by Steve Lehto
WAA representatives went to Tucker’s plant to see what progress was being made with the car. Presumably they quizzed the other entities seeking the Cleveland plant. Soon, another hitch arose. Tucker once again came to the attention of Michigan senator Homer Ferguson, who accused the WAA of “gross mismanagement” for its disposition of government property.14 Everyone knew that the biggest item on its list was Tucker’s Chicago plant. Ferguson, of course, represented the state that was the home of Detroit’s Big Three automakers. And now Ferguson was attacking Tucker indirectly, by going after the WAA.15
Later, Ferguson’s critics would point out his direct connection to at least one auto company: Chrysler. Chrysler had developed air-conditioning for consumer use long before it was installed in automobiles, and their Airtemp division was a big moneymaker for them. Ferguson’s wife was listed as the agent for Airtemp in Washington, DC, at a time when the company was negotiating lucrative contracts with the US government. Furthermore, one Airtemp franchise near Detroit had been awarded to Senator Ferguson’s daughter and son-in-law, while his wife was awarded shares of stock to control the franchise. These facts were publicized, but no action was ever taken against Ferguson since he, as far as anyone could prove, had never directly profited from these cozy relationships.16
On May 28, 1948, the WAA advised Tucker that his bid on the blast furnace was “inadequate,” without further explanation. Eventually, the Cleveland plant would be awarded to the automaker Kaiser-Frazer, whose bid had been lower than Tucker’s.17
The End of the Dream
By 1948, Preston Tucker had hired former race car driver Ralph Hepburn to be the western regional manager for the Tucker Corporation. Hepburn was more than just a trusted employee; he was a personal friend. And it was Hepburn whom Tucker had entrusted with the first public drive of the Tin Goose when it cruised off the stage at its world premiere.
In May, Hepburn decided to race one more Indy 500, even though he was fifty-one years old.1 A car owner named Lew Welch had some of the fastest cars at the track, and one of his drivers, Cliff Bergere, almost crashed one during practice, losing control, leading to an argument between Welch and Bergere. Stories differ as to whether Bergere quit or was fired, but the vacant seat gave Hepburn a chance to race again. Just a couple days later he was out driving practice laps in the 550-horsepower car when he blew by an Italian driver named Luigi Chinetti. Chinetti said he saw Hepburn’s car begin to “weave like a fish.”2 Hepburn never regained control and slammed into a wall, killing him instantly. Forty thousand spectators witnessed the wreck on May 16. Tucker was at the track that day but did not see the accident. He did, however, attend the funeral in Glendale, California, on May 22.3 After Tucker returned from the funeral, his friends noticed his gloomy aspect.
Before he died, Hepburn was one of the most experienced drivers at Indianapolis. In his fifteen races he had completed 4,512 miles. His best result was a second place finish in which he lost by a mere two seconds to Wilbur Shaw in 1937. At the time it was the closest finish in the race’s history.4 Tucker said, “Ralph was a man of rare courage—one of the truly great figures in racing. His death is not mourned alone by us but also by the entire racing fraternity.”5
Less than a week later, on May 28, 1948—the same day the WAA denied Tucker’s bid on the blast furnace—the SEC told him that they were launching an investigation into his corporation.
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The Tucker Corporation had come under increased scrutiny from the agency earlier in May, when it filed its annual report for the previous year with the SEC. Though the report covered a period of less than four months, since the stock offering had closed on September 12, the SEC contacted Tucker and told him there were problems with the report as it was filed. Usually, the SEC would issue a “deficiency letter” to a corporation, noting the problems with the report and allowing time for the corporation to make the needed corrections. Tucker traveled to the SEC headquarters with an attorney to see what the deficiencies were so he could correct them.6 Several commissioners indicated they could simply put them together in a letter and Tucker could amend his report.
