Overzealous SEC

[carolyncriss]

This is a good website. Thank you for providing this information in a clear, non-biased manner. I would like the participants opinion on the following questions.

Is it fair to say that the SEC contributed to the downfall of the Tucker automobile? It appears that poor business strategy and investing may have done him in anyway, but were the bureaucrats a little over-the-top in accusing him of outright fraud? Did they really "save the duped investors"? I would have liked to see how this played out had the feds just let him sink or swim. Investors make investments knowing that there are risks. That is the nature of investing. I am a proponent of small businesses and less-is-more government. I don't want to step into conspiracy land, but I am curious if people think he might have pulled it off if it were up to him, his investors, and the American people.

Any thoughts?

[Larry Clark]

Carolyn: It is unfortunate that it is hard for someone to search previous topic posts because this issue has been addressed several times. However, it is a good question, especially for people who have come to this site since these posts, like you. The reality is that the company would have probably failed with or without the SEC interventions because of too little money and it taking the company too much time to get a car ready for market (because of a combination of reasons, including money and bias from the federal government). Yes, the SEC was over-zealous (as were many of the administrative agencies after World War II). Did Preston Tucker and/or the company do things that justified the SEC taking a hard look at the company? Yes. The movie accurately captures the fact that Preston Tucker was talking about having a car when he did not have prototype and that the corporation essentially had no money when he secured the plant (his check to the WAA went uncashed for over a year- it would have bounced had it been cashed (why the WAA did not attempt to earlier cash the check was of interest to the SEC)). Time after time Preston Tucker promised that production was about to begin when the sad reality is that it never truly "was about to begin" production- close but not truly "about to begin" true mass production. In contrast, the SEC noted that Kaiser-Frazer produced over 100,000 cars in the time period that Tucker claimed he would be producing cars. Did the SEC contribute to the problem of not getting to the "about to begin" stage? Yes. What most will agree to is that the Tucker '48 was the first post-war car to truly envison the car of today, including the role of women in purchasing and driving a car. For sure the SEC and Prosecutor Kerner had no appreciation of cars to have any recognition of this.

Larry

[carolyncriss]

Larry

Thank you for your comprehensive answer. I appreciate that you approach this subject without a conspiracy agenda or an anti-conspiracy agenda. You are capable of spotting both the good intentions and the poor decisions amongst a variety of parties involved in the story. This is helpful information.

-Carolyn

[toolguybak]

During the SEC investigation, many of the Tucker Corporation's records were confiscated. In a time period before electronic media and photocopies this probably included operating records that didn't have duplicates. I believe this also set back/stalled/hurt the daily operations of the corporation.

[Larry Clark]

Brian: I agree with you- having to turn over actual records to the SEC had to have had a devastating effect, especially given how overly broad the SEC's demands were. To their partial defense, there were a broad array of charges of wrong-doing fed to them by several highly motivated, disgruntled departed top Tucker executives (Preston Tucker was a like a lightning rod in that he had extremely loyal friends AND very strong enemies, especially the disgruntled ex-executives). The SEC, in part, cast a broad net to try to find evidence to support their charges.

There were meetings between the SEC and the company prior to the SEC securing the court order for company records. In a post-trial Congressional hearing about what happened with Tucker the SEC claimed that they had tried to get Tucker to cooperate to more directly respond to potentially lessen the breadth of their discovery and offered to go on-site to the plant (since there was not an easy way to copy records). The SEC claimed that Preston Tucker chose to grandstand by instead delivering the records to the courthouse (you have possible seen the picture of Preston Tucker diving under the hood of a Tucker '48 to pull out records as the car sits in front of the courthouse).

By the time the picture was taken the company's financial situation was already near perilous. Some people felt even then that Tucker saw the SEC situation as an opportunity to have an excuse to explain the continued delay in getting to production while he simultaneously continued to search everywhere for a "Warren Buffett" of that era who could inject substantial needed capital. Every so often Tucker provided leaks that he was near securing such a person or company when he apparently never was, something that again upset the SEC because they felt such leaks caused investors to have false confidence in the long-term health of the company.

One final thing to note. The SEC did NOT seek the massive set of engineering drawings, many today in the Dave Cammack collection. As a result, the engineering work could and to some extent did continue even though much of the workforce was laid off. What was always missing was a sufficient critical mass of engineers and production operations persons to complete final work that would have enabled actual production to begin. Was this a result of the SEC? Not directly. However, it had very strong indirect impact because potential investor confidence and interest totally sunk. The inability to bring in additional capital and financing quickly toppled the company. The company was essentially toast by late summer 1948 even though it limped along for another six months, followed by the criminal trial that began six months after that (the movie, to make it work, condenses the actual company timetable to make it seem that some major stuff towards the end happened much closer together in time).

Larry

[toolguybak]

Great info--thanks Larry!