by Steve Lehto
On January 18, the prosecution gave the jury a five-hour argument explaining why Tucker and the others should go to prison. They “knowingly committed one of the largest frauds that has ever been perpetrated upon the public of these United States.”88 The prosecution had long since given up on seeking convictions for violations of securities law in the strictest sense. They tried to aim the jury’s attention at the company’s advertising and publicity. “It doesn’t make any difference what their intent was when they started out. They made misrepresentations of what they had. Read the pack of lies in their ads and remember what they had and what they didn’t have in the way of an auto.”89
The defense attorneys each spoke with a common theme: Either these men had set out to build a car or they had set out to defraud investors. It couldn’t be both. And in case the jury was curious which it was, a Tucker ’48 sedan was parked outside the courthouse at that very moment. One defense attorney suggested the jurors go for a ride in the car before reaching a verdict.90
The judge instructed the jury on the law: “The fact that the defendants and those associated with them failed to mass-produce an automobile and accomplish what they undertook is not of itself proof of fraud. Erroneous judgment may be as consistent with good intentions as with bad intentions.”
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It was a Saturday morning at 11:00 AM when the case was given to the jury. A little over twenty-four hours later they had a verdict. They found all defendants not guilty on all counts.
“Tucker and the other defendants cheered wildly and a few wept openly yesterday when a Federal court jury of seven men and five women cleared them of 31 counts of mail fraud, Securities and Exchange Commission violations, and conspiracy,” reported the United Press. After thirty minutes, quiet and order returned to the court. Tucker spoke to the press: “I’m ready to help in any way possible in a reorganization of the Tucker Corp. or anything else. My immediate plan is to get my wife, Vera, back on the road to health. She is in this courtroom now against the doctor’s orders. [The jury’s verdict was] a victory for all dealers, stockholders and distributors. My interest has, of course, always been second to theirs.”91 As for Vera, she was merely exhausted. She was worried sick and insisted on attending court every day even though she clearly needed rest. Now that the trial was over she could finally get some.
One juror told the press it wasn’t even a close call. William Zacher said, “It wasn’t so hard to reach a decision. From the beginning, only two jurors voted guilty.” A few ballots later, those two agreed with the rest and the not guilty verdict was unanimous.92
On January 22, 1950—a Sunday—Preston Tucker walked out of the federal courthouse in Chicago a free man.93 Tucker invited the jurors outside, where he gave them a demonstration of the Tucker ’48.94 Later, he said, “It’s been like a bad nightmare. This is a victory for the stockholders and dealers as well as free enterprise.”95 He told reporters he would do everything he could to reorganize and revive the corporation.96
The US attorney called some of the jurors into his office, asking them to “explain” their verdict—something they did not have to do. One juror was so upset by the confrontation he called Tucker’s attorney William Kirby and told him about it. Kirby told him he didn’t need to explain his verdict to anyone.97
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Considering how much time and effort the SEC and the prosecution had expended accusing Tucker and his associates of criminal activities, the acquittals represented a colossal failure on the part of the government. The result vindicated Tucker on the grandest scale. And the defendants’ actions in not even bothering to mount a defense showed that everyone in the courtroom knew the government’s case had been bogus. But would that matter? Tucker’s career was in tatters. Government officials could move on as if nothing happened. And they did.
SEC officials gave little thought to the acquittals. On February 21, 1950, Harry McDonald spoke in Detroit before a home crowd audience of Detroit Stock Exchange members. He updated them on “some of the cases which were at that time much in the limelight.”98 Specifically, he noted “the Tucker case” and how “everyone” wanted to know about it.
“The Tucker case is history.”
He then moved on to another topic. Less than a month after Tucker and all his codefendants had been found not guilty on all counts, this was McDonald’s complete statement. He then addressed the American Light and Traction Company, Detroit Edison, and how some other utilities might be affected by recent changes in securities law. He did not say another word about Tucker. He closed his talk by saying, “The invitation to come here as your speaker was most flattering, and it has indeed been satisfying to be with you, people I have known so well for so many years. I salute you all as friends. I thank you for your kind attention. Good night.”99
The SEC had lost the trial but had won the war. They put Tucker out of business and assured he could never do business in America again.
