The Bottom Line... Busted

By Ed Magnuson

The handsome silver-haired businessman stretched out his 6-ft. 4-in., 170-lb. frame on the metal bunk in Cell 2 B4 of "the glass house," the downtown Los Angeles jail where male prostitutes, muggers and murderers are kept in holding pens. Arriving in the custody of FBI agents around 7:30 p.m., too late for Tuesday night's dinner, he disdained the tray of eggs, hash browns and sausage that was eventually offered. Throughout the night, he rarely slept; he just stared at the dank walls of the six-bed cell, which he occupied alone, and at the thick windowpanes flanking the barred door. This was not the Ritz in London, one of his favorite jet-set stops, nor his art-rilled office high above Manhattan's Park Avenue. John Zachary De Lorean's dream of soaring to industrial fame on the gull-winged glitter of his stainless-steel sports car had turned into a nightmare.

How could this be happening? With obsessive drive, a brilliant mastery of automotive engineering and management techniques, and a maverick's allure, De Lorean, barely out of his 30s, had risen to rule the Pontiac and Chevrolet divisions of giant General Motors. He had charmed his way into the glitzier show-biz celebrity circles, dating the likes of Candice Bergen, Nancy Sinatra and Ursula Andress before selecting his third wife, Actress-Model Cristina Ferrare, 32 (he is 57). Impatient with the corporate world's slow decision making, he had quit GM to race down a faster track. He had persuaded Britain's frugal government to give him $156 million and used it to turn vacant land outside Belfast into an ultramodern auto factory site in just 2 1/2 years. When his flashy De Lorean sports cars failed to sell, his company edged toward bankruptcy. But these antics only made more headlines and added to the De Lorean myth and mystery.

Newspapers are not allowed in Cell 2 B4. But De Lorean knew he was back in the news. The tabloid banners, though sensational, were accurate. DE LOREAN NABBED IN COAST COKE BUST blared the New York Daily News. This was no dream. He actually was under arrest and in jail, charged by federal prosecutors with conspiring to acquire 220 lbs. of cocaine in the expectation of making a $50 million profit. Federal investigators described De

Lorean as a driven man who could not face the failure of his enterprise, a desperate man who had turned to the lucrative drug trade in a brazen attempt to save his crumbling company.

De Lorean's arrest last week was more than a self-inflicted personal tragedy. It inspired charges among the cynical that corporate greed knew no ethical bounds. It touched off a furious row in Britain's Parliament, where a formal inquiry was launched into how the government could have let itself be used by an American highflyer at such cost to its treasury. Protested Sir William Clark, chairman of the Conservative Party's backbench finance committee: "This is absolutely monstrous; it shows that to pump public money into businesses merely to create jobs can be disastrous."

In the U.S., De Lorean's disgrace was seen by federal law-enforcement officials as symptomatic of the pervasive lure of illegal drugs as a source of illicit riches. "This shows the incredible ability of drugs to corrupt," claimed one Justice Department official. "You're not surprised to find occasional corruption of a $40,000-a-year FBI agent," he added, "but you don't expect it to reach into the ranks of an $850,000-a-year auto executive. It makes you wonder how many other companies have been saved this way."

The six-month federal investigation that resulted in the arrest of De Lorean and William Morgan Hetrick, 50, who was described by investigators as "one of the largest drug smugglers in Southern California," was cited as an example of the new spirit of cooperation among the often feuding federal agencies involved in stopping the drug traffic. In fact, it was one of the first interagency drug investigations since Attorney General William French Smith announced on Jan. 21 that the FBI would throw its resources fully into the antidrug fight. Before then the smaller Drug Enforcement Administration had carried the main burden in the fight against narcotics trafficking.

The De Lorean probe involved undercover agents of the FBI working closely with DEA officers, investigators from the U.S. Customs Service and with local police in Los Angeles and Ventura, Calif. Predicted Assistant FBI Director Roger Young after De Lorean's arrest: "This is only the tip of the iceberg as far as cooperation is concerned." Praising President Reagan's proposal two weeks ago to set up joint federal task forces throughout the nation to snare big drug suppliers, Young declared: "We've got the Commander in Chief saying, 'Go get 'em, guys.' No one can back down from cooperating now."

Inevitably, the way in which De Lorean met with undercover agents posing as drug distributors while clandestine cameras and microphones recorded both sight and sound was reminiscent of the FBI's controversial Abscam operation. But, well aware of possible claims of entrapment, Justice Department officials stoutly insisted that the operation that netted De Lorean was carefully designed to meet all court standards. Moreover, they said De Lorean could not have been entrapped because the operation had not been aimed at him. Declared one FBI agent: "Hetrick was the original target. He was Mr. Big. De Lorean just walked into it."

But how could a shrewd businessman like De Lorean fall so stupidly and easily into the hands of drug suppliers and federal agents? From affidavits and numerous interviews, TIME correspondents have pieced together the following account of the astonishing case.