But while they were discussing the matter, SEC attorney James Goode entered the room and announced that a letter would not suffice. Goode said he wanted to subpoena the records at the factory and perform a full-blown public investigation into the company’s operation. Tucker left not knowing which way the SEC was going to rule on the matter.7 Then came the announcement that an investigation was underway.
On June 3, six agents of the SEC showed up at the Tucker Corporation and asked to see the corporation’s books and records.8 They did not explain what they were looking for or what had triggered their visit. One SEC representative told Tucker’s attorney that the investigation would be confidential if the requested materials were furnished soon.9 Tucker asked if the men could be more specific. What were they looking for? Tucker later said they would not tell him. He accused them of launching a “fishing expedition.”10 It was clearly related to the meetings he had had with the SEC after the corporation had filed its annual report. However, Tucker had one other thing going for him: Federal law strictly mandated that anything turned over to the SEC had to be kept confidential and closely held within the circle of officers, employees, and members of the commission. In fact, the prohibition was so strong it required officers and employees of the commission to defy subpoenas and court orders requesting the information. In those instances, the commission would go to court and fight such a subpoena.11
Despite the renewed government attention, the seventh issue of Tucker Topics had no trouble maintaining its optimistic tone. The cover showed a full-page photo taken from above of a Tucker ’48 swarmed by a crowd on LaSalle Street in Chicago. According to the caption, the driver of the car spent an hour working his way through the crowd to get to the car.12 Fred Rockelman’s introduction noted the successful accessories program and the impending production of the Tucker ’48, adding, “Let’s go out and make ourselves some history!”13 The first article was a reprint of the Chicago newspaper article describing the test-drive in a Tucker ’48 just a month before the newsletter was published.14 The future still looked promising.
But June 6, 1948, marked the end of America’s love affair with Preston Tucker. That end was engineered by Drew Pearson, a radio broadcaster and newspaper columnist based in Washington, DC. His radio program, Drew Pearson Comments, was broadcast nationally and his newspaper column, Washington Merry-Go-Round, was syndicated nationally as well. Pearson’s material often focused on bureaucratic and political gossip. He was well connected, and sources within the government furnished him confidential information, knowing he would broadcast it.
Historian Arthur Herman has written, “Pearson is hard to understand in terms of today’s Washington media. A strong and fervent liberal, he was a political commentator, investigative journalist, gossip columnist, and political blackmailer rolled into one.”15 Pearson was a modern-day muckraker, but with a darker side. He had no qualms about smearing his targets with lies and destroying reputations. Some of his targets deserved the attacks—he was an active critic of Joseph McCarthy—while others found themselves in his crosshairs because Pearson didn’t like their politics. Jack Anderson, Pearson’s assistant, said that the truth to Pearson “was often a subjective matter.”16
On his June 6 broadcast, Pearson announced that the Securities and Exchange Commission was about to launch a major investigation into Preston Tucker and the Tucker Corporation. Pearson boldly announced that the investigation would “blow Tucker higher than a kite.”17 Pearson did not identify his source, but he didn’t need to for his listeners to believe him.
With that single broadcast, Tucker’s good fortune was destroyed. In hindsight, Pearson’s announcement can only be seen as a groundless and vicious attack. The SEC had only shown up at the Tucker factory three days before Pearson’s broadcast. They had notified Tucker of an impending investigation but had not indicated it was any more important
than previous occasions when the SEC had looked at Tucker’s activities.18 The investigation had not turned up anything damning yet. Pearson had nothing to substantiate his claim.