Reflecting years later, Alex Tremulis noted another tragic aspect to the trial. By refusing to present a defense, Tucker’s attorneys had made a bold decision that ultimately vindicated Tucker the man. But it also meant that the Tucker automobile had gone undefended. A robust defense—though it had proved unnecessary from a legal perspective—would have been a great opportunity to showcase the car’s merits and confirm the legitimacy of the Tucker Corporation’s operations.100
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Preston Tucker was ruined when the trial was over. He was broke and his company had been taken from him. On January 26 he was arrested—“detained” by a court officer—for failing to honor a $3,567 judgment against him in an unrelated matter. Tucker had bought a farm but failed to make final payment on it. Though the seller had obtained a judgment, Tucker didn’t have the money to pay it. His attorney negotiated with the creditor to reduce the figure, and Tucker’s friends raised the money. Another attorney pitched in a thousand dollars. Papers told the story nationwide of Tucker, the man who had raised $28 million but found himself briefly in the equivalent of debtor’s prison.101
Meanwhile, the bankruptcy court had appointed a receiver for the Tucker Corporation, and Preston Tucker and his management team had lost control of the company. It was clear from the civil proceedings that the judge did not like Preston Tucker. On one occasion, Judge Igoe listened to Tucker’s lawyers describe Preston Tucker’s efforts to find an eleventh-hour investor to save the company and said, “I don’t have the least bit of confidence in the statements of Mr. Tucker.” Later, news organizations reported that he said, “That is the difficulty in this whole case and the sad situation presented by the whole case is that the persons who have been defrauded are the poorest and smallest people in America, five or ten dollar people, those are the people we have to protect around here.” He said this on January 27, 1950—five days after Tucker had been acquitted of such fraud.102
The legal wrangling over the carcass of the Tucker Corporation raised an interesting question: Why didn’t someone simply buy enough of the outstanding shares to take over the company? Tucker only owned a small portion of the Class B stock, and Class A stock held the same voting rights. With five million shares in the corporation outstanding, someone could have simply bought 2,500,001 shares of the stock and taken control. When the stock crashed after the Drew Pearson broadcast, the shares could have been bought for pennies on the dollar. The only issue, it seems, was what the new owners would be inheriting. Simply changing management of the company did not guarantee smooth sailing for the corporation.103
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Tucker sold his apartment in Chicago to Raymond E. Dodge, an Olympian-turned-entrepreneur whose company made the Oscar and Emmy statuettes.104 His mother’s apartment had been sold the previous year. Tucker returned to Ypsilanti, to the family home on Park Street, along with his wife, mother, children, and the grandchildren who were by now in the mix. Some of the family members lived in apartments in the shop behind the house where Preston had met with Charles Pearson years earlier. Preston J
r. and his wife lived in one apartment, John and Mary Jane in the other.105
All the family members would often gather for meals in the main house. Without a business to run, Preston found more time to spend with his family, often calling for the grandchildren to be brought into the house when he saw them in the yard. When they were a little older, he would load his Cadillac with the children and take long drives on country roads around the area.106 He still enjoyed listening to his music. He had even wired his television room with special speakers so he could hear Lawrence Welk better when the bandleader was on.
