<html><body style="word-wrap: break-word; -webkit-nbsp-mode: space; -webkit-line-break: after-white-space; "><span class="Apple-style-span" style="font-family: Georgia; font-size: 13px; line-height: 15px; "><div>waaaay back in the day i acutally used to own stock in them. luckily i didn't lose any cash like the guy in this story...</div><div><br></div><div><br></div><div><br></div>Published Monday, March 24, 2008, by Wired <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">Hype Machine: Searching for ZAP's Fleet of No-Show Green Cars<br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">By Randall Sullivan<br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">In September 2006, Ehab Youssef, an intellectual property lawyer in <br style="line-height: 1.22em; ">San Jose, California, was shopping for a new car. With gas prices <br style="line-height: 1.22em; ">surging above $3 a gallon and headlines warning of a disappearing<br style="line-height: 1.22em; ">ice cap, Youssef and his wife were looking to offset their Toyota <br style="line-height: 1.22em; ">Land Cruiser with something more fuel-efficient. One day, while <br style="line-height: 1.22em; ">researching vehicles on the Web, he came across ZAP Corporation <br style="line-height: 1.22em; "><<a href="http://www.zapworld.com/" style="line-height: 1.22em; color: rgb(30, 102, 174); ">http://www.zapworld<wbr style="line-height: 1.22em; ">.com</a>>.<br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">A small California company, ZAP seemed to be doing what Detroit <br style="line-height: 1.22em; ">couldn't: bringing environmentally friendly cars to the masses. For <br style="line-height: 1.22em; ">starters, ZAP was selling the Xebra, an electric three-wheel buggie <br style="line-height: 1.22em; ">imported from China. The Xebra wasn't quite ready to take on the <br style="line-height: 1.22em; ">freeways of Silicon Valley, but it was cute and cost less than <br style="line-height: 1.22em; ">$10,000. Then there was the Obvio 828, a sleek vehicle from Brazil <br style="line-height: 1.22em; ">capable of running on pure ethanol. It was expected to reach <br style="line-height: 1.22em; ">showrooms in 2007. ZAP also had a $99,000 fuel-cell vehicle called <br style="line-height: 1.22em; ">the Worldcar in the pipeline, and the company said it would soon be <br style="line-height: 1.22em; ">selling the Smart Fortwo the dramatically designed, Mercedes-<br style="line-height: 1.22em; ">engineered micro-vehicle from DaimlerChrysler. The Fortwo ran on <br style="line-height: 1.22em; ">gasoline but got 37 miles to the gallon and fit in nicely with<br style="line-height: 1.22em; ">ZAP's eco line.<br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">The topper, however, was the ZAP-X. Youssef learned about the <br style="line-height: 1.22em; ">company's planned supercar from ZAP's chair, Gary Starr, when he <br style="line-height: 1.22em; ">visited the company's headquarters that fall. The all-electric <br style="line-height: 1.22em; ">crossover SUV due sometime in 2007 would not only produce 644 <br style="line-height: 1.22em; ">horsepower, rocketing it from 0 to 60 miles per hour in a Ferrari-<br style="line-height: 1.22em; ">esque 4.8 seconds, but would travel 350 miles on a single 10-minute <br style="line-height: 1.22em; ">charge. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">Youssef was no longer just shopping for a car; he was ready to change <br style="line-height: 1.22em; ">careers. In November, he and his wife plunked down $100,000 for a ZAP <br style="line-height: 1.22em; ">franchise territory covering most of Los Gatos, a wealthy town near <br style="line-height: 1.22em; ">San Jose. "We felt that we could do something that was not only good <br style="line-height: 1.22em; ">for society but also profitable for us," Youssef says. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">The first disappointment came in January, when Youssef went to ZAP <br style="line-height: 1.22em; ">headquarters to pick up the new Smart car he intended to drive as<br style="line-height: 1.22em; ">his personal vehicle. There were "some problems" getting Smart cars, <br style="line-height: 1.22em; ">Starr told Youssef. What Starr didn't say was that DaimlerChrysler <br style="line-height: 1.22em; ">had told ZAP more than a year earlier that it wouldn't sell the <br style="line-height: 1.22em; ">California company any of its vehicles. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">Youssef was frustrated, but he still believed in ZAP's vision. "I <br style="line-height: 1.22em; ">thought, Well, OK, at least they have these great new vehicles<br style="line-height: 1.22em; ">coming out the Obvio and the ZAP-X. And the Xebra cars, which are <br style="line-height: 1.22em; ">available now, do incredible things for under $10,000.'" It wasn't <br style="line-height: 1.22em; ">long, though, before Youssef learned that the Obvio was not coming <br style="line-height: 1.22em; ">anytime soon. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">Even more crushing, Youssef discovered that the all-electric Xebra <br style="line-height: 1.22em; ">sedan did not come close to achieving the 40-mph speed and 40-mile <br style="line-height: 1.22em; ">range ZAP claimed. In fact, the Xebra "went about 34 miles per hour <br style="line-height: 1.22em; ">on very flat ground with the wind behind it," Youssef says. It <br style="line-height: 1.22em; ">stalled on steep hills and, worst of all, had a range of less than<br style="line-height: 1.22em; ">20 miles. When he complained that it would be impossible to sell<br style="line-height: 1.22em; ">an electric vehicle with such limited range, Youssef says, he was <br style="line-height: 1.22em; ">referred by ZAP's dealer liaison to a larger and more powerful <br style="line-height: 1.22em; ">battery set; with that installed, the Xebra would go almost 40 mph <br style="line-height: 1.22em; ">and travel nearly 40 miles on a single charge. "Only they wanted<br style="line-height: 1.22em; ">us to pay for the battery upgrade out of our own pockets," recalls <br style="line-height: 1.22em; ">Youssef, who realized that after expenses he would be making, at <br style="line-height: 1.22em; ">most, $100 per vehicle. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">Youssef tried to persevere. The ZAP-X was in the news, and he was <br style="line-height: 1.22em; ">getting as many as 20 calls a day from people asking to sign up for <br style="line-height: 1.22em; ">the supercar. In February 2007, he asked when exactly the company <br style="line-height: 1.22em; ">intended to begin delivering the ZAP-X. "Gary Starr told me, Well, it <br style="line-height: 1.22em; ">may be two years out, it may be four years out, it may never happen.' <br style="line-height: 1.22em; ">I was stunned," Youssef recalls. "That was when I realized what an <br style="line-height: 1.22em; ">idiot I had been to trust this guy." <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">He was hardly alone. Over the years, ZAP has taken millions from <br style="line-height: 1.22em; ">investors and dealers eager to see the company's line of green cars <br style="line-height: 1.22em; ">hit the road. But that line has never materialized. Of nearly a dozen <br style="line-height: 1.22em; ">groundbreaking eco-vehicles ZAP has promised in public announcements <br style="line-height: 1.22em; ">and on its Web site, only the Xebra and its sibling, a truck version, <br style="line-height: 1.22em; ">have ever made it to market. As a result, fans of electric cars have <br style="line-height: 1.22em; ">grown disillusioned, while individuals like Youssef have been <br style="line-height: 1.22em; ">financially devastated. What's more, investment firms around the <br style="line-height: 1.22em; ">country have become cautious about financing electric vehicles after <br style="line-height: 1.22em; ">being repeatedly misled by one of the industry's most visible <br style="line-height: 1.22em; ">companies. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">In spite of all this, the pair now running the company, Starr and CEO <br style="line-height: 1.22em; ">Steve Schneider, enjoy lucrative employment packages that have made <br style="line-height: 1.22em; ">them millions. Their compensation and ZAP's continued existence as <br style="line-height: 1.22em; ">a business heavily depends on the continual issuance of new stock <br style="line-height: 1.22em; ">shares. And although ZAP has earned an annual profit only once in its <br style="line-height: 1.22em; ">16 years of existence (even that was the result of a one-time debt <br style="line-height: 1.22em; ">conversion) and its stock has been delisted from the New York Stock <br style="line-height: 1.22em; ">Exchange, Nasdaq, and the Pacific Stock Exchange, Starr and Schneider <br style="line-height: 1.22em; ">have managed to keep ZAP shares from becoming worthless. They've <br style="line-height: 1.22em; ">achieved this almost entirely through a relentless flow of press <br style="line-height: 1.22em; ">releases in which ZAP describes itself as "a world leader in electric <br style="line-height: 1.22em; ">transportation" and constantly claims to be on the verge of <br style="line-height: 1.22em; ">innovations and business deals that will yield breakthroughs in green <br style="line-height: 1.22em; ">transportation claims that consistently fall short. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">None of this would be possible without the optimism and naοvetι of <br style="line-height: 1.22em; ">those eager to put their faith in the electric car future. When it <br style="line-height: 1.22em; ">comes to green technology, some people just want to believe. It's <br style="line-height: 1.22em; ">easy to see why: Electric cars, after all, don't run on gas, so they <br style="line-height: 1.22em; ">produce virtually no emissions. They do consume some fossil fuels, <br style="line-height: 1.22em; ">since they charge their batteries from the grid, which mostly uses <br style="line-height: 1.22em; ">coal and natural gas to generate power. But because electric cars are <br style="line-height: 1.22em; ">more efficient than gas cars at turning energy into miles, their <br style="line-height: 1.22em; ">carbon footprint averages out to be 50 to 90 percent less than that <br style="line-height: 1.22em; ">of traditional vehicles. (And that figure drops to nearly zero if the <br style="line-height: 1.22em; ">car is plugged into a renewable energy source like a solar panel <br style="line-height: 1.22em; ">array.) Electric cars could decrease dependence on oil, reduce global <br style="line-height: 1.22em; ">carbon emissions, and save consumers money. But while Honda, Toyota, <br style="line-height: 1.22em; ">Nissan, Ford, and General Motors all toyed with electric vehicles in <br style="line-height: 1.22em; ">the '90s, these companies had effectively ended development by 2003, <br style="line-height: 1.22em; ">when California stopped requiring automakers to offer zero-emissions <br style="line-height: 1.22em; ">vehicles. Since then, electric car enthusiasts have been forced to <br style="line-height: 1.22em; ">pin their hopes on small independent companies like ZAP. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">"They tug at your heartstrings,<wbr style="line-height: 1.22em; ">" says Joseph Gottlieb, a ZAP dealer <br style="line-height: 1.22em; ">from the San Diego area who has filed an official complaint against <br style="line-height: 1.22em; ">ZAP with the Securities and Exchange Commission. "If ZAP was in any <br style="line-height: 1.22em; ">other business, the company would have been dead long ago. But they <br style="line-height: 1.22em; ">keep taking advantage of how much environmentalists like me want <br style="line-height: 1.22em; ">to see electric cars come to market." <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">ZAP declined to comment on the allegations in this article on several <br style="line-height: 1.22em; ">occasions. Starr and Schneider cut off communication with Wired when <br style="line-height: 1.22em; ">they learned "the direction you're going with this story," as <br style="line-height: 1.22em; ">Schneider put it. Wired also ran the major points of the story by a <br style="line-height: 1.22em; ">PR consultant working for the company, but ZAP again declined to <br style="line-height: 1.22em; ">address most of the issues raised here. Schneider will only say that <br style="line-height: 1.22em; ">he and Starr never knowingly committed any illegal acts. While<br style="line-height: 1.22em; ">"mistakes have been made," he admits, "it's all been based on trying <br style="line-height: 1.22em; ">to make the company work." <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">ZAP began as the vision of the aptly named Jim McGreen. In 1991, <br style="line-height: 1.22em; ">McGreen, then 38, was looking to start a business that would be<br style="line-height: 1.22em; ">"both green and profitable." A consummate garage inventor, he began <br style="line-height: 1.22em; ">building and selling parts and kits for electric bicycles. The next <br style="line-height: 1.22em; ">year, McGreen launched ZAP Power Systems (for zero air pollution), <br style="line-height: 1.22em; ">his electric vehicle company. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">Based in Alameda, across the bay from San Francisco, McGreen was <br style="line-height: 1.22em; ">looking for cash to expand his operation when he met Gary Starr. A <br style="line-height: 1.22em; ">short, wiry fellow with bushy brown hair and a habit of giggling at <br style="line-height: 1.22em; ">awkward moments, Starr had founded the electric vehicle division of <br style="line-height: 1.22em; ">Solar Electric Engineering, a struggling solar cell company based in <br style="line-height: 1.22em; ">Sonoma County, California, in 1983. After settling in Santa Rosa, the <br style="line-height: 1.22em; ">company changed its name to US Electricar in February 1994. Soon <br style="line-height: 1.22em; ">thereafter Starr was asked to leave, according to a former company <br style="line-height: 1.22em; ">executive. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">McGreen knew only that Starr had departed US Electricar with a pile <br style="line-height: 1.22em; ">of cash and was looking for investment opportunities. "There were a <br style="line-height: 1.22em; ">lot of money people who came to Jim," McGreen's wife, Nancy Cadigan, <br style="line-height: 1.22em; ">says, "but Gary was the first one who wrote a check." <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">On September 21, 1994, ZAP filed incorporation papers. There were <br style="line-height: 1.22em; ">four people on the board of directors: McGreen, Cadigan, Starr, and <br style="line-height: 1.22em; ">Starr's wife, Susan. The next year, ZAP moved to Sebastopol, a hamlet <br style="line-height: 1.22em; ">just west of Santa Rosa. In the fall of 1996, ZAP made a direct <br style="line-height: 1.22em; ">public offering of its stock, eventually netting over $2 million. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">In 1997, McGreen invented the Zappy, a two-wheeled stand-up scooter <br style="line-height: 1.22em; ">with a top speed of 15 mph. It quickly became a national <br style="line-height: 1.22em; ">sensation. "When Kevin Spacey rode it on Letterman's show, we felt <br style="line-height: 1.22em; ">like screaming," Cadigan recalls. "Edward Norton was calling me," <br style="line-height: 1.22em; ">McGreen says, "saying he wanted his Zappy to be faster than <br style="line-height: 1.22em; ">Spacey's." <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">In 1998, ZAP sold more than 2,000 scooters at $650 a pop for a <br style="line-height: 1.22em; ">total of $1.4 million. But the company still wasn't making a profit, <br style="line-height: 1.22em; ">and tensions started to grow between Starr and McGreen. Starr wanted <br style="line-height: 1.22em; ">to relocate manufacturing to Asia to cut costs, but McGreen worried <br style="line-height: 1.22em; ">quality would suffer. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">Starr, who had persuaded investors to support the expansion of ZAP's <br style="line-height: 1.22em; ">board to seven members, decided to push McGreen out. In September <br style="line-height: 1.22em; ">1999, the board voted five to two (McGreen and Cadigan being the only <br style="line-height: 1.22em; ">dissenters) to remove McGreen as president and CEO. Gary Starr was <br style="line-height: 1.22em; ">now in charge. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">Under starr, ZAP all but collapsed. The trouble started right away: <br style="line-height: 1.22em; ">Between December 1999 the month McGreen officially resigned from <br style="line-height: 1.22em; ">the board and April 2000, ZAP's stock price dropped from an all-<br style="line-height: 1.22em; ">time high of $13 a share to $5.50. This fall was fueled in part by <br style="line-height: 1.22em; ">the company's botched attempt to purchase a North Dakota-based <br style="line-height: 1.22em; ">electric cart maker named Global Electric Motorcars. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">To repair the damage, ZAP's new board brought in electric-vehicle <br style="line-height: 1.22em; ">veteran John Dabels to manage operations with Starr. Dabels, who was <br style="line-height: 1.22em; ">appointed president in June 2000, made rapid progress: In just seven <br style="line-height: 1.22em; ">months, year-on-year sales more than doubled. But Dabels, like <br style="line-height: 1.22em; ">McGreen before him, fought with Starr over moving manufacturing to <br style="line-height: 1.22em; ">China and resigned in January 2001. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">As always, Starr was hungry for more money. But a deal he started <br style="line-height: 1.22em; ">shortly before Dabels left ZAP would soon make raising capital almost <br style="line-height: 1.22em; ">impossible. According to Scott Cronk, ZAP's chief engineer at the <br style="line-height: 1.22em; ">time, Starr told the board that the investment group Union Atlantic <br style="line-height: 1.22em; ">was going to buy several million dollars worth of ZAP stock. The <br style="line-height: 1.22em; ">plan, Starr said, was for Union Atlantic to quickly sell the shares <br style="line-height: 1.22em; ">if the price increased. Starr assured the board, however according <br style="line-height: 1.22em; ">to both Cronk and Dabels that Union Atlantic couldn't sell below a <br style="line-height: 1.22em; ">certain price. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">By the summer of 2001, with Dabels gone and the threat of Zappy <br style="line-height: 1.22em; ">knockoffs hurting ZAP's share price, Union Atlantic had started <br style="line-height: 1.22em; ">unloading its investment. In September, the share price fell below<br style="line-height: 1.22em; ">50 cents, but the sell-off continued. "That's when we all knew there <br style="line-height: 1.22em; ">was no floor," says Cronk, who resigned a short time later. