DeLorean Ends Legal Battles; to Get Millions

Times Staff Writer

John Z. DeLorean, the one-time sports car maker who has made little besides court appearances for the last five years, is finally out from under the American judicial system.

Late Tuesday, DeLorean reached a tentative settlement here in DeLorean Motor Co.'s bankruptcy case, bringing to a close the last of DeLorean’s controversial legal fights, which began when his auto company collapsed and he was arrested on drug-trafficking charges on the same day in October, 1982.

Still a Winner

And, once again, it appears that DeLorean, 62, will walk away from court a winner, just as he did in his criminal trials in Los Angeles and Detroit.


If the settlement with DeLorean Motor’s court-appointed trustee is approved by the bankruptcy court, DeLorean will personally emerge with nearly $1 million in his pocket and the prospect of getting several million more, the rights to a Utah snow-grooming equipment maker and a $6.5-million, 20-room cooperative apartment on Manhattan’s 5th Avenue.

Meanwhile, his creditors, who have been waiting since 1982 to be repaid, will receive little more than 9 cents on the dollar.

To Drop All Suits

The bankruptcy trustee, representing the creditors, has also agreed to drop all outstanding lawsuits against DeLorean personally, clearing up a maze of suits and countersuits that had added to the bewildering complexity of the DeLorean Motor bankruptcy case.


DeLorean, who now says that he plans to start yet another sports car company in the near future, will retain all the patents and licensing rights from DeLorean Motor Co. under the agreement with the trustee.

“He feels ecstatic,” DeLorean’s Detroit attorney, Mayer Morganroth, said. “This is the last of his legal problems, major or minor, we hope. It’s been five years, and that’s long enough.”

Throughout a daunting web of legal challenges over the last five years, DeLorean has shown an uncanny knack for landing on his feet.

In his most highly publicized court case, DeLorean was acquitted of cocaine-trafficking charges in federal court in Los Angeles in August, 1984, nearly two years after he had been arrested on Oct. 19, 1982, at an airport hotel by undercover agents acting as drug dealers. DeLorean, who has repeatedly contended that federal prosecutors tried to frame him, charged entrapment after he was videotaped sitting with undercover agents and a suitcase filled with cocaine.


Last December, DeLorean was once again acquitted, this time of racketeering and related charges in federal court in Detroit. The case stemmed from allegations that DeLorean had set up dummy corporations around the world in a scheme to defraud his company’s investors, including celebrities like Sammy Davis Jr. and Roy Clark, of millions of dollars that was supposed to be earmarked for research and development on his gull-winged sports car.

Millions Vanished

The government’s criminal investigation into those missing funds began after attorneys for creditors in the bankruptcy case here began to search through the network of related corporations set up by DeLorean and found that millions of dollars had disappeared.

DeLorean’s acquittal on the federal racketeering charges weakened the creditors’ case against him in bankruptcy court, leading to the favorable settlement for DeLorean, Robert Weiss, an attorney for the bankruptcy trustee, acknowledged Wednesday.


“The acquittal in the (federal racketeering) case had an affect,” Weiss said. “If he had been convicted on the racketeering charges, we could probably have gotten a judgment against all of his assets, since we had asserted the same charges in connection with our claims.”

Instead, DeLorean is now likely to be financially secure once more. The trustee has agreed to release $710,000 to DeLorean, on top of $200,000 turned over to him about one month ago, Morganroth said. The $910,000 had been held in escrow by the trustee, who seized the funds when DeLorean sold a New Jersey property after his company entered bankruptcy proceedings.

20-Room Residence

In addition, DeLorean will gain control of Logan Manufacturing, the Utah snow-grooming equipment maker, and will receive payments totaling $2 million from Logan over the next 18 months. He will also retain the 20-room co-op, his current residence.


If DeLorean sells Logan, which Morganroth said has been valued at about $28 million, the profits from the sale--after payments to the creditors and other expenses--will go into a trust for DeLorean’s children by his former wife, Christina Ferrare.

In return, DeLorean must pay the bankruptcy trustee $9.36 million in two installments by January, 1989; the payments are guaranteed by liens against Logan Manufacturing and DeLorean’s co-op, Weiss said. That money will then be distributed to the creditors but will cover only about 9% of the $100 million in claims they have lodged against DeLorean Motor Co., the lawyer said.