Tracing De Lorean’s missing millions

Press, 29 August 1984, Page 35

Tracing De Lorean’s missing millions

The surprise acquittal of John De Lorean in Los Angeles last week does nothing to explain what happened to the large sums invested in his failed car firm by the British Government. MICHAEL GILLARD, LAURENCE MARKS, and WILLIAM SCOBIE, of the “Observer,” trace the fate of the missing millions. In John De Lorean’s New Jersey mansion, there are 30 bulging cartons of documents. De Lorean has refused to hand them over, claiming that they are personal papers. But a preliminary examination by investigators has already indicated that they contain clues to the “missing millions” which the British Government and the 600 other creditors of De Lorean’s failed Belfast car company have been trying to trace. They may also help to explain how it was that senior British public servants responsible for the taxpayers’ SNZ22O million subvention allowed at least SNZIBM to be used by De Lorean to refinance his purchase of a nice little business in Logan, Utah, that manufactures ski-slope snow-grooming equipment. The manoeuvres by which De Lorean acquired the money for this purpose were complicated. Put simply, he ended up with the capital which had been subscribed by the British Government and private United States investors to pay for design work on the car, having placed it in the Swiss bank account of a Panamanian company, which had been given the design contract. That company, GPD Services, had sub-contracted the design work to the late Colin Chapman’s firm, Lotus Cars, which was paid directly by De Lorean Motors Cars in Belfast. So the cash in the GPD account was free to be switched through a series of other bank accounts before using it to repay money he had borrowed to buy the Logan company. The trail of the missing millions starts with a contract between the Belfast company and the mysterious Swiss-based firm, GPD. This was signed on November 1, 1978. GPD had received JUS3SM for the design and development programme. Of this, ?25M had been subscribed by a group of Erivate investors in the Fnited States who included actor Sammy Davis jun, and the novelist Ira Levin. The other SIIM came out of the British Government’s S22OM subsidy. Nothing wrong with that, so long as GPD paid Lotus for doing the work. But investigators who have been tracing payments in and out of various De Lorean accounts have discovered that none of the ?35M was ever used for this. As successive bits of the design programme were completed, Lotus submitted invoices to Belfast and was paid directly by De Lorean Motor Cars. The total sum received by Lotus was $28.5M. So what did GPD do with the S3SM of American and British investment? And what on earth was the purpose of GPD? Chapman said it was De Lorean’s idea. De Lorean has said that it was Chapman’s. Certainly GPD’s director and only known manager, Marie-Denise Juhan, was a long-time business associate of Chapman, who had a fetish for hiding his affairs in companies registered in Panama and other tax havens. The British Government was perfectly well aware of this highly unorthodox ar- ' rangement, but no civil ser-

vant is known to have objected to it. Indeed, GPD’s very existence was not publicly disclosed. The Callaghan Government’s statement in the House of Commons on November 15,1978, announcing the design deal, referred to a contract signed with Lotus. GPD was not mentioned. A few days earlier, De Lorean had paid the American investors’ S2SM into GPD’s account at the United Overseas Bank in Geneva, and De Lorean Motor Cars had paid Britain’s SIOM into the same account. At that time, exchange control was in force. This transfer was approved by officials of the Bank of England, of the Northern Ireland Department of Commerce and of the Northern Ireland Development Agency. As De Lorean now says, tauntingly, “The British Government signed every cheque.” The ?35M did not stay in the United Overseas Bank for long. There were some mysterious temporary transactions: ?8M was switched back to the American investors’ account at Citibank in New York and SBM paid to Lotus as a ‘good faith deposit.’ Both sums were later returned to

the Geneva account and never seen again. Another SI.BM of British money also disappeared, leaving $500,000 (out of the original $10.2M) in the GPD lawyers’ clients account. The explanation of what happend to most of that S3SM is to be found, rather improbably, on the ski slopes of the Rockies. In June 1979, De Lorean purchased the Logan Division of the Thiokol Corporation, an American firm that makes snow-grooming equipment. The price was about S2BM. He raised SIOM of this from the sale of some land on his California ranch and borrowed another ?15M of it from a Chicago bank, Continental Illinois. Soon afterwards a complicated series of transactions began which enabled De Lorean to repay Continental Illinois. A lawyer, Jacques Wittmer, acting for De Lorean and GPD, was holding ?17M of the money GPD had received from the United States investors in a separate account. He was empowered to release it only when De Lorean, as boss of the Belfast firm, certified that GPD had fulfilled its phantom obligations under the design contract (which were in fact being carried out by Lotus). On September 13, 1979, by which time the SI7M had grown with interest to ?18.6M, Wittmer received the necessary authorisation to release it. This money should have gone to GPD, but Mme Juhan, seven months earlier, had assigned GPD’s right to this money to ‘bearer (i.e. whoever had the document). In accordance with his instructions in this document, Wittmer handed over the money to a senior director of the Rothschild Bank in Zurich, acting for a still