One day Preston took his granddaughter Cynthia for a walk. He spotted a penny on the ground and showed it to her. “Don’t ever be so lazy and not bend over to pick up a penny.” The man who had raised more than $25 million handed the penny to her. Decades later, Cynthia still stopped to pick up pennies when she saw them on the ground, always thinking of her grandfather when she did so.107
The Civil Suits
Though Tucker had been vindicated in the criminal trial and was settling back into life in Ypsilanti, he was not prepared to simply give up on the legal concerns his company’s destruction had raised. Believing that he had been targeted unfairly by the criminal action, he filed suit for malicious prosecution against US Attorney Otto Kerner Jr. and two of his assistants, Lawrence J. Miller and Robert J. Downing. He also named Harry McDonald, Thomas Hart, and some others involved in his case.1 He also filed lawsuits against various news organizations that he believed had defamed him, including the Detroit News, Collier’s, and Reader’s Digest.2
Among the suits was Preston T. Tucker v. The Evening News Association, the publisher of the Detroit News. Preston filed the case in federal court in Michigan, asking for $3 million in damages. All the civil actions against the media outlets hinged on one simple theory: Tucker had not defrauded anyone, so when the press said he did, that constituted libel.3 Through the lawsuits’ discovery phase, Tucker could subpoena evidence and compel witnesses to answer questions under oath in front of a court reporter. Who was behind the investigation? Who leaked the SEC report to the press? This endeavor was made more difficult by the fact that even as he pursued discovery, Tucker still did not have his own copy of the agency’s report.
Attorneys for the defendants in the suits demanded that Preston Tucker appear for a deposition, where they would be allowed to question him under oath about the claims he was making. Very early on, the Detroit News’ attorneys pulled out a copy of the report and began questioning Tucker about it. His attorney and he were both shocked. The attorney objected: “May the record show that so far as I know, Mr. Tucker has never seen the SEC report. Mr. Tucker repeatedly tried to get the report and was turned down by the commission.”
Opposing counsel found that hard to believe. Tucker spoke up: “Well, what I can’t understand is that the SEC report, by the congressional act itself, is supposed to be a secret report . . . and I am amazed to find the report in the hands of the Detroit News attorneys.”4
In a subsequent deposition, Martin Hayden, the Detroit News reporter, testified that he had hinted to Harry McDonald that he would write a story critical of the SEC unless McDonald revealed details of the previously unreported confidential investigation. It was then, Hayden said, that McDonald invited Hayden to a hotel and handed him a copy of the 561-page report.5 Tucker’s attorney asked Hayden what steps he took to verify the facts he had taken from the report to use in his story. Hayden hadn’t bothered. He admitted he simply parroted the report, assuming it was all true.6
Tucker’s attorney questioned Hayden at length about the report, even though he and Tucker did not have a copy to work with. Halfway through the day, Tucker’s attorney said he was going to adjourn the deposition until a later date so he could subpoena a copy of the report to allow for better cross-examination. After a brief discussion, Hayden’s attorney offered to give a copy of the report to Tucker’s attorney as long as they could finish the deposition that afternoon. Tucker’s attorney would be given an hour to study it before they resumed after lunch. This copy would be the first that Tucker had seen.7
Hayden had not gotten this copy from the SEC; when he had been shown a copy to write his damning newspaper article, he had not been allowed to keep it. The new copy had come from the Tucker Corporation’s bankruptcy trustee. When asked why he didn’t ask McDonald for the report, Hayden said he didn’t want to “cause Mr. McDonald any more trouble.”8 It was the first indication by Hayden that he knew his receipt of the confidential report was a violation of federal law.
