbyonline.com/automobile/la-saga-delorean-lillusion-inoxydable-346485/

    Everything is explained there, from the origins of the project to the fall … there are even the complete plans of the car!
    By using google translate you should learn a lot …

    1. Oh, it looks like they used an X1/9 as a test mule for the drive-unit-system-what-ever. And we wonder why so few are left over. A sports car for every day use had to die for a sports car without any use. Poor little Fiat.

    2. Fred, you wouldn’t happen to have any insights into DMC’s dealings with Porsche, would you? As far as I remember, JZD approached Porsche about them developing the DMC-12 to production readiness at about the same time as Lotus – the difference being that Porsche wanted twice as high a fee and three times the timeframe.

  9. I wonder if John’s fear of staying overnight in Belfast didn’t help matters when it came to running the company. The case of missing Thomas Niedermayer managing director of the Grundig factory next door a terrible example. It also beggars belief the monthly costs of running the DMC New York office and staff. So many poor decisions. Although I feel DMC offered the British Government more than enough in hope and goodwill among the people of Northern Ireland and may have helped attract other businesses to set up in Belfast and surrounding area. If one can put a value on that. You never hear a bad word about John in Northern Ireland.

  10. saw a DeLorean yesterday, first time ever. the man
    and the car had hardly been on my radar until your
    researches Daniel, thank you. driving through a
    country town on my way to Melbourne airport,
    part of my brain noticed a car heading toward me,
    brain said mmm dunno, maybe 80s Toyota.. then
    the westering sun illuminated the DMC on its grille.
    thinking about the whole sad saga leaves me wondering
    about Colin Chapman, partly about his likely chancer
    criminality, but more about all that he gave us, things
    like the original Elite, the Eleven, the 23, the 7, the 25,
    no end of surprising and interesting designs.
    I wonder if there is a really good biography.

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