Friday, December 08, 2006

The Preston Tucker Story, 2: Triumph and Tragedy


In the first part of this two-part series, we met Preston Tucker, who dreamed of building a new and safer automobile but was stymied at every turn by sinister forces in the government and the auto industry. Accused of fraud, violation of SEC regulations and conspiracy, Tucker faced a jail term of 155 years and sizable fines. His first trial ended in a mistrial. We now pick up the threads of the story. A jury of six men and six women has been chosen for a new trial.

The government resumed with U.S. Attorney Otto Kerner's repetition of the history of the Tucker Corporation. He told the jury he would prove the defendants used it as a device "to prey upon the public, the dealers and distributors, and the stockholders." The parade of government witnesses began again--all familiar faces from the first trial. Ex-Tucker employees followed, many venting their grievances under questioning by the three government attorneys. Their doleful testimony gave an insight into the birth pangs and growing pains of an industrial enterprise attempting to manufacture a complicated product in a highly competitive marketplace.

Alex S. Tremulis, designer of the body of the car, admitted under prosecution questioning that the first Tucker was made of reformed parts of a 1942 Oldsmobile. Defense attorneys quickly brought out that it was a common industry practice to use existing body parts and hardware to create mock-ups of a new model.

Witness Lee Treese, vice-president in charge of manufacturing for Tucker, was cross-examined skillfully by defense attorney Floyd Thompson. He confirmed that many of that year's 1950 cars made in Detroit incorporated features first introduced earlier in the 1948 Tucker. Treese, an expert on mass production methods, testified that the Tucker die-stamping program was more than 90 percent complete in June of 1948. He insisted the company would have succeeded in producing a good car except for outside interference.

Treese was eminently qualified to speak to the subject of interference; in July of 1948 he had been literally dispossessed from his own office in the Tucker plant by SEC investigators going through the company's records. The personal animosity of some witnesses toward Preston Tucker showed clearly in their testimony. William Stampfli, Tucker Corporation master mechanic, testified that the individual wheel suspensions had to be installed three times on the eve of the car's initial showing because of persistent breakdowns. Defense attorney William T. Kirby got the witness to admit that instead of the steel suspension arms that were specified, aluminum castings had been used.

Stampfli showed frequent flashes of annoyance. Asked by Kirby if he had access to Tucker's research department, the witness snapped, "I didn't even know they had one." The one-note quality of such recitals, often tinged with personal rancor, eventually proved too much for patient Judge LaBuy. On November 8, he gave government attorneys a stern admonition to "get down to the meat of the case and start proving the conspiracy charge."

Defense attorney Kirby knew that shipbuilder Henry J. Kaiser was a friend of Senator Ferguson and the SEC's Harry McDonald. Cross-examining Carl H. Scheurman, a member of Tucker's engineering staff and a government witness, Kirby managed to insert several references to rival carmaker Kaiser's automobile venture. He asked Scheurman if he knew that the first Kaiser-Frazer model was partly made of wood and that Kaiser-Frazer had promised a front-wheel drive car they never produced.

"Kaiser-Frazer didn't get indicted," Kirby added, "and they got 44 million dollars in loans from the government, didn't they?" The barrage of objections from government attorneys drowned out the witness’s response.

An Alias Is the Issue
When defense attorney Daniel O. Glasser heard the testimony of prosecution witness Robert B. Walder, he picked up his ears. Walder, an engineering consultant to Tucker, had a decided German accent. Glasser decided to play a hunch. "What was your father's name?" he asked the witness.
"Braunwalder," was the reply.
"And what was your name when you went to school?"
Glasser asked the witness whether he had received a subpoena to testify in the Tucker trial.
Walder answered "Yes," displaying the subpoena almost proudly.
The attorney then asked if the government had referred to him in the subpoena as "Robert B. Walder, alias Robert Braunwalder."
The prosecution objected to the question as irrelevant.
"I think it is important, Your Honor," Glasser insisted. The subpoena handed to his client had read, "Harold A. Karsten, alias Abe Karatz." "They did exactly that in this case to my client. They did it as deliberately as they could. There is no reason I cannot develop the same information here."
Judge LaBuy agreed.
Attorney Glasser repeated his question: "Did they refer to you as 'alias Robert Braunwalder' when they subpoenaed you?"
Walder's answer was "No."
"That is all," said Glasser. He had scored a point. A couple of jurors exchanged knowing glances.

