Business & Finance: Qualified Approval

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SEC was finally satisfied that Preston Tucker was telling the truth about his financing. So last week it withdrew its stop order and allowed Tucker to float $20 million worth of stock to finance the production of his rear-engined automobiles (TIME, June 23). The Commission had no choice; it cannot bar anyone from selling the stock as long as the truth is told about the issue.

But SEC was so perturbed by the truth that it said flatly that Tucker's past publicity in newspapers, magazine articles and paid advertisements was "grossly misleading and false." It also warned prospective investors to read Tucker's amended registration statement carefully before buying, and listed the facts which Tucker had previously failed to disclose.

Among them were Tucker's dealings with one Harold A. Karsten, formerly known as A. H. Karatz, a fellow promoter of the Tucker Car Corp. Tucker had attempted to conceal the Karsten connection, said SEC, because of Karsten's "criminal record."* Karsten introduced Tucker to Floyd D. Cerf Co., Inc., a Chicago underwriting firm, and later helped him negotiate his lease for the $70 million surplus Chicago Dodge plant from the War Assets Administration.

In return, Tucker promised Karsten 10% of the class B promotional stock, a distributorship in Southern California, and a monthly salary of $2,000 until Tucker started delivering cars. To camouflage payments to him, said SEC, Tucker overpaid a public-relations firm which kicked back some of the money to Karsten.

SEC also said:

¶ Although Tucker had never put any cash into the corporation, he had received $217,669.60, and he will keep 20% of the voting stock even if all the shares are sold.

¶ Floyd D. Cerf Co., with net worth of only $87,352, stands to gross about $2,800,000 through the sale of Tucker stock.

¶ Of the$2,238,200 in cash and $1,814,350 in promissory notes the corporation received for sales franchises, $1,087,326 has been spent. Once when $89,695 could not be accounted for, the corporation charged $13,320 of it to Tucker's miscellaneous expenses ("taxis, limousines, racing tickets") on 333 days of travels.

¶ New features of the Tucker car have been so little tested that production may be delayed.

SEC's concern was not shared by another Government agency, WAA. For ten months Tucker has had a provisional lease on the Dodge plant, subject only to his ability to show WAA $15 million in cash on July 1, as proof that he was in a position to make cars. Tucker was unable to meet the deadline. WAA last week postponed the deadline to Nov. 1, the third such extension.