unidentified assignee. (De Lorean had been introduced to Rothschild’s by one of its shareholders.) Rothschild’s transferred it to its own account at the Chase Manhattan Bank in New York. Meanwhile, De Lorean had borrowed $17.8M from an Amsterdam bank, Pierson Heldring Pierson, against the security of the Rothschild J18.6M, now said to belong to the Betros Corporation of Panama, a Rothschild nominee, company. On October 3, the $18.6M was paid into a Pierson account at the Mellon Bank in New York as security for the loan. The same day, $17.8M was paid from that account to De Lorean’s personal account at Citibank. De Lorean used $1,690,000 of the money he had borrowed from Pierson to repay a personal loan and SISM to repay Continental Illinois. It is because of this series of transactions that De Lorean’s creditors are claiming that the Logan company now belongs to them. It was in effect purchased with the American investors’ money. Last year, with De Lorean facing cocaine-traf-ficking charges and fraud investigations, Pierson seized its security from the Betros account. In theory, that left De Lorean in debt to the ghostly Betros Corporation to the tune of more than $17.8M. but in the meantime, Betros had assigned the De Lorean loan to yet another shell company, Gotaru SA of Liberia. So is Gotaru pressing De Lorean to settle the debt? Surprise, surprise! It is not. Who then was the unidentified assignee of the money in the GPD account which Wittmer handed over to Rothschild’s and which became the security for the Dutch bank loan to De Lorean? The investigators believe it was De Lorean himself.

They still don’t know what happened to the rest of the GPD money: notably, the SBM that was switched to Lotus and back again to Geneva, and another SBM that was switched to the American investors’ account in New York and back. This money was at one time or another under the control of either De Lorean or Chapman or their business associates.

What is certain is that the British taxpayer has lost about ?8.5M which was shunted to Switzerland under the eyes of civil servants responsible for monitoring the proper use of public funds. Not one of these officials has been publicly censured or even clearly identified. None has had the self-respect to own up to misjudgments. What did happen was that 2600 De Lorean factory staff lost their jobs and the already shattered economy of Northern Ireland received yet another demoralising and unnecessary blow. Meanwhile, De Lorean is likely to spend the next few years in and out of court in Detroit, where his rise to motor industry wealth began.

Bankruptcy hearings, which were stayed in April pending the outcome of the Los Angeles trial, will begin again soon. There is a S3BM civil claim by his creditors. Most menacing of all, a grand jury is inquiring into allegations of fraud and tax evasion.

At the bankruptcy hearings, the judge pinned three “badges of fraud” on De Lorean: for mingling the company’s funds with his own; for failing to maintain adequate records; and for paying himself SI.BM. The drugs trial itself offered a richly ironic contrast between the past secrecy of De Lorean’s fin-

ancial manipulations and his subsequent desperate need for publicity as a weapon in his defence strategy. In the event, the spectacular campaign to establish his innocence was won as much on the television screens of America as in the courthouse. From the day he took on the defence, attorney Howard Weitzman astutely exploited his client’s glamour and celebrity to build public sympathy for him. It is true that he was assisted by glaring weaknesses in the prosecu-

tion case. Weitzman uncovered numerous irregularities in the investigative procedures of the federal narcotics agents who had trapped De Lorean, and inconsistencies in the testimoney of their star witness, the convicted drug-smug-gler, James Hoffman. The jury were eventually persuaded that the law-en-forcers had gone beyond permissible measures to seize a suspect in flagrante delicto and had themselves set up the conspiracy in which De Lorean had allowed himself to become

entangled. But Weitzman’s central achievement was a dramatic as much as a jurisprudential triumph. Revealingly, the film rights are being sold, with James Coburn tipped to play the lead. Weitzman was quick to realise the importance of De Lorean’s 34-year-old wife Cristina to his case. He even advised on her famous wardrobe, ordering dark colours rather than light, dresses (never trousers), no flashy jewellery, “and a large handbag of Kleenex”).

By Californian standards, it was not an abnormally flashy performance. Weitzman, aged 44, is not a stereo-typical American criminal lawyer, blustery and abrasive. He looks like a pudgy Hollywood producer, a sharp dresser who likes to pad barefoot around his opulent Los Angeles offices. He is voluble but soft-spoken, polite, almost ingratiating In court, above all a cunning tactician. For a dozen years or so, he has had notable successes defending apparently hopeless cases: alleged

Mafia capos and brutal killers, even a member of the Manson family whom he got off a murder charge — the only Mansonite to go free.

From the outset, he portrayed the slender, moviestarlike De Lorean, who is 59, as an injured innocent, arguing that he had been the victim of a. Keystone Cops operation in which the Federal Bureau of Investigation, the Drugs Enforcement Agency and other supposedly collaborative federal forces had fought to upstage one another as they tried to edge a fish into the net “John,” he said, “was sucked into that trap.” Although most federal drugs cases come to trial in about six weeks, Weitzman managed, with motion after motion and demands for thousands of documents, to delay the case for 17 months. In the middle of this hiatus came “Big John’s” much publicised conversion to Christianity — at Cristina’s behest. An Italian butcher’s daughter, raised a Catholic, she had become a born-again evangelical several years earlier. In the summer of 1983, just when jury selection appeared imminent, De Lorean joined her in the faith. After counselling from Watergate sinner Chuck Colson, now a prison minister, De Lorean (with Cristina beside him) was baptised in the ornamental swimming pool of his 400acre estate at Bedminster, New Jersey. She wore a long white gown, he a dripdry “leisure suit.” — Copyright, the “Observer,” London.