The release of sports car manufacturer John Z. De Lorean last October after his arrest on drug trafficking charges "was procured by fraud," a federal prosecutor said at a bail hearing today, citing undisclosed restrictions on property used by De Lorean to secure his $5 million bail.
De Lorean and his attorneys denied that and other prosecution charges that De Lorean was trying to sell a Utah company for $7.5 million in cash and had access to another $17.6 million secreted in Switzerland so he could flee the country and avoid trial.
U.S. District Court Judge Robert M. Takasugi denied a motion from De Lorean's attorneys to reduce his bail to an unsecured $2.5 million, requiring only $250,000 in cash, and also denied the prosecution's follow-up motion to raise the bail. He set a new trial date of Aug. 9.
Assistant U.S. Attorney James P. Walsh Jr., arguing that bail should be raised to $10 million, had introduced an affidavit from a British accountant involved in the collapse of De Lorean's Northern Ireland car-making plant. The affidavit alleged that $17.6 million of the firm's money, much of it provided by the British government, had gone to a mysterious firm called GTD Services Inc. and had disappeared.
Walsh also said he had been surprised to learn in December that a Continental Bank loan agreement prohibited De Lorean from offering his three residences in New York, New Jersey and California as bail.
Although the government has secured sufficient title to those properties, leading the bank to cut off what De Lorean says is his principal source of income from the Utah plant, Walsh said, "I don't think he is to be believed at all on any matter of substance" and said De Lorean should not be allowed to stay free without more security.
Walsh, in papers filed with the court and unsealed today, also denied a claim by De Lorean in a February Rolling Stone magazine interview that the auto maker had been forced to remain involved in a deal to help finance the sale of cocaine and heroin when a government informer who lured him into the case threatened to kill his children if he backed out.
Walsh said the interview portrayed De Lorean, 57, as "under siege from all sides" and said he might be considering "flight to avoid the excruciating embarrassment of trial and the enhanced likelihood of conviction."
One of De Lorean's attorneys, Howard Weitzman, told the judge that the size of the bail had forced De Lorean to violate an agreement with Continental Bank not to reassign any of his personal assets worth more than $500,000 and thus cut off income from the Logan Manufacturing Co., a snowmobile manufacturer. That income has been estimated at about $2 million a year.
Despite his alleged net worth of $14 million reported to prosecutors in October, De Lorean owes at least $7 million, Weitzman said, and is in "severe financial difficulty." De Lorean's financial situation "may look good to all of us out here, but it is a bleak picture right now," Weitzman said.
De Lorean, questioned briefly outside the courtroom, called the allegations of secret Swiss money and plans to flee "all wrong."