Early last March an anonymous caller told police in Ventura, 40 miles northwest of Los Angeles along the Pacific Coast, that a "Mr. Morgan" had been overheard talking about transporting large sums of money across state lines. Suspecting an illegal cash-laundering operation, Ventura detectives tried to trace Morgan. The trail led to Morgan Aviation, an aircraft repair shop in a leased hangar at Mojave Airport on the edge of the Mojave Desert, 90 miles north of Los Angeles. The company was operated by William Morgan Hetrick, who used his middle name as his first. Ventura police notified the U.S. Customs Service of their suspicions.

Hetrick, a quiet man who had been married three times and was separated from his third wife, had moved his business to Mojave Airport from Camarillo, Calif, in May 1981. He overhauled the old building, spending some $225,000 on carpeting, a sophisticated machine shop and an advanced computer. "Everything he bought was first class," recalls Airport General Manager Dan Sabovich. "I used to take friends there just to show it off." But few aircraft or customers seemed to be using the hangar. Said Sabovich: "I thought he must have an angel--a financial backer."

Hetrick, in fact, rarely worked at the hangar, leaving operations to his eldest son. But he had a sidekick, Stephen Arlington, 34, a former Navy frogman in Viet Nam, who shared a Hetrick enthusiasm: scuba diving. The two often flew off to Grand Cayman Island in the Caribbean and took trips to the Bahamas on Hetrick's 46-ft. trawler, the Highland Fling, based in Fort Lauderdale, Fla. Hetrick also owned five airplanes and a 53-ft. yacht, the Ivory. Arrington, said a former Morgan employee, was "a kind of super gofer" for Hetrick.

The Los Angeles office of the DEA had picked up tips as long ago as March 1980 that Hetrick might have been flying coke from Colombia to a landing strip near Biloxi, Miss. Not until last May, however, did agents get more tangible reports that Hetrick was planning to use his Mojave hangar as a place to off-load coke and marijuana from incoming aircraft. He had even boasted about a Colombian coke connection, federal agents learned. They were also told that Hetrick was looking for a U.S. bank to convert his illegal profits into a legitimate savings account more easily. The DEA, Customs Service and FBI agreed to set up a joint undercover operation to make a case against Hetrick.

The scheme involved having FBI Agent Benedict Tisa pose as "James Benedict" and claim to be an officer of the Eureka Federal Savings and Loan Association in San Carlos, Calif, 40 miles southeast of San Francisco. A key figure, described in FBI affidavits only as a "C.I." (cooperating individual), made contact with Hetrick and told him that the bank would help him with his "money problems." The C.I. also told Hetrick that Benedict would not only approve the laundering of funds at the bank, but would like to make some money from drug deals too.

Federal investigators insist that all of this was under way before De Lorean entered the picture. By sheer coincidence, they say, the C.I. knew De Lorean. According to a confidential federal memo, De Lorean, not realizing that his friend might be talking to the Government, approached the C.I. in July. De Lorean said he needed money to save his car company from bankruptcy, and offered to help finance a drug-smuggling deal if it would net him at least $50 million. James Walsh, an assistant U.S. Attorney in charge of the task force, approved a plan to go along with De Lorean's overtures.

First, the mysterious C.I. met with De Lorean on July 11 at the Marriott Hotel in Newport Beach, Calif. By Sept. 4, the C.I. had arranged another meeting with De Lorean in a room at the L'Enfant Plaza Hotel in Washington, D.C. There, with the meeting filmed and recorded by nearby FBI agents, the two discussed, in the FBI affidavits' language, "the importation and distribution of heroin from Thailand and cocaine from South America as a means of generating large amounts of capital for the De Lorean Motor Co." De Lorean agreed to supply $1.8 million to begin the drug purchases.

The C.I. then told De Lorean that a "Mr. Vicenza," a drug distributor the C.I. knew, would be willing to put up about $3 million to complete the purchase of 220 lbs. of cocaine for roughly $5 million. Vicenza, actually DEA Agent John Valestra, would handle the distribution of the coke, and De Lorean would be given most of the profits. The C.I. told De Lorean that once the cash was on hand, the actual financial transaction would be conducted by Benedict, the presumed bank officer.

On Sept. 20, De Lorean and Hetrick, who had been introduced to each other by the C.I. earlier in the month, met with

Benedict in a room at the secluded Bel Air Sands Hotel in Los Angeles. With the secret FBI tapes rolling, Hetrick bragged of his "expertise and experience" in smuggling cocaine into the U.S. and agreed to supply the 220 lbs. (100 kilos) that was wanted.

The scheme was further refined at a meeting on Sept. 28 in Los Angeles' Bonaventure Hotel; present were De Lorean, the C.I. and, for the first time, Vicenza. De Lorean would get the cash profits after Vicenza had sold the drugs. The group agreed that the sales could gross more than $50 million. For his key role, Vicenza would get a 50% interest in De Lorean Motors, which theoretically would have been rejuvenated with the fresh funds.

The snare was set for springing. Last week Hetrick telephoned Benedict to say he would take Pan Am's Flight 442 on Monday from Miami to Los Angeles. He would be bringing the cocaine. Benedict met Hetrick at the airport and drove him to the nearby Sheraton Plaza Hotel. On the way, Hetrick admitted he had brought only 25 of the expected 100 kilos. He would sell this share for $1.8 million. If everything went well, the other 75 kilos would soon follow. Hetrick was being cautious--but not cautious enough.

