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Part Two from 'Cork on Cork' relating to DeLorean
Back to Part One
The first thing was to tell everyone at Dunmurry exactly what the position was. Fortunately, one of the members of the Northern Ireland Development Agency while I was chairman was John Freeman, head of the Transport and General Workers Union in Northern Ireland. When he heard that I had been appointed joint receiver he sent me a message saying he would meet me when I came to Belfast and promised his assistance and that of the workforce in anything that I wanted to do. He had told them that he knew and trusted me, and I was his friend, and that they were togive me all the support they could. If they did not, they would be answerable to him. So my first appearance at the factory was with the head of the TGWU at my side. He had got the twenty or so trade union representatives into one room and introduced me to them. He asked them to trust me; he knew, he said, that I was going to do my damnedest to save the business. I told them that I was now running the factory and the object was to get it refinanced or sold. To do that we would be making no new vehicles from scratch, and could only employ people who could be usefully employed in the job of completing the stock of two-seater models in various stages on the assembly-line. We then went and met the entire workforce and explained exactly what was going to happen. If I had not been able to meet and talk to the men with John Freeman at my side, there would almost certainly have been trouble. John DeLorean left the very good British management, mostly former Chrysler people, to carry on the business and we established a good relationship with them, too. Our efforts to make ends meet were still thwarted, however, by our having to sell the cars we were going to complete through the DeLorean network in America. Possessing the sole selling rights, he had a stranglehold over us.
In his grand Park Avenue office in New York, DeLorean worked away at trying to find an investor and devising one scheme after another, each of which he optimistically hoped I would agree was just what we had been waiting for to save the day. I made several visits to New York in this period and, from one to the other, I never knew how I would be greeted or treated. One week I would be God's Gift to the company; next week I was the Devil Incarnate. Each time I had a go at trying to persuade him to let us have some control of his distribution company, he always refused. Whenever I raised the matter of the millions of dollars he owed his British subsidiary for the vehicles sent to him from Dunmurry, he jumped in with a counterclaim which showed we were not creditors at all. On my second visit, when he again had Roy Nesseth with him, I told him point-blank I was not prepared to sit in the same room with the man, and he asked him to leave. So from then on my sessions were always with John Z. alone. On most occasions he paraded before me at least two prospective purchasers who always expressed great interest to start with but never came to the boil. There was the day when he gleefully presented a 'report' on the profitability of the car which had no relevance to reality whatsoever. Between confident declarations that 'I've got a wonderful business' (as if saying so would make it so) he would abuse the British government for letting him down and failing to carry out their promises. Every time I started to talk about timelimits for producing the $ 10 million which we had agreed was the sort of initial investment which might postpone the closure of the Belfast factory, he changed the subject. So I made him find the money for the continuation of the factory week by week. If he wanted to continue for another week, then he had to pay for it. For the final week he borrowed the money from his own lawyers in Belfast, who were never repaid. And then there was no more. The British government ran out of both patience and money.
There was a last-minute drama, the would-be deus ex machina which came out of the blue with a promise of a loan to the American DeLorean company not of $10 million but $100 million. This was 'Minet Finance Management', a connection of Minet Holdings of London, a Lloyd's insurance broker which, as Ivan Fallon and James Srodes explain in their book DeLorean (Hamish Hamilton, 1983), specialised in high-risk, high- yield investment outside the reach of the Inland Revenue. That amount would have settled the Belfast company's %~O million of creditors' debts, bought the assets of the Northern Ireland plant and paid for the now finished cars. I said I would be happy to consider this on the condition that DeLorean himself at once invested $20 million of his own capital in the Belfast company, which would stay there even if the proposed Minet loan failed to mater-ialise. When John Z. said he could only raise half that amount, Minet contacted an American woman, Jeanne Farnan of an organisation called Financial Services Inc. of Virginia, and asked her if she would be interested in making him a short-term loan of $10 million. She said she might, and on her way back to Virginia dropped in for a quick look at the Dunmurry operation. The next day her firm offered John DeLorean a standby loan of $ 10 million for ninety days at 12 per cent and he accepted it. Whether or not she knew that he would 4ot be able to retrieve the sum he was investing in the Belfast Company, of which the $10 million was part, if the Minet loan fell through, I do not know. I put the deadline for wrapping up the whole transaction as 20 October.
All this time a subplot to the DeLorean Drama was unfolding on the other side of the Atlantic of which I was unaware, and by sheer coincidence had its climax the day before my deadline.
Apparently for some time the FBI had been suspicious that DeLorean was about to become involved in a plot to distribute drugs, and they had been observing and watching his movements. They were also watching people known to be in the drug trade and they considered it possible that John DeLorean was about to deal with those people. On 18 October in Los Angeles, one of them was apparently arrested by the FBI and a quantity of cocaine was found in his possession.
The next morning over on the East Coast, John DeLorean arrived for work in his New York office where Jeanne Farnan's document requiring DeLorean's signature was delivered in the course of the morning. He opened the package and presumably recognised its contents as the papers which would bring him the ninety- day loan of $ 10 million, but for some reason he postponed signing them. He was due to fly to Los Angeles later in the morning. However, on arrival there, he went to the Sheraton Plaza Hotel and was apparently arrested by the FBI and charged with dealing in drugs. I felt rather sorry for him when I saw his picture in the paper, but the sympathy did not last long!
I had a surprise too that morning! I was hoping our transaction would go through later in the day, and the business continue, but I was woken by a telephone call at 5 a.m. from a newspaper reporter. Everything seemed to happen with DeLorean at the wrong time of the day, because of the difference In time between America and the UK. As I answered the telephone the reporter said, 'Did you know that DeLorean has been arrested for dealing in drugs?' I said, 'No.' I was then asked, 'What is your reaction?', to which I replied, 'I am bloody astounded', which indeed I was! However, later that morning when I opened the letter from FSI saying the money was in place I sent a telex to DeLorean's office in New York enquiring whether the financing was still on. The reply I received was in the negative. I was soon to learn officially what had happened, and it all came as a bit of a shock. When, as receivers, Paul Shewell and I had to realise the British company's assets and wind it down, that involved us in enquiring into what had happened.
