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‘Shagadelic’ Green Machine Only a Mirage, Investors Say

Times Staff Writer

Jerry Harvey’s interest in the Sparrow was understandable: The three-wheeled electric vehicle could run on pennies a day, was good for the environment and cut such a quirky cool image it had won a cameo in the latest “Austin Powers” movie.

And it could hit 70 mph. As the Web ad teased, “Get yours today! Only a handful left!”

But Harvey’s Sparrow never arrived. He was one of several hundred would-be buyers of the space-age car who put down a $1,000 deposit and got nothing, according to legal documents.

Corbin Motors, maker of the Sparrow and an updated version called the Merlin, filed for bankruptcy in March. Last week, the state Department of Corporations sued the motor company, which has roots in Costa Mesa, but ultimately settled in Northern California, alleging the firm’s owners used those deposits and other investments to fund a lavish lifestyle, including leasing a gas-guzzling luxury car.

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Harvey, a 60-year-old business owner from Anaheim Hills, got the electric-car bug when he saw a Sparrow on display in Las Vegas. He had a Bentley, a Lamborghini and Lincoln’s new Blackwood luxury pickup in his garage. But the Sparrow caught his eye.

“It seemed like a good plaything,” he said.

To reserve a car, Harvey wrote a check for $1,000 to Corbin Motors, the Hollister-based manufacturer, and was told to wait a year. He waited two. Then nearly three.

After repeated phone calls and failed attempts to find out what happened to his order, Harvey sued Corbin Motors in May. He is seeking class-action status against the manufacturer, alleging that he and 299 other customers are entitled to restitution of $300,000 from Thomas W. Hanagan, who also goes by the name Tom Corbin, the company’s top official.

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What Harvey didn’t know was that Corbin Motors had filed for Chapter 7 bankruptcy. The liquidation filing represented a dream gone bust for those who considered the odd, egg-shaped vehicle a clean, cheap alternative to the gasoline-powered car. To some, it also illustrated the perils of the green car business.

At one point, the Corbin companies, which includes Corbin Pacific Inc., a manufacturer of motorcycle seats, was the biggest employer in Hollister, a small town near San Jose. Corbin Motors brought together the motorcycle equipment maker and an Orange County engine designer to form a new car-building company in 1999.

Auto writers praised the car, which received a jolt of publicity when it was featured in “Austin Powers in Goldmember.” Writers were intrigued by the electric Sparrow and the fact that the merger included MCM Engine Technologies Inc. of Costa Mesa, which had developed a lightweight V-twin fuel-injected gasoline engine capable of meeting California’s ultra-low-emissions rating.

Sparrows, according to advertisements, could recharge in two hours using a 220-volt power supply or in four hours with standard household current. All for only $14,900.

Harvey now joins a growing list of Corbin’s angry investors, dealers, and suppliers, who are allegedly out more than $10 million and queuing up as creditors in Bankruptcy Court.

Last week, the state Department of Corporations filed a lawsuit freezing the corporation’s assets, alleging that Hanagan; his wife, Jennifer J. Wilson; his father, Michael Hanagan, who goes by the name Mike Corbin; and other company officials, including those who operated Corbin Motors in Daytona Beach, defrauded investors and dealership owners by lying about the financial health of the company. The lawsuit seeks fines and a court order to have the defendants pay restitution.

Though investors were told their funds were going to develop the Sparrow, Corbin officials “shifted focus away” from the Sparrow to other models “more salable or profitable, leaving Sparrow purchasers and franchisees with no vehicles,” the lawsuit said.

The company was used by Tom Hanagan and other defendants “to offer and sell unregistered securities ... [and to] defraud investors and franchisees with sales of securities and franchises,” according to the lawsuit and the Sacramento County district attorney’s office.

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Hanagan and his family members also allegedly diverted company assets to fund lavish lifestyles, including extravagant purchases with business credit cards and leasing a Bentley, the lawsuit and former company officials said.

About 285 Sparrows were produced, but most were recalled to be retrofitted with parts. After focusing on the Sparrow, the company’s officials diverted their attention to the Merlin, a gas-powered and speedier version of the Sparrow with MCM’s engine, former company officials said.

“The good thing is that things are starting to catch up to the Corbins,” said Ron Huch, an investor and former executive who won a $619,200 judgment against Corbin Motors, which changed its name to CorbinMotors.com. “They got a lot of press on the car. They got it in movies, and people loved it, and when they had shareholders meetings, they told them everything was rosy.”

Huch, a former Corbin executive who headed MCM in Costa Mesa before the merger, invested $500,000 but said the Corbins fired him several weeks later. He has filed a lien against the company and is waiting in line with other creditors.

The former Corbin executive called the financial meltdown “Hollister’s version of Enron.”

A Department of Motor Vehicles investigation is also underway, said DMV spokesman Bill Branch. The DMV licenses and regulates vehicle dealers and manufacturers.

Andrew Carver, a Northern California podiatrist, bought more than a dozen Sparrow dealerships throughout the country from the Hanagans, investing $10,000 to $50,000 for each site, depending on the location, said Gerard Rose, Carver’s attorney in Carmel.

“Dr. Carver is a dedicated environmentalist who was searching for an environmentally friendly vehicle,” said Rose, who contends his client lost more than $250,000 in the deal. Carver received only 10 Sparrows, one of which was so flawed that he had to pay an unhappy customer $22,500 under the state’s “lemon” law, Rose said.

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The podiatrist has filed a lawsuit alleging breach of contract and fraud, but the case is stalled until the bankruptcy is resolved.

“In this case, there are scores and scores of people literally left hanging out to dry,” Rose said.

Former Corbin officials such as Huch and Bill Kniegge, who co-founded MCM in Costa Mesa and became a vice president at Corbin, said part of the problem was the company was undercapitalized, lacked technical expertise and operated without a business plan.

Still, there have been satisfied Sparrow customers. One of them, David Butcher of Los Gatos, chronicled his love-hate relationship with the little car on the Internet, discussing in great detail the amount of time -- and money -- he spent fiddling with the electronics of his Sparrow, a vehicle he said he now loves.

“The Sparrow is happily ‘roosted’ in our carport, sipping from a trickle charger, ready for anything,” Butcher proudly said in an e-mail last week. “I use it for three to five trips a week. The most recent was to the local hardware store on Monday.”

But such cheerleaders leave Jerry Harvey unimpressed. He is spending nearly $4,000 in legal fees to try to persuade a judge to order CorbinMotors.com to refund his $1,000 deposit.

“I know it sounds kind of dumb,” Harvey said. “But there’s a principle here, and it’s just not right to ask someone to pay that money and never get anything in return.”


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