Death of the Tucker ‘48 — Part II
a.k.a. The Tin Goose
Read Part I here.
Long before there ever was a headline and a broken man, there was an enemy: Harry A McDonald, commissioner of the Securities and Exchange Commission.
Harry thought Tucker was a crook. He was certain that the Tin Goose (the car’s nickname) was an imaginary car and that Tucker was fleecing the public by convincing it to invest in his phony car company. But Harry didn’t just want to prosecute Tucker, he wanted to destroy him. He wanted the public to hate him, he wanted Tucker’s employees to be afraid to show up to work, he wanted to perch Justice’s mighty boot heel atop Tucker’s head and push him six feet under without so much as affording him the dignity of a coffin. Why did he hate him so much? I can’t say for sure, but I can give you plenty of reasons why he didn’t hate him.
Harry A. McDonald did not hate Tucker because he was worried about unsophisticated investors losing their money in some made-up car scheme. The reason we know that Harry wasn’t worried about the fortunes of investment-happy car fanatics is because at the very same time he and his agency were devoting the bulk of their efforts to prosecuting Tucker, they simultaneously presided over the greatest fleecing of both public and private investors in the history of car manufacturing at the hands of the great Kaiser Frazer Corporation.
Now don’t feel bad if you’ve never heard of the Kaiser Frazer Corporation; it’s probably because they built very mediocre cars that no one cares about — unless you happen to be a collector of rare, mediocre automobiles. What the Kaiser Frazer Corporation did do was talk an enormous game. They were going to build an affordable “people’s car” that came with wild features like “Torsionetic suspension.” (“Torsionetic suspension” has such an impressive, futuristic ring to it that it doesn’t require any explanation or definition whatsoever.) The car was supposed to sell for $500, come complete with a brand new engine design that would revolutionize the industry and be the world’s first front driven car.
The initial stock offering was ushered in with an extravagant show held at the Waldorf Hotel where dinner was served to a boisterous crowd sprinkled with the occasional movie star and a healthy besmattering of models to help beautify the landscape. 1,000 cars were ordered by the euphoria-filled crowd within the first day, and the company went on to raise $54,000,000 in its initial stock offering on the strength of its many promises. That’s a good haul by today’s standards but was a ridiculous sum of cash over 67 years ago. Yet despite being flush with more money than any start up ever needed, neither Mr. Kaiser nor Mr. Frazer were ever able to deliver on any of their promises. No Kaiser car ever sold for anywhere near $500, each Kaiser came with the same old type of engine that had been around since the dawn of man, the “front driven” feature never panned out either and unless “Torsionetic” means “Coil springs like the kind you find on every other car in the world,” that was just a cruel joke played on suckers who liked strange sounding words.
Additionally, the Kaiser Frazer Corporation’s stock never paid out a single dividend and as its final act, the company fled the U.S. passenger car market within a decade of that lavish Waldorf bash. Not only did Mr. Kaiser and Mr. Frazer raise vast quantities of cash based entirely on bogus promises — at the very same time that they were pickpocketing the American auto investor — Tucker and his associates were being hounded by the SEC, the FBI and the Justice Department for misrepresenting their vehicle’s features. But the irony only begins with the first of three SEC sanctioned Kaiser Frazer stock sales, because in addition to private funding, the Kaiser Frazer Corporation also required two bailouts by the U.S. Government’s Reconstruction Finance Corporation: one so that it could retool its manufacturing plant and another so that it could keep afloat all of the Kaiser dealers across the country who were having a devil of a time hawking their cars on a public that wasn’t nearly as gullible as the crowd that had filled the ballroom of the Waldorf. The total bill for the U.S. Government’s involvement in the Kaiser Frazer Corporation up to this point in the story: $40,000,000.
So it’s like I said, Harry wasn’t bent on crushing Tucker because of a silly unkept promise to investors. The case of Old Man Kaiser proved that he didn’t mind those at all. Besides, even if in reality Harry couldn’t stand car salesmen who over promised and under delivered, that’s no excuse to hate Mr. Tucker. Tucker actually kept nearly every single promise he ever made to the buying public:
- Lightweight aluminum, air-cooled, rear engine with more power per pound than any other vehicle? Check.
- Automatic Transmission. Check.
- Easy cruising at speeds of 100 miles per hour? Check.
- Windshield that popped out of its casing in an accident instead of showering the driver with shards of glass? Check.
- Independent suspension for safety and comfort? Check.
- Center positioned steering wheel for increased visibility? Check.
- Roof opening doors for ease of entrance and exit? Check.
- Padded dash for safety and curved front bumpers for better deflection in an accident? Check.