In the Sheraton Plaza's Room 501, a glass-divided minisuite, the C.I. and the ubiquitous FBI cameras were waiting when Hetrick arrived at 4 p.m. Benedict assured Hetrick that the $1.8 million would be in the room shortly. Hetrick said he was "ready to go." It was not until 7:45 p.m., however, that yet another self-styled drug distributor, actually DEA Agent Gerald Scotti, arrived with Vicenza. Hetrick was wary, but in Scotti's briefcase, which was placed on a Plexiglas coffee table, was a vast amount of cash.

Now the tricky part of any drug deal: the exchange. Hetrick said the cocaine was secreted in a car. Arrington, Hetrick's gofer, drove the C.I. and Scotti to the Van Nuys Airport in the San Fernando Valley. Arrington parked the car and went off to get the drug-loaded auto. He soon arrived in a Chevrolet Caprice. He reached under the dashboard, flipped a switch--and the back of the rear seat flipped forward. "Go ahead, take a look," Arrington told Scotti. The agent found a number of large brown packages wrapped in masking tape. He pierced one with a car key, sampled the white powder--and signaled agents who had been trailing in other cars. They moved in to arrest Arrington.

Other agents had been following Hetrick. He was now dining with Benedict at

La Cage aux Folles, an expensive French restaurant on La Cienega Boulevard, where transvestites impersonate famous female singers. Tipped by radio that Arrington and the coke had been seized, the agents waited until Hetrick finished his late-night meal, then arrested him outside the restaurant.

Now the agents' attention switched to De Lorean, who was scheduled to arrive in Los Angeles from New York the next day, Tuesday, to wind up the coke transaction. But Hetrick had to be permitted one legally mandated telephone call. Would he tip off De Lorean? He did not. When De Lorean's scheduled flight arrived in Los Angeles, he was aboard, and so were three FBI agents.

De Lorean went directly, and unsuspectingly, to well-wired Room 501 at the Sheraton Plaza. Waiting were the Government's trio: the C.I., Benedict and Vicenza. One of them showed De Lorean a suitcase containing 20 kilos of coke. De Lorean picked up one bag and said, "It's as good as gold and just in the nick of time." Actually it was too late. Only hours earlier, the British government had closed De Lorean's plant in Northern Ireland (see following story).

To De Lorean's astonishment, Benedict and Vicenza abruptly broke the light mood by announcing that they were federal agents. They told De Lorean he was under arrest. One of them read him his constitutional rights. Recalled an FBI official: "He was calmer than they had expected him to be." De Lorean was hustled into an unmarked federal car, booked at the downtown Los Angeles jail and led to a six-prisoner cell.

After a restless night there, he was taken to a Los Angeles federal courtroom jammed with reporters and spectators.

At the arraignment, De Lorean appeared haggard but impassive. His anguished wife Cristina, who had flown in from New York, rushed to his side, kissed him and draped a hand protectively across his shoulder. The 90-minute hearing centered on the bail arrangements. Walsh, the prosecuting attorney, asked that De Lorean not be released unless he puts up a $20 million bail bond, the same bail that had been set for Hetrick. (Arrington's bail was placed at $250,000.) One of De Lorean's lawyers, Sam Miller of San Francisco, argued that "Mr. De Lorean has led an exemplary life until now. If he's not out this week, it's not just his family that will be affected; 2,600 people may lose their jobs if Mr. De Lorean is not free to save his company." With scathing sarcasm, Walsh replied: "I never thought I'd live so long to hear a man like this described as a community-minded person, forever assisting the disabled. One doesn't create an industry on the backs of cocaine users and heroin addicts."

Unimpressed, Magistrate Volney Brown set bail at a relatively low $5 million, which would require De Lorean to come up with $250,000 in cash to acquire the bail bond. De Lorean and his wife signed papers placing the deed to their 48-acre estate in exclusive Pauma Valley, northeast of San Diego, as collateral for the bond. But De Lorean was to have a surprisingly difficult time finding the cash.

Following his arraignment, De Lorean, still wearing the Western-style sports jacket and open shirt in which he was arrested, was transferred to the Federal Correctional Institution on Terminal Island in Los Angeles harbor. He occupied a large room with a writing desk. A preliminary hearing at which the Government is expected to present a formal indictment is set for Nov. 1. De Lorean has hired one of California's most experienced criminal lawyers, Joseph Ball, 79, of Los Angeles, to head his defense, one that almost certainly will dwell on the key question of entrapment.

The auto industry's most daring driver had spun out of control on a bizarre turn toward the underworld, and will soon have his day in court. Anyone tempted to take the same road seems likely to face similar hazards. The startling case dramatically demonstrated the Government's new determination to put big-time drug profiteers behind bars. --By Ed Magnuson.

Reported by Benjamin W. Cate, Steven Holmes and Alessandra Stanley/Los Angeles

With reporting by Benjamin W. Cate, Steven Holmes, Alessandra Stanley

This file is automatically generated by a robot program, so viewer discretion is required.