When trading opened the next morning, Tucker Corporation stock crashed. It soon hit 2⅜, less than half of its recent price of 5. Investors lost $10 million in value overnight.19 But worse for Tucker, no one would extend the corporation credit with the cloud of a federal investigation overhead. This was particularly troublesome in the auto industry, where manufacturers expected suppliers to ship them components and materials on credit. Tucker would have to pay cash to most of his suppliers in advance.20
An irate Tucker did not know where to turn for help. He sent a telegram to the Justice Department, inquiring if it had been behind the leak, or to find out if Pearson spoke for them. The Justice Department ignored Tucker’s telegram.21
Tucker’s friends and allies suspected foul play: someone had set out to harm Tucker and his company. Cliff Knoble noted, “The ‘leak’ was too well timed—too shrewdly destructive—too immune to defensive counter measures—to have been accidental. Within twenty-four hours it practically destroyed the Tucker Corporation.”22
Just in case anyone missed the broadcast, Pearson repeated the story in his syndicated newspaper column of June 10, read by millions nationwide: “The ax is now falling on Preston Tucker, the revolutionary automobile man, and falling hard.”23 Pearson explained how Tucker had lost out on the Republic Steel plant, and now “Tucker will have no steel to make his cars.” Pearson did not explain why Tucker would not be able to simply buy steel on the open market. The meat of the article followed:
Meanwhile, the Justice Department has 5 G-men investigating Tucker for alleged mail frauds. Likewise, the Securities and Exchange Commission is breathing hot on Tucker’s back over his latest money-raising scheme. He has been trying to get his sales agencies to order accessories, even though he still isn’t certain of even producing the automobiles to match. Tucker has oversubscribed his stock—a total of $25,000,000 being sold to the public—and has also sold out his franchises in advance, reaping in another seven million dollars. All this took a lot of promoting for a man who doesn’t know where the steel for his first car is coming from.
Much of it was untrue. Among other things, the sale of the stock was in fact undersubscribed: Tucker had ended the sale before selling all the shares he had offered in the prospectus. And Tucker did know where the steel for his first car would come from: car #1001 had been built three months earlier and shown to the press. Pearson was falsely telling his readers that Tucker had not built a single car yet when he had already built several.
On June 14 the SEC served a subpoena on the Tucker Corporation, demanding the surrender of virtually every record, letter, invoice, or other scrap of paper the company had in its possession. In a time before photocopiers, the reproduction costs for the requested materials, and the time it would have taken to make all the copies, were prohibitive.24 When Tucker protested, he was told the investigation would be over in ten days and he would soon have all his paperwork back. Tucker refused to turn over the requested documents, and the SEC went to court. A federal judge ordered the Tucker Corporation to appear and explain why it would not honor the subpoena.25
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Through it all, Tucker’s workers kept at it. They managed to assemble some cars, and those already finished still drew rave reviews. Tucker #1005 had been flown to Oakland, California, on May 25, and then driven to a local Tucker dealer. Later, Preston Tucker drove it east to Salt Lake City. More than fifty thousand people came through the showrooms to see the car when it was displayed on this trip, and the car’s appearance on local streets caused a “near riot.”26
And Tucker’s engineers continued their work on outstanding design issues. Although Tucker had agreed to let the first Tucker sedans be built with manual transmissions, he still hoped to offer automatic transmissions in his cars. He asked Warren Rice, an engineer, to design a suitable one. Rice did so, assembling a working prototype of his “R-1” transmission. It was fitted into a test chassis, and it ran well. To see how it stacked up to others, Tucker’s men installed it into a Buick they had bought as a test bed, and the Buick ran better with Rice’s R-1 transmission. Tucker was so enthused he announced he would bring the transmission to Detroit and demonstrate it for the automotive press. He even gave Rice a $5,000 bonus, which incensed D. McCall White, who later told investigators the payment was “unwarranted and ridiculous.”27
A demonstration of the new transmission was scheduled for a park in Detroit, where a crowd of people showed up to see the Tucker cars. People were allowed to walk around and examine them. One of the cars was merely a test chassis with the power train—using the R-1 transmission—installed. It had no body, but it could be driven. The other two cars were the Tin Goose and #1001 from the shareholders meeting. Rice invited journalists to go for a ride in the test chassis. Leo Donovan of the Detroit Free Press compared the ride favorably to the excitement of a “first ride in a roller coaster.”28