- Better gas mileage and quicker acceleration than any other car in its class for the ensuing decade? Check.
Did I mention that he also held the patent on a collapsing steering wheel so that you wouldn’t necessarily have to crack your sternum in an accident? Or the patent he held for an odometer with a built in alarm that would sound once specific speeds were exceeded? Sorry if I left those out.
Yet despite the fact that any half intelligent kid enrolled in his High School’s shop class could independently verify each of Mr. Tucker’s claims, the SEC insisted that the Tucker ’48 (the car’s official name) was “an untested, unproved conglomeration of highly questionable engineering ideas.” Just to make sure that the SEC’s opinion of the vehicle was clear to the literate public, they referred to the car as — please note the quotation marks — a “monstrosity.” Even the whole “untested, unproved” issue couldn’t have been what had Harry in an uproar. My guess is that that line was written by some low-level staffer who never read the very public results of a test of seven Tucker vehicles held at the Indianapolis Speedway.
For two weeks, the cars were driven around that very famous oval to analyze handling, performance at various speeds, engine wear, oil consumption and a whole slew of other factors. A few of the cars were even driven non-stop by teams of professionals at average speeds of 75 miles per hour, sometimes reaching speeds in excess of 100 miles per hour. And at the end of an exhausting two weeks, six of the Tuckers were plenty capable of making the drive back to Chicago. The seventh had rolled three times during one of the trials, in which the driver suffered a bruised knee and the windshield popped out as advertised.
It wasn’t the “unproven” nature of the Tucker’s capabilities that raised Harry’s ire. Because even if Harry didn’t trust the results of tests performed by Tucker’s employees, a man so engrossed in all things Tucker couldn’t have possibly missed the article published in Mechanix Illustrated and written by the nation’s premier authority on all things related to the automobile, Tom McCahill. The following are excerpts from his article:
“Tucker is building an automobile! And, brother, it’s a real automobile! I want to go on record right here and now as saying that it is the most amazing American car I have ever seen to date; its performance is out of this world. Why do I think so? Wait until you have had an opportunity to drive the car and you’ll know what I mean.”
To counter a myth that the Tucker couldn’t go in reverse Mr. Cahill made sure to include the next paragraph:
“The pre-select shift worked well and the car took off like a comet. After several acceleration runs I stopped and tried reverse gear. The Tucker does back up! Leaving the plant grounds, I went up to Cicero Boulevard on the southside of Chicago, and soon I knew I was in one of the greatest performing passenger automobiles ever built on this side of the Atlantic.”
His article goes on to include lines like “This was the quickest 105 miles an hour I have ever reached.” And “The car is roomy and comfortable. It steers and handles better than any other American car I have driven. As to road-ability, it’s in a class by itself.”
Nope. Harry’s hatred wasn’t caused by “unproven” Tucker claims. It couldn’t have been that at all. But it might have been the money. It was probably all the money Tucker was stealing that got ol’ Harry so upset.
For well over a year, scores of investigators from the SEC, accompanied by FBI agents and with the cooperation of the Justice Department, crawled through literally every nook and cranny of Tucker’s Chicago plant. They confiscated and reviewed every single document and retraced the flow of every penny into and out of the company. As a direct consequence of the very intrusive investigation, Tucker was forced to close his plant for a time and when he eventually reopened it was with a skeleton crew of about 300 men and women, down from 1,600. At one point during the investigation, one Tucker executive noted that there were more government officials on site than employees. Considering the verifiability of each of Tucker’s claims regarding his car and his business practices, the scale of the investigation seemed unnecessary and was certainly unprecedented. But sometimes when in the pursuit of justice that is just what you have to do. And to his credit, Harry was a thorough man who did not want to make any mistakes. So only after a very exhaustive search did he finally feel confident that he had enough dirt on Tucker to make a criminal charge stick. At long last he had him; this time he really had him! So he lowered the boom and leaked the contents of the SEC’s confidential report on the Tucker Corporation to the Detroit Free Press (which, by the way, was illegal.)
On March 13, 1949 Detroit’s largest newspaper printed in bold letters across its front page “GIGANTIC TUCKER FRAUD CHARGED IN SEC REPORT.” And after a long slew of headlines that had harassed the company’s bottom line since almost the day of its inception, that was the headline that put the company under for good.
In the ensuing article reporter Martin S. Hayden wrote that Tucker had illegally funneled $759,000 dollars of corporate funds to his own account, along with the oft repeated claim that Tucker was a charlatan who made “grossly misleading and false” statements about his car. You can imagine what type of damage a headline like that does to a company’s stock price, to its ability to raise funds in the stock exchanges, to employee morale and most of all, to consumer confidence in the product. Though even a half-hearted review of the company’s balance sheet as of March 13, 1949 would show that the Tucker Corporation was very far from insolvent, the numbers lied. The Tucker Corporation was effectively finished as of March 13 and the autopsy report would read “Death by a Headline.”
