The DeLorean Motor Co., which collapsed more than 17 years ago amid charges of money laundering, is about to end its bankruptcy proceedings, and creditors may get 100 percent of what they are owed, the company's trustee said Tuesday. U.S. Bankruptcy Judge Ray Reynolds Graves is expected to close the case before the end of this week, trustee David Allard said. "The only complication we expect is the difficulty in locating creditors," Allard said. "Because it has been so many years, we haven't been able to locate all of the creditors. Some have died, many have closed."
John Z. DeLorean launched his Detroit car company after he quit as vice president in charge of North American car and truck operations for General Motors Corp. in 1973. He produced nearly 9,000 of his eponymous sports cars. They were notable for their gull-wing doors and unpainted stainless-steel skin and won a place in the "Back to the Future" films. The company filed for bankruptcy protection after DeLorean was arrested in a sting in 1982, accused of conspiring to sell $24-million worth of cocaine to salvage his venture. He used an entrapment defense to win acquittal.
Originally, attorneys estimated creditors would receive less than 5 cents on the dollar. But because of recoveries the company realized from lawsuits, creditors may be able to collect their full due, Allard said. "Hundreds of lawsuit recoveries over the years ...created a sizable estate for distribution," he said. The key to ending the proceedings was a 1999 settlement that ended a lawsuit against Arthur Andersen & Co. that was first filed in 1985. DeLorean's creditors alleged the accounting firm signed off on the company's financial statements despite evidence of possible fraud. In 1998, a New York jury ordered Arthur Andersen to pay $46.2 million. The firm appealed but agreed in May 1999 to settle the lawsuit for $27.75 million. DeLorean owed about $85 million to 266 creditors when litigation began.
The company's trustee made an interim distribution of 9 percent to all creditors in 1990, and Allard has started paying creditors 90 percent of the remaining balance. That means creditors will receive about 99 percent of their claim. "That's almost unheard of in Chapter 7 cases," Allard said. France's Renault SA, which is owed the most, received about $12.74 million in April. Other creditors started receiving checks last week. Legal notices will be published, and missing creditors will have six months to come forward before the remaining money will be prorated among the others, Allard said.
The DeLorean case -- "the oldest bankruptcy case in Detroit," Allard said -- took so long because the British government was suing Arthur Andersen at the same time the U.S. case was taking place. The British government was impressed by plans to create a 2,000-worker plant and wooed DeLorean to Northern Ireland in 1976. But the plant closed in 1982, and a year later the government concluded it spent $130 million to help the venture. "Because of the British involvement in the other case, Margaret Thatcher's deposition was taken and they had to debate discovery issues in Parliament," Allard said. "That slowed both cases down to a crawl."
John DeLorean declared bankruptcy in September 1999 after wrestling with 40 other legal cases. In March, he was evicted from his 434-acre estate in New Jersey when the court ordered a bankruptcy auction to help pay his creditors. The last residence he reported to his trustee is a New Jersey hotel, Southfield attorney Mayer Morganroth said Tuesday.