Other reports were somewhat less enthusiastic. Working mentions of the demonstration into their coverage of Tucker’s struggle with the SEC, newspapers pointed out that the cars did not contain all the features originally promised, such as fuel injection and disc brakes. But even they admitted that the test chassis with the automatic transmission worked perfectly, “operating in reverse as well.”29
The R-1 transmission was a resounding success. But it was not ready for mass production yet. What the press did not know was that the R-1 transmission had a limitation that harked back to the scrapped fluid drive system: it could not be shifted into reverse without shutting the engine off.30 It was a problem that simply required more time, but Tucker had been anxious to show off the car. Luckily, no one asked to see the transmission shifted from drive to reverse. While discussing the transmission, a Tucker representative told the press that the tooling for the car was 80 percent complete and that assembly lines would be able to turn out a hundred cars daily by mid-September.31 Tucker said he intended to sell the ’48s with automatic transmissions eventually, but for the time being, the cars would have pre-selector manual transmissions.32
Nevertheless, the “Tucker News Bureau” (Tucker’s publicity department) issued a press release describing the automatic transmission demonstration. The release also laid out the current state of affairs at the Tucker Corporation. The release quoted Offutt as saying that the Tucker ’48 had been modified slightly from its original configuration due to cost. “Our most important contribution, in our opinion, is increased safety, not only in design and construction of the body, but also in weight distribution for better handling and safer stopping in emergencies.”33
The Tucker News Bureau also issued a press release announcing that permanent dies had been ordered and were anticipated in the plant no later than the end of July. Barring work stoppages at the die makers, or impediments from the SEC or the court, the Tucker Corporation could have cars rolling off its assembly line soon. “We are on the threshold of mass production.”34
* * *
But Preston Tucker soon learned that the investigation was more widespread than the SEC had led him to believe. SEC and FBI agents traveled the country, interviewing investors who had bought dealerships, distributorships, or even stock. Tucker heard from stockholders who had been grilled by federal agents and, he later wrote, “it got so that even owning a few shares of Tucker stock caused a man more trouble and embarrassment than being accused of a sex crime.”35 In all, the SEC grilled at least twenty-eight investors who could be called as witnesses against Tucker.36 The SEC never said how they chose the subjects of their interviews. Some reports placed the number of Tucker stockholders at fifty thousand.37 There is also evidence that the SEC found witnesses who were not favorable to their anti-Tucker case but ignored them and moved on, looking only for people who were willing to bash Tucker—as later interactions between federal prosecutors and Alex Tremulis would sugg
est.
The Chicago plant and Ypsilanti Machine and Tool were soon swarming with investigators, attorneys, and accountants. James P. Goode, Thomas B. Hart, and John R. O’Connor were the attorneys in charge of the investigation, while Sydney Orbach and Frank Corbin led a team of six accountants. The SEC even hired two engineers and told them to poke around the plant.38 Then, although the agency had originally claimed to be following up on the recent annual report Tucker had filed, it decided to expand the investigation back to 1945, to what it called the “approximate date of formation of a scheme to defraud.”39 The investigation would take several months, and each side would blame the other for how long it took.
Preston Tucker decided he needed to fight back against the SEC. It was unclear what the SEC was up to, but a remarkable amount of damage was being done. And much of what the SEC had done did not appear to be aboveboard. Tucker wrote an open letter to the “Automobile Industry” that was published in several nationally distributed newspapers on June 14 and 15, 1948. The letter took up a full page, and Tucker was not coy:
Gentlemen: As you know, we are building a completely new motorcar—the rear engine Tucker. Being new-comers in the field we have had to start from scratch and work harder and faster than most of you. For example, instead of the 20 months you usually take to produce a new model of conventional design, my engineers have taken less than 10 to perfect a car which I firmly believe opens a new era in motoring.
*
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But there is another group—a very powerful group—which for two years has carried on a carefully organized campaign to prevent the motoring public from ever getting their hands on the wheel of a Tucker.