The government next tried to cast doubt on Tucker's claims about his association with the late Harry Miller, legendary racing car builder. Fred Offenhauser, veteran builder of racing cars and engines, testified that Tucker did no engineering work on cars built by Miller. Miller's son Ted and his widow, Edna, were also put on the stand. Under prosecution questioning they testified that Tucker had merely been a contact man for the late racing car builder and the companies for whom Miller & Tucker, Inc., had built cars. But the government attorneys' strategy exploded in their faces. In cross-examination by the defense, Mrs. Miller's quiet admission that her late husband's funeral and burial expenses in 1943 had been paid by Preston Tucker left a hush over the courtroom. It also left little doubt in the minds of jurors about the man Preston Tucker or about his relationship with Miller.

Government witness Emery Hughett was a drawling Tennessean and a former bookkeeper at the Ypsilanti Machine and Tool Works, Tucker's engine-building subsidiary. Hughett could have been a model for Forrest Gump. He testified that an IRS agent, identified only as "Mr. House," came to the Ypsilanti Company's offices and began to grab records from file drawers. The witness said he retrieved the papers, slammed the drawers shut and told the agent he was exceeding his legal rights.

The Villain Identified
"Homer Ferguson [Michigan Republican senator] is hell-bent on putting Tucker in jail," Hughett quoted House as saying. "Joseph Struett in Chicago told me to get evidence in any way possible." Hughett also testified that he saw two men in an Ypsilanti restaurant with what he recognized as company records. He identified the men as James Goode and Frank Corbin, SEC representatives. Hughett testified that when he returned to the company's offices later he found other company records hidden in a desk about to be junked at the rear of the building.

The laconic witness added little to the government's case. On direct examination by Assistant U.S. Attorney Downing, Hughett vaguely identified records of the Ypsilanti company. His stock answers to specific questions exasperated the government attorney: "I just don't know," "I can't exactly remember," or "I just couldn't exactly tell whether that's Preston Tucker's signature or not."

Under cross-examination by defense attorney Kirby, Hughett startled the court. He claimed government attorneys threatened him with indictment if he told the grand jury that Federal attorneys had raided Tucker's Ypsilanti plant in search of records. He said the threat came from James Goode, an attorney for the SEC. Goode was one of the two men Hughett had already charged with taking records from the company's files without authority and without even leaving a receipt. "If you tell about the raid on the Ypsilanti Company's office, you'll be indicted," Hughett quoted Goode as saying. "There doesn't have to be a charge. One can always be drummed up."

The next day, Goode and Everett House, an agent for the Treasury Department, stood on the courthouse steps and denied they had stolen records for evidence or threatened witness Hughett with indictment. Government attorneys asked permission to have Hughett declared "the court's witness," thus relieving them of responsibility for his testimony. Judge LaBuy denied the request, ruling that the government would be impeaching its own witness, Hughett, if Goode and House were allowed to dispute Hughett's story for the record. On the witness stand, the two were only permitted to identify the Ypsilanti Company's books--and nothing more. They had to be content with making their denials to reporters outside the courtroom.

By the first of December, only about a third of the government's 75 witnesses had been heard. The tiring pace of the government's case was beginning to be felt. With the prospect of a long recess spanning the Christmas and New Year's holidays, defense attorneys tried to convince Judge LaBuy to make it a short recess. Tucker's counsel declared that Tucker and his other clients (Dulian and Radford) were penniless and in serious financial straits. Facing the problem of being able "to put food on the table," Dulian was selling cars at night, and Radford had taken a part-time job to keep his family going.

Sharp Exchanges
Tensions heightened between prosecution and defense, with several sharp clashes between Floyd E. Thompson and Otto Kerner. In point of age and experience, the 63-year-old Thompson was the senior lawyer in that courtroom. He had been Chief Justice of the Illinois Supreme Court, then returned to a trial practice famous for many stirring defenses, including the successful acquittal of utilities tycoon Samuel Insull.

At one point, Kerner objected to Thompson's repeated use of the word "prosecutor." Kerner pointed out that it was not his title, and he wished Thompson would stop using it. "Judge" Thompson responded that he had been a prosecutor for six years and had never been ashamed of it. If his aim was to needle the federal attorney, he certainly succeeded. "Who said I was ashamed of it?" snapped Kerner.