We discovered that the American DeLorean company had undertaken to put up the cost of completing the engineering of the car. When it came off the end of the assembly-line it was to be a complete working vehicle. Unfortunately it was not. It had to go to the British firm of Lotus in East Anglia who, it was arranged, were to 'develop' the car. It could not go under its own power but had to be taken to the Lotus works on a car- transporter. This was of less financial consequence than it might have been, since part of the deal was that the British government through the Northern Ireland company would finance the tooling and the glass-fibre process for the body to the tune of about $5 million, but the Americans would finance the engineen'ng of the car. For this the American DeLorean company formed The Research Partnership in which John Z. persuaded friends to invest some $18 1/2 million. Though Lotus were to do the actual work, the contract to 'develop' the car was between this Research Partnership in America, with the British subsidiary in Belfast, and an organisation in Switzerland called 'GPD Services Inc.' incorporated 'in Panama in 1977 as ILC Inc. The initials are supposed to stand for General Products Development. GPD has been described as a'shelf corporation'and a 'cash laundry'. It appeared to have no assets and no office premises, and was run by a woman called Marie-Denise Juhan Perrin ('Juhan'), an associate, so I am told, of Colin Chapman of Lotus for twenty years, and whose husband worked for Lotus.
GPD signed the contract to develop the DeLorean two-seater sports-car and subcontracted the development work to Lotus. I never learnt why it had not been possible to have the work done by Lotus direct. But in the course of our inquiry we found the minutes of a board meeting of the Belfast company at which John DeLorean had informed directors that, though his American friends had put up $12 1/2 million, a little more money would be needed to develop the car. It would not be fair therefore for his American colleagues to continue to pay out money for this, as they had made their contribution. The rest of the cost of development should fall on the Irish company, he claimed. Since the British directors had agreed to this and had paid out another $17 million I was anxious to see how far the car had in fact been 'developed' by Lotus at that stage. I wrote to Lotus asking for this infoi'~;mation but got no reply. So I telephoned Colin Chapman, the head of the firm, told him I had to have an answer and was coming to see him. Chris Hughes of Cork Gully, who later took over from Paul Shewehl as Joint receiver, came with me, and we took with us all the receipted invoices making up the $17 1/2 million. What had the Belfast company got for the original money? Moreover what had been done by way of Lotus 'developing' the car at the time the arrangement had been made that the Americans should stop paying for it? It was uphill work. We tried painstakingly to go through Invoice- by 'Invoice with Chapman and his finance director Fred BushelT to discover precisely what work had been done for each sum of money paid. At one point Chapman became exasperated.
'What are you trying to do?' he exclaimed.
'We are trying to find out what the DeLorean factory in Belfast got for its $17 1/2 million.'
'People keep on talking about $17 1/2 million. I know nothing about any such sum. Lotus has never received $17 1/2 million. All we had was $5 million from GPD to show good faith, which was later returned to them. All the costs for the development of the car have been Invoiced to the Irish company. We here know nothing about $17 1/2 million.'
'I can't understand it. Seventeen million dollars was the money put up by the American "Research Partnership" and the Irish company to develop the car.'
'If that is so, then we at Lotus know nothing about It.'
'So far as I remember, you signed a contract to carry out all the work under contract with GPD. You must have seen the contract, surely?'
'I did not see it,'claimed Chapman.
On my return to Belfast I dug out all the contracts, and there was the one from Lotus declaring: 'We undertake to carry out the work which GPD has contracted to do "according to the contract attached".' I telephoned Chapman at once and read this out to him.
'I really am rather puzzled,' I said.
'Oh,'said Chapman breezily, 'we only saw that bit of the contract, the bit about what was to be done to the car. We did not see the rest of it.
In view of what he had said, I told him, I would have to come and talk to him again. He agreed to see me, but before I could go he had a heart-attack and died. The true version of this tangled sequence of events died with him. Though during my visit Bushell had certainly seemed concerned, Chapman was perfectly happy and relaxed. So I do not think his heart-attack was in any way related to the problem we had been discussing. The British government, through the Irish company, had paid for the whole cost of developing the car, in spite of the fact that in the contract it was very carefully spelt out that invoices for the glass-fibre tooling only should go to the British government; and that any surplus money required over L17 million should be paid for by The Research Partnership in America, the general partner of which was John DeLorean or rather his DeLorean Motor Company in America.
It appeared that in spite of everything which had been said in the past the whole of the money put up for the development of the DeLorean Car had disappeared - or'gone walkabout', as I told the parliamentary committee. Where had it gone? To find out, Chris Hughes and I journeyed to Geneva to see Mme Juhan, the woman reputed to be running GPD.
'Can you tell us, madame, what has happened to the seventeen million dollars paid out by the DeLorean Motor Company Limited of Belfast, for which we have receipted invoices?' I asked her.
'It is none of your business,'she said without flinching.
'So you won't tell me?'
'It's not that I won't tell you. I'm just telling you that it is nothing to do with you.'
'On the contrary, I am afraid it is.'
I hammered away for a few minutes in the same vein, but got no change out of her whatsoever. She resolutely refused to divulge what she obviously knew.
'Will you at least tell me whether anyone who signed the contract got any money out of it?' I said in an attempt to leave Geneva not entirely empty-handed.
'Yes,' she said, 'I can tell you that they did not.'
Go to Part Three
Read Part Three here
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