Ford's Secret Probe of lacocca

In 500 interviews, asking some leading question

Normally about this time of year, conversation at suburban Detroit's Bloomfield Hills Country Club starts rotating around to how strong the autumn selling season will be. Last week Topic A at the favorite watering hole of the auto industry's top leaders was quite different. Just as they have for weeks, auto executives were buzzing with nonstop speculation as to the motives for Chairman Henry Ford II's firing last month of Lee Iacocca as Ford Motor Co. president.

Quite a few Ford executives were in a nervous and edgy mood. Company spokesmen denied speculations that a purge of Iacocca's supporters was imminent. They also denied a report that Henry Ford may dismiss three of the company's outside directors because they had held private talks with Iacocca when he was trying to line up their support in the crucial weeks just before he was sacked.

One story the Ford Motor Co. did not deny is that in 1975, at just about the time reports began to circulate regarding a deep rift between Henry Ford and Iacocca, the company ordered up an audit of the travel and expense-account practices of a number of Ford executives. According to sources familiar with the details, the audit was really a full-scale investigation, and it was highly unusual. It ranged far beyond the expense accounts of some Ford managers, cost some $1.5 million in company money and was personally launched by Henry Ford. Most important, it centered on an exhaustive and wide-ranging probe of Iacocca's business and private life.

The investigation began in August of 1975 and was headed by Theodore Souris, a former Michigan Supreme Court justice who is now a senior partner in the prestigious Detroit law firm of Bodman, Longley, Bogle and Armstrong. The financial aspects of the probe were directed by Norman A. Bolz, partner in the accounting firm of Coopers & Lybrand. Before the probe ended, 500 interviews had been conducted, and 50 Ford executives, among many others, had been questioned, Iacocca learned of the dimensions of the probe only from friends and business associates who had been grilled.

Initially, the probe focused on a large gathering of Ford dealers in Las Vegas. Private detectives were hired to check hotels, interview people who put on the entertainment for the dealers and ask questions of Las Vegas dancers and showgirls.

Around mid-October of 1975 the investigation was expanded to employees of a number of Ford Motor suppliers. These included U.S. Steel Corp., the Budd Co., the Kenyon & Eckhardt and J. Walter Thompson advertising agencies. The first contractor to be investigated was Diner's/Fugazy Travel and Incentive Inc., which is headed by William Fugazy Sr., a close friend of lacocca's.

The investigators demanded to see books and records of these supplier companies, which, in turn, generally complied with the wishes of the valued customer. According to a source at a major New York City investment bank, the questions asked about Iacocca by the investigators were of a particularly leading and accusing nature. This, said the source, was, as much as anything, responsible for stirring up rumor and innuendo about Iacocca.

The investigation was wound up in December 1975. A full report was given to Franklin Murphy, an outside director who is chairman of the Ford board's audit committee and also chairman of the Los Angeles Times Mirror Co. Murphy had never authorized the investigation in the first place. The elaborate examination produced no damaging information about Iacocca. According to his friends, lacocca is enraged by the thought that people within the company may be spreading rumors concerning his personal life and finances. qed

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