This was not the only instance in which the bankruptcy trustees provided aid to the parties Tucker was suing. Before depositions were taken of the SEC members who had swarmed the Tucker factory, their attorneys were given access to the Tucker records for three weeks so they could prepare. The documents were not, however, made available to Tucker or his attorneys.9
Tucker’s suit against Collier’s revealed similar bias on the part of the US Attorney’s Office. Lester Velie had written the Collier’s article after he was likewise shown the report in Chicago, in the office of Otto Kerner. Later, when he asked to see it again, he went to Washington, where the SEC lawyer Thomas B. Hart gave him the report, along with an office to work in while he took notes.10 Hart had been the one who wrote to Tucker and assured him that the report had not been shown to anyone in the media. (During the litigation, a representative of Collier’s swore under oath that the magazine did not have any editors or managers fact-check the article before it went to press; the magazine trusted the writer to keep the facts straight.)11 Velie’s and Hayden’s testimony directly contradicted the prosecution’s assertions in the criminal trial that the SEC report was confidential and had never been shown to anyone outside the prosecution.12
Tucker filed his case against Kerner and the others for malicious prosecution in Illinois state court, and the defendants had the action removed and heard by the federal court. The case was sent to the courtroom of Judge Igoe. Tucker’s attorneys asked the judge to disqualify himself, noting the various prejudicial things he had said in previous proceedings. Igoe denied the request and threw Tucker’s case out of court. Tucker appealed and the court of appeals wrote that it could find nothing improper in the handling of the case. As for what Igoe had said about Tucker? The court of appeals said the statements were hearsay, and perhaps Collier’s and the other news organizations had simply made some of them up.13
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In October 1950 the bankruptcy trustee auctioned the Tucker Corporation’s remaining assets. It was an interesting exercise. The plant was filled with valuable car-making equipment, along with quite a few cars in various stages of assembly. The auction took place over three days at the end of the month. Among items auctioned were “title and interest in and to all Tucker Corporation patents, patent applications and trademarks, as well as all production dies, tools, jigs, fixtures, blue-prints and engineering data . . . . [and] 23 Tucker 4-door sedans.”14 Auction flyers detailed the more valuable equipment, like a new Landis camshaft grinder, six dynamometers, stamping and sheet metal machinery, cutting tools, welders and welding equipment, and more. The auctioneer admitted that the poster-sized auction flyers lacked room to list everything. “Due to the urgency and magnitude of this sale, a completely detailed and itemized description of all of the items to be sold could not be compiled prior to going to press and will not be available in published form as is customary in such sales.”
On October 30 the auctioneer sent the trustee a report of items sold, amounts raised, and buyers’ names. The highlight was the list of Tucker sedans and their selling prices. Tucker sedan #1039 sold for $2,200 while #1011 sold for $2,000. Several sedans without transmissions sold for $1,050.15 Remarkably, the cars sold at auction for around Tucker’s suggested retail price, even though buyers received no warranties, there would be no source for replacement parts, and buyers had no place to take them for factory service.
The public’s fondness for the cars seemed to
help owners overcome such obstacles. A few months before the auction, a Seattle Tucker sedan owner had written directly to Preston Tucker, now back in Ypsilanti, with questions about a particular Tucker ’48 he’d purchased in an earlier sale. Tucker did not have access to the records but remembered it: it had been a factory display car taken around the country as a demonstrator. While the company owned the car, it had been driven 150,000 miles. Its new owner was curious about the transmission slipping out of gear. Preston Tucker told him he was not sure which transmission was in this particular car, but the high mileage certainly meant the transmission was worn. He told the man to contact Dan Leabu for further help with the transmission.16
With the October 1950 auction, the corporation’s assets were disposed of, the plant was emptied, and the Tucker Corporation ceased to exist. While the machinery and equipment drifted anonymously back into the stream of commerce, the Tucker ’48 sedans would remain a vivid reminder of Preston Tucker’s accomplishment. The company had bought the materials and parts to build fifty of the cars after the Tin Goose, and astoundingly, all fifty of them would eventually be assembled. Before the assets were liquidated, thirty-seven had been completed. The parts for the other thirteen were bought at the auction and later assembled.17
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Along with disposing of the physical assets, like the tools and parts to build the cars, the trustee also had the power to resolve any legal claims the corporation may have been entitled to make. The trustee chose not to do so, simply telling the court that any claims the Tucker Corporation may have had against the government were being abandoned. Presumably, the trustee did not believe any of the corporate legal claims were worth pursuing. Several stockholders became upset upon hearing this. Why not sue the government for shutting down the Tucker Corporation? After all, the trial had exonerated it of wrongdoing.