At the same time Otto Kerner was displaying his discomfiture in the courtroom, the government was formally taking possession of the huge Dodge-Chicago plant. With that action, any hope of sustained car production collapsed. On December 17 Judge LaBuy recessed the trial for two weeks. It would be anything but a merry Christmas or a happy New Year for the defendants or their families.

A Star Witness
When the trial resumed in January, one of the first witnesses was Daniel J. Ehlenz of St. Paul, Minn. Ehlenz was expected to be a star government witness. He had paid $28,000 for a distributorship and owned a Tucker automobile. The defense learned that Ehlenz disliked Tucker but still believed in Tucker's car. They decided to turn the witness's testimony to their advantage. In cross-examination, Ehlenz's animosity toward Tucker was skillfully brought out. Then he was made to admit that he still drove his Tucker, that it had 35,000 miles on it, that he cruised it at 90 miles an hour, and that it was "the finest car I have ever driven." These were telling points in Tucker's favor from a prosecution witness. The smiles in the jury box told attorney Kirby that his gamble had paid off.

The tangled accounts of the Tucker Corporation next went into the record. Sidney Ohrbach, witness No. 71, the SEC statistician in charge of the small army of accountants and auditors who pored over the company's books, took the stand. In the 26-month period ended March 3, 1949, when all operations ceased, the corporation had taken in $28,491,652 and spent $28,309,280.

Prosecution attorney Downing asked what percentage of the development spending had gone toward developing items other than automobiles. He dropped that line of questioning when told that $158,734 went to the so-called Campini Project.

Tucker had learned of the work of Secundo Campini, whose 1931 Italian patents on jet propulsive devices made him a pioneer of jet aviation. Tucker had arranged for Campini to be flown from Italy and had put him on the payroll to work on the problem of a turbine automobile. Understandably, testimony about forward-looking research projects would not fit the picture of Tucker as a swindler of widows and orphans the government was trying to paint.

According to witness Ohrbach, the Tucker Corporation had $36,820 in cash on hand and in banks on December 31, 1946. A year later, that figure was a little more than $12 million. It then dwindled month by month to a low of $10,151 in November 1948 and stood at $219,193 on March 3, 1949. The chief items of income included $15 million from the sale of Class A stock; $7.2 million from the sale of dealer and distributor franchises; $3 million from dealers for accessories; and $237,469 from customers as deposits for accessories.

Debits on the Tucker books included $4.5 million for engineering and development; pre-production expenditures of $3.8 million; administrative charges of $3.6 million; $1.3 million for promotion; and selling expenses of $639,907. Newspapers ran these figures under scare headlines that read, "Little Found Spent on Tucker's Design" and "SEC Statistician Says Only Seventh of Income Went for Engineering, Development."

The defense moved swiftly to counter any impression of penny-pinching. Under cross-examination by attorney Kirby, Ohrbach admitted that salaries and wages for employees other than the eight defendants made up the largest single expense item. Almost $3 million had been paid to federal, state and local governments for rental of the vast Dodge-Chicago war plant occupied by the company, and for taxes and fees. Attorney Kirby pointed out that of the $28 million described as receipts, only $25 million was actually available to be spent on the production of the automobile. The difference included discounts to securities dealers who sold the stock, and money held in escrow from the sales of accessories.

The government had saved what it believed to be the most damaging testimony for the last. It summoned to the stand its 73rd and last witness, SEC accountant Joseph Turnbull. Mr. Turnbull testified that Preston Tucker alone had netted more than half a million dollars from his operation of the ill-fated automobile enterprise. Payments of various kinds to the other defendants totaled almost one million dollars. The witness had a list of "questioned transactions" totaling $527,000. These included items the SEC had first leaked to the Detroit News. Under cross-examination by attorney Kirby, Turnbull admitted he could not define any of the payments he had testified as being fraudulent or dishonest. He insisted he had based his testimony on the company's books--but had not investigated the individual items.

Kirby patiently took the witness through his list, item by item, skillfully demolishing his testimony. Summarizing the amounts Turnbull had described as "questionable," he asked him, "You are not here suggesting these figures are figures of monies taken fraudulently, are you?" His answer was, "Not exactly, no." Another star government witness had fizzled out. After Judge LaBuy denied defense motions for directed verdicts of acquittal, jurors and spectators looked forward to the defense presentation, scheduled to begin on January 16.

