The Government Leaks that Destroyed Tucker

T H E A A C A M U S E U M FA M I LY: T U C K E R AU T O M O B I L E C L U B O F A M E R I C A

VOLUME 49 • ISSUE

The Government

LEAKS that Destroyed

By Steve Lehto

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Editor’s Note: Steve Lehto is a writer, attorney and professor.

He practices and teaches law in southeastern Michigan, and has taught history at the University of Detroit Mercy.

His book Preston Tucker and His Battle to Build the Car of Tomorrow was published in 2016. His writing frequently appears on RoadandTrack.com.

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ucker fans know that his story involved government officials leaking information to the press in attempts to harm his business. It happened at least twice, and we now know who leaked the information.

The first time it happened was June 6, 1948. That was the day Drew Pearson, a radio broadcaster and newspaper columnist based in

Washington, DC, accused Tucker of being a fraud. On his nationally broadcast radio show, Drew Pearson Comments, as well as in his newspaper column, Washington Merry-Go-Round, he announced that Tucker was under investigation by the SEC – and that the investigation was going to be Tucker’s undoing.

Pearson boldly announced that the investigation would “blow Tucker higher than a kite.”

He repeated the story in his syndicated newspaper column of June 10, read by millions nationwide. “The ax is now falling on Preston Tucker, the revolutionary automobile man, and falling hard.”

Pearson did not identify his source, but someone had tipped him off.

When trading opened the next morning, Tucker Corporation stock crashed. It soon hit 2⅜, less than half of its recent price of 5. Investors lost

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$10 million in value overnight.

But worse for Tucker, no one would extend the corporation credit with the cloud of a federal investigation overhead.

Tucker’s friends and allies suspected foul play. Cliff Knoble noted, “The ‘leak’ was too well timed—too shrewdly destructive—too immune to defensive counter measures—to have been accidental. Within twenty-four hours it practically destroyed the Tucker Corporation.”

But Pearson’s story – based on information leaked to him by someone in Washington – would not be the last time

Tucker was harmed by leaked confidential information. It happed again with a report the SEC created, a report which was supposed to be confidential.

On March 13, 1949, the Detroit News headline read, “GIGANTIC TUCKER FRAUD CHARGED IN SEC REPORT.” The story contained information that could have only come from the confidential report, but the story did not explain how its reporter had gotten access to it.

After the Detroit News ran its piece, other newspapers around the country ran sim-

Not actual vehicle.

ilar pieces, savaging Tucker and his business. By the time Tucker and his associates went to trial in June, public opinion had overwhelmingly shifted to the belief that Preston Tucker and his associates were probably guilty of something – and probably headed to prison.

But who leaked the material to the press? It was Harry McDonald, an SEC man from Detroit. He would eventually head the SEC and butted heads with Tucker a few times when his company issued its Initial Public Offering. When the SEC finished its investigation at the end of 1948, McDonald contacted a few reporters – including Martin Hayden from the Detroit News – and offered them access to the 561-page confidential report so long as they kept their source confidential.

It was important for McDonald to ensure Hayden’s discretion, as the commissioner was breaking the law by sharing the report.

At the time of the leaks, Tucker did not know who was behind them. After the trial in which he and all of his codefendants were found not guilty, Tucker sued the Detroit News and some other organizations he felt had libeled him. Hayden testified he had gotten access to the report from Harry McDonald. In fact, McDonald was the one who told Hayden of the report’s existence.

Lester Velie wrote a Collier’s article after he was likewise shown the report. Later, when he asked to see it again, he went to Washington, where

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Win a 2021 Corvette or $40,000 cash The U.S. Securities and Exchange Commission Report: Information from the Report was leaked to harm Tucker.

an SEC lawyer gave him the report, along with an office to work in while he took notes.

In his litigation, Tucker sought to take testimony from McDonald, and ask him if he was the source of the report for all of the journalists’ stories.

Rather than testify, McDonald submitted a sworn affidavit to Tucker’s attorneys. In it, he admitted he had furnished the report to the press. He did not explain why he was motivated to do so, other than to make sure the reporting was “accurate.”

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Many people believe that McDonald leaked the report at the behest of a Michigan senator, or that he had done it to help the auto industry which was so important to his home state of Michigan.

Tucker wanted to get to the bottom of it, but his litigation ended when he passed away in 1956. So, we may never know why McDonald did it.

But we do know that he was the source of the leaks. n

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