A funny thing happened though. After months in legal limbo, on June 10 Tucker and seven of his associates were indicted on 25 counts of mail fraud, 5 counts of violations of SEC regulations and 1 count of conspiracy to defraud. Tucker and each of his cohorts faced up to 155 years in prison if convicted. But despite all those years of investigating, June 10th 1949 would prove to be the high point for the government’s case against Tucker. Because no sooner did the judge open the trial then the prosecution’s case began to unravel. Their evidence of fraud was flimsy on a good day and meandered back and forth every day between conjecture and fiction. Such was the incoherent nature of the Government’s case that a frustrated judge eventually had to demand of the prosecution “… let’s get down to the meat.”
If it was sad to watch the prosecution botch a case it had spent 2 years and thousands and thousands of dollars and man hours developing, it was downright painful to see how the key witnesses withered under cross examination. Joseph A Turnbull, of the SEC’s Boston office, a self-proclaimed financial super sleuth, had confidently accused Floyd D Cerf, the Tucker Corporation’s agent who handled the IPO, of hijacking $2,443,000 of corporate funds during the flurry of financial activity surrounding the stock issue. Yet after only a handful of questions from the defense attorney, one of which was “Did he (Cerf) ever get $2,443,000 from the Tucker Corporation? Yes or no?” Repeating himself because Mr. Turnbull did not answer, he asked, “Did it pay out the money? Yes or no? Did the Tucker Corporation ever pay out $2,433,000 in relation to the stock transaction?” To which Mr. Turnbull was forced to reluctantly reply, “Never.”
And as to the $759,000 that Tucker was supposed to have pilfered from corporate coffers? That enormous sum was reduced to a measly $10,000 amount that Tucker may or may not have received in relation to the purchase a company plane. In short the verdict was arrived at very easily:
But the damage was already done. For months the company’s progress had been stalled by the cloud surrounding the Government’s case against Tucker. Tucker had lost the lease on the building, lost all of his employees and had his assets forcibly placed into receivership. Though the prosecution lost the case, Harry A McDonald won the war. The Tucker Corporation was dead.
At this point in the story I have to ask a question: why did Harry kill the Tucker Corporation? Why’d he do it? Was it because he saw Tucker’s picture in the newspaper, didn’t like the tie he was wearing and decided to mobilize the assets of the Federal Government to crush his company? Probably not, things usually don’t play out like that. And it wasn’t because of bad blood either. These two men had no previous interactions; Tucker never stole Harry’s girlfriend or cut in front of him in the lunch line or anything of the sort. They were perfect strangers. So think about it for a second, what makes the guy in charge of monitoring securities transactions climb down the throat of one man whose only crime is innovation while at the same time he turns a blind eye to another man within the same industry who at the same time is plundering the public by selling stocks based off of gross exaggerations of the truth and who in addition requires government loans to prop up his failing company? Why’d Harry go after Tucker and ignore Kaiser?
Well, money might be a good reason. If I were an auto manufacturer whose costs to retool a plant ranged from between $17,000,000 and $75,000,000, instead of rushing to incorporate Tucker’s innovations into next year’s models I’d be very tempted to first check in and see how much the commissioner of the SEC costs. Because when Tom McCahill, by far the auto industry’s most widely read columnist, claims that if the Tucker 48 has any degree of durability it will make all other cars seem like wheel-less coaches, and I’m sitting at my corner office at GM or Chevy or Ford, I have to take that statement very seriously. I can afford to ignore Kaiser, his cars suck, but I have to crush Tucker before Mr. McCahill’s prophesy has a chance come true. So I cut Harry a check, a big one for Harry but a very small one for me. And then I tell him that there’ll be another one, with another zero on the end, once Tucker is buried. And if I’m Harry, and I’ve never seen so many numbers on a check written to me, I’d be very, very interested in getting my hands on that second check. And I’d do whatever it took, if I were crooked, to pummel Tucker until his company was broken and he was broke.
Now I admit that I don’t have any evidence to back up my theory. I could be wrong — but I doubt it. There was too much money at stake for the Big Three and Harry’s obsession with destroying Tucker was too irrational for there not to have been some cooperation between the two parties. At the very least, someone, somewhere was misbehaving. The persecution that Tucker faced was no accident, it was a set up.
But long before the set up, way back before there was even an enemy — and a headline — and a trial, there was an idea; a wild, wild idea.
Continue to Part III.