A Surprise Announcement
That morning, the defense dropped a bombshell, surprising spectators, and judge and prosecution attorneys alike. One by one, defense attorneys announced that they would not call a single witness. It had been expected that the defense's portion of the trial would produce another long procession of witnesses, climaxed by the testimony of Preston Tucker and his seven co-defendants. Government attorneys were salivating at the prospect of cross-examining them.

"It is impossible to present a defense when there has been no offense," attorney Daniel Glasser told the court. The other defense attorneys made longer statements, all to the same effect--namely, that the government had proved no offense; therefore there could be no defense. The last was William Kirby, who closed his statement with two words: "Tucker rests."

Caught flat-footed by the defense's decision to rest, the prosecution was unable to proceed immediately to its summation. Two days later, Robert J. Downing argued for five hours before the jury. He asked for a verdict of guilty as charged, claiming that Tucker and the other defendants "knowingly committed one of the largest frauds that has ever been perpetrated upon the public of these United States."

Summing up the prosecution's case, Otto Kerner asked, "Did these defendants tell the truth or did they lie to the public? I trust you will find all are guilty." In his masterful summation, defense attorney Kirby portrayed Tucker as "a man of honesty and vision whose automobile enterprise was crushed by the weight of malicious government investigations." He branded frictions between Tucker and his executives merely as "the obsequies of a failing corporation and not evidence of a conspiracy to defraud."

Kirby spoke all day in an emotional defense of Tucker, urging the jury to "stop picking at the turkey." At one point he paused in mid-sentence, obviously overcome with emotion. "I'm sorry," he apologized, wiping his eyes. Referring to the defendants, he added, "You get fond of these people." Kirby told the jury the defendants "either intended to cheat and that's all they intended to do or they tried in good faith to produce a car. The two are irreconcilable." He even invited the jurors for a ride in one of the Tucker cars parked outside the courthouse.

Attorney Dilling, representing Robert Pierce, declared, "private enterprise itself is on trial." And "Judge" Thompson pointed out that his client, Floyd D. Cerf, had stood to lose a million dollars if the sale of Tucker stock had not been successful, adding that "people who are going to defraud don't take chances like that--they let the other fellow take the chances."

Judge LaBuy's 45-minute charge to the jury was a masterpiece of juridical step-by-step interpretation and instruction. "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," the judge opined. "Erroneous judgment may be as consistent with good intentions as with bad intentions.

"You are dealing here," he told the jury, "with offenses that require specific intent. Unless there is proof that the particular defendant whose case is being considered was acting in bad faith and with an intent to do wrong, he must be found not guilty." The court declared, "Good faith is a complete defense," echoing the sentiment expressed by Justus Chancellor, attorney for Fred Rockelman and Cliff Knoble.

The Verdict
Jury foreman Joseph Kouba, an employee of the Western Electric Company, received the case Saturday morning, January 21, 1949, at 11 a.m. Twenty-eight hours later the jury signaled it had reached a verdict. Everyone scurried back to their places in the courtroom and stood up as Judge LaBuy entered from his chambers. "Have you arrived at a verdict?" the judge asked. "We have, Your Honor." The foreman handed a sealed envelope to the court clerk.

After reading each count, the clerk spoke the words "not guilty." Jubilant cheers from the 75 relatives and friends of the defendants shattered the decorum of the courtroom. Recognizing the futility of trying to restore order, the judge walked into his chambers without saying a word. Four ballots had been taken. Two jurors were for conviction on the first two ballots, one for conviction on the third ballot, and all twelve for acquittal on the fourth ballot. Tucker had won, but at great cost. In the process, his corporation and his automobile were gone. His dream was smashed by naked abuse of governmental power. Ever an optimist, he shrugged. "Even Henry Ford failed the first time out."

Dramatists classify as a tragedy any story that captures the tragic sense of life--that some of us are inevitably doomed through fate, destiny or the human condition to suffer, fail and die. In a tragedy, the measure of a life is taken by how a person confronts inexorable failure. Preston Tucker's story is a classic tragedy in every sense of the word, celebrating his courage and dignity in the face of disappointment and defeat. Some of his innovative design changes that would promote automobile safety have yet to be adopted by the industry.

