DeLorean’s Fraud Trial Gets Under Way

More than two years after he was acquitted in his celebrated drug smuggling case in Los Angeles, former auto maker John Z. DeLorean was back in federal court on Monday, once again confronting the prospect of a long and complex criminal trial and the threat of years behind bars.

After months of delays, jury selection began Monday in DeLorean’s trial on fraud and racketeering charges stemming from his days as the flamboyant founder of a luxury sports car company. Jury selection in U.S. District Court here is expected to take two weeks, and potential jurors have been told that the trial itself could last up to two months.

More than a year ago, DeLorean, 61, was indicted by a federal grand jury on 15 counts of racketeering, fraud and tax violations for allegedly scheming to swindle about $8.9 million from the private investors in his defunct auto company in Northern Ireland.

His trial was initially scheduled to open last April but was repeatedly delayed to give government prosecutors time to interview potential witnesses in Europe.

As he entered the courthouse in downtown Detroit on Monday, DeLorean, who has pleaded not guilty to all of the charges, complained that “they framed me in California and they’re trying to do it here.” Later in the day, however, he honored a gag order imposed by Judge Julian A. Cooke Jr. and refused to discuss the case with reporters as he left the court during an afternoon recess.

But Los Angeles attorney Howard Weitzman, who is once again defending DeLorean after gaining his acquittal in the cocaine case, said he was disappointed that the judge did not let attorneys for either the defense or the prosecution question potential jurors directly during Monday’s initial screening process.

Government attorneys charge that while he ran DeLorean Motor Co., DeLorean set up a complex maze of corporate shells through which to embezzle millions of dollars of investors’ funds. He raised about $18.8 million in research and development money from private investors, including entertainers such as Sammy Davis Jr. and Roy Clark, but prosecutors claim that about $8.9 million of those funds remains unaccounted for. The prosecution alleges that DeLorean used much of the money to purchase a profitable Utah company that manufactures snow-blowing equipment while also spending hundreds of thousands of dollars on personal expenses.

Government attorneys charge that about $17.75 million earmarked for DeLorean’s Michigan-based research and development subsidiary was channeled through a Panamanian company, called GPD Services, which supposedly had offices in Switzerland.

GPD was supposed to turn the funds over to Lotus Cars Ltd. of England for engineering and development work on DeLorean’s gull-winged sports cars, but only about $137,000 ever stayed with Lotus. DeLorean, the government charges, instead siphoned much of the money out of GPD through other corporations in Europe.

He used $8,375,000 to buy Logan Manufacturing Co., the Utah snow-grooming equipment maker, and another $534,000 for personal investments, the government’s indictment charges.

A self-professed born-again Christian, who is divorced from Los Angeles television talk show host Cristina Ferrare, DeLorean has repeatedly insisted that the government’s charges are false. He claims that the fraud case is part of a long-running conspiracy by federal prosecutors to put him behind bars.

If convicted, DeLorean could face up to 87 years in prison and fines of up to $82,000. He is currently free on a $1-million bond.

The government’s probe into the missing funds was apparently begun after attorneys for creditors in the separate DeLorean Motor Co. bankruptcy case here began to search through the complex web of related corporations set up by DeLorean and found that millions of dollars had disappeared.

DeLorean Motor Co., heavily subsidized by the British government, briefly produced expensive, stainless-steel performance cars, bearing DeLorean’s name, in Northern Ireland for export to the United States. But the DeLorean car never caught on, and the company filed for bankruptcy in 1982 and went out of business just as DeLorean was arrested in the drug case.