Torpedo's Wake

As a promoter and would-be automaker, Preston Tucker had an easy explanation for almost all his troubles. Even when his company filed to reorganize under the bankruptcy laws, he glibly promised that everything would be all right. But he ran out of answers before a federal grand jury which called in 95 witnesses and collected 10,000 pages of testimony during a 3 1/2-month investigation of the Tucker Corp.

Last week in Chicago the grand jury indicted Tucker and seven associates on 31 counts of mail fraud, conspiracy and violation of the securities laws.* Trading in Tucker stock, which had been floated at $5, was suspended on the Chicago Exchange, where it had been quoted at 40-c-.

Named with Tucker were Harold A. Karsten, alias Abraham Karatz, a promoter who once served a jail term for bank embezzlement conspiracy; former Investment Banker Floyd D. Cerf, whose firm had a net worth of only $87,352, yet made $2,500,000 on the sale of Tucker stock; and five former Tucker directors.

Profit-Takers. The indictment made no attempt to set forth the complex schemes by which Tucker had raised--and spent --$28 million collected from the sale of stock and dealer franchises for his Torpedo 8. The grand jury merely totted up Tucker's statements and labeled each one "false." Said the jury: Tucker & Associates, "seeking to capitalize on the unusual consumer demand" for autos, falsely "represented [Tucker] as an automotive inventor and designing genius" and obtained money "for [their own] personal benefit and profit" by "payments of excessive salaries and expense accounts to themselves, by the creation of fictitious experimental and development projects."

The investors in Tucker had only themselves to blame; the Securities & Exchange Commission had said practically the same thing when it blew the whistle on Tucker's initial effort to sell stock.

Loss Holders. Though SEC later permitted the stock flotation--it cannot bar anyone from selling stock as long as "full disclosure" is made about the issue--SEC again warned prospective investors that Tucker's public statements had been "grossly misleading and false."

What had happened to the investors' $28 million? Court-appointed trustees were still trying to find out. So far they had found few assets--an engine plant at Syracuse which Tucker had bought, a handful of lathes in the Government-owned plant at Chicago where he had said he would make cars, and some 25 hand-built Tucker autos, some with motors lifted from the cars of other manufacturers. There was only about $100,000 cash on hand.

As usual, Preston Tucker had an explanation for the grand jury's action; it was "the biggest rape of free enterprise ever perpetrated on this country." Soon, however, a jury would have a chance to decide who had been raped.

-Possible maximum penalty for each defendant: 155 years imprisonment, $60,000 fine.

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