Fifty-eight years have passed since the Tucker trial ended and the defendants emerged into the cold, clear air of Chicago's South Dearborn Street to pick up the pieces of their lives. Soon after the trial, defense attorney Kirby received an agitated phone call from one of the jurors, who said that U.S. Attorney Otto Kerner, Jr., had called the jury into his office and asked them to explain the verdict. Kirby told the juror that Kerner's action was unethical, uncalled for and almost without precedent. The juror wanted Kirby's advice."I told him," Kirby said, "you don't have to explain your decision to anyone until the Last Judgment." Kirby summed up his feelings with this comment: "It was my honor to defend Preston Tucker, and I have always been proud of our courts that he was acquitted."

William T. Kirby died in 1990 at the age of 79 after a long and distinguished career as a trial attorney. Chicago attorneys who were associated with him early in their careers still proudly list that fact in their biographies. He became the first counsel and later chairman of the MacArthur Foundation, the philanthropy that makes awards to artists, writers and scientists who show originality and promise in their fields.

Otto Kerner, Jr., continued to serve as U.S. Attorney for the Northern District of Illinois until 1954, when he became county judge of Cook County. He held that office until 1960, when he was elected governor of Illinois, easily beating incumbent William G. Stratton, and served from 1961 to 1968.

Worried that agitators had fomented inner city riots, in August of 1967 President Lyndon B. Johnson named Governor Kerner to head a presidential commission to investigate the nation's ethnic tensions. The commission's report issued in March of 1968 concluded that racism and economic inequality had sparked the riots.

After his second term as governor ended in 1968, Otto Kerner was named a judge in the U.S. Court of Appeals. In 1973, in an ironic reversal of fortune, he was charged with crimes committed while governor. After being convicted of 17 counts of bribery, conspiracy, perjury and income tax evasion in a racetrack stock deal, Otto Kerner resigned from the bench. Disgraced and sentenced to three years in prison, he died of cancer in 1976 at the age of 75. "Judge" Floyd E. Thompson died in 1960 at 73, having spent a lifetime in the service of the blindfolded goddess. Abe Karatz went to Texas and is believed to have died there.

For Preston Tucker a desire for vindication, not vengeance, burned strongly within him. He instituted a series of libel suits against those persons, newspapers and magazines that had pilloried him so unmercifully. By September of 1950, outstanding Tucker damage suits totaled more than $19 million. Depositions taken in the suits were revealing. Before the trial, Assistant U.S. Attorney Lawrence Miller had referred to the confidential report of the SEC and assured the court, "As for Collier's and the Detroit News is concerned, we don't know anything about those newspapers or where they got their information, if they got it." Yet Detroit News writer Martin S. Hayden admitted that Harry A. McDonald, a commissioner of the SEC, had given him a copy of the SEC report to read in a room at Washington's Statler Hotel. He confirmed that much of the information in his Detroit News article had come from this report.

SEC Commissioner McDonald acknowledged that he gave the report to Hayden and later told a Senate investigating committee, "My purpose was to protect the Commission against unjustified criticism and to maintain public confidence in the Commission. I would unhesitatingly do the same thing today under similar circumstances." Similarly, Lester Velie, writer of the damaging Collier's article, admitted that he had been given a copy of the SEC report to read in Otto Kerner's offices in Chicago's Federal Building and in the Chicago office of SEC Commissioner Thomas B. Hart, who furnished him with office space and a desk.

Tucker's libel suits dragged on. He went to Brazil in the mid-1950s, hoping to stage a comeback there by building a popularly priced car designed by Alexis de Sakhnofsky and to be called the Tucker Carioca. Debilitating fatigue plagued him in Brazil. Aware that time might be short, Tucker made a last desperate attempt to reach his homeland by air. The rigors of the trip worsened his condition. Once home, his illness was diagnosed as lung cancer .

Preston Tucker died in Ypsilanti, Michigan, the day after Christmas in 1956 and is buried in Michigan Memorial Park in Flat Rock, Michigan. The death certificate gave the cause of death as pneumonia, a complication of his lung cancer. Still, there are some who say that this office boy on roller skates, this sentimental chump, this believer in luck, this dreamer of the American dream, this optimistic supersalesman sure that tomorrow will be better, this strange melding of charismatic visionary and practical realist, this Preston Tucker really died of a broken heart. And who is there among us that can deny this?

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