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">By 2002, the company had laid off 80 of its 100 workers and moved the <br style="line-height: 1.22em; ">bulk of manufacturing to Taiwan. Cheap Zappy copies from Asia soon <br style="line-height: 1.22em; ">flooded the market. "ZAP was still selling the Zappy for $500," Cronk <br style="line-height: 1.22em; ">says, "while Wal-Mart was offering knockoffs for a quarter of that." <br style="line-height: 1.22em; ">Annual revenue, which had reached $12 million in 2000 under Dabels, <br style="line-height: 1.22em; ">was down to less than $5 million. Operating expenses, on the other <br style="line-height: 1.22em; ">hand, continued to rise. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">With its stock price decimated and its sales sinking, ZAP filed for <br style="line-height: 1.22em; ">Chapter 11 bankruptcy reorganization on March 1, 2002. The company's <br style="line-height: 1.22em; ">stock was suspended by Nasdaq with a final share price of 21 cents. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">Convinced that Starr had destroyed the value of the options he and <br style="line-height: 1.22em; ">other employees had taken in lieu of higher salaries, Cronk contacted <br style="line-height: 1.22em; ">the SEC in May 2002, faxing a detailed summary of concerns to the <br style="line-height: 1.22em; ">agency's San Francisco office. In his complaint, Cronk alleged that <br style="line-height: 1.22em; ">Starr had guaranteed Union Atlantic a return and cost the company $25 <br style="line-height: 1.22em; ">million in market capitalization. Cronk also provided the SEC with a <br style="line-height: 1.22em; ">chart correlating the decline of ZAP's stock price with the Global <br style="line-height: 1.22em; ">Electric and Union Atlantic deals, which he said were promoted with <br style="line-height: 1.22em; ">false or misleading press releases. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">Cronk says an SEC rep told him that the agency was swamped with <br style="line-height: 1.22em; ">complaints against small-cap companies and might not be able to take <br style="line-height: 1.22em; ">immediate action. Pat Huddleston, a former enforcement branch chief <br style="line-height: 1.22em; ">with the Atlanta office of the SEC, isn't surprised. "Because of its <br style="line-height: 1.22em; ">limited resources, the SEC has to target bigger companies first," <br style="line-height: 1.22em; ">says Huddleston, who now runs the site Investor's Watchdog. "The <br style="line-height: 1.22em; ">commission simply can't investigate all the companies it should." SEC <br style="line-height: 1.22em; ">spokesperson John Heine will say only that the commission refuses <br style="line-height: 1.22em; ">comment "on any case other than those in which we have filed a <br style="line-height: 1.22em; ">complaint." <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">In July 2002, ZAP emerged from the Chapter 11 reorganization with <br style="line-height: 1.22em; ">Starr as ZAP's new board chair. This position would permit him to <br style="line-height: 1.22em; ">bring in a new partner, Steve Schneider, a used-car dealer with <br style="line-height: 1.22em; ">stable cash flow and his own grandiose ambitions. Their new direction <br style="line-height: 1.22em; ">would drastically reshape ZAP, enrich both men, and leave a new round <br style="line-height: 1.22em; ">of green believers feeling burned. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">Schneider is handsome and charming, though he can come across as the <br style="line-height: 1.22em; ">used-car salesman that he is. In the late 1990s, he made his living <br style="line-height: 1.22em; ">as owner of the Repo Outlet, a lot specializing in automobiles that <br style="line-height: 1.22em; ">had been seized for nonpayment. The business is a quarter-acre of <br style="line-height: 1.22em; ">asphalt just beyond the city limits of Santa Rosa in a neighborhood <br style="line-height: 1.22em; ">inhabited primarily by working-class Latino immigrants. Repo Outlet <br style="line-height: 1.22em; ">did well, but Schneider's methods were sometimes questionable. <br style="line-height: 1.22em; ">According to the Santa Rosa Press Democrat, in 1997 the Sonoma County <br style="line-height: 1.22em; ">District Attorney sued Schneider's enterprise for selling unsafe <br style="line-height: 1.22em; ">vehicles and engaging in misleading advertising. Schneider settled <br style="line-height: 1.22em; ">for $9,382. Then, in 2001, the business was fined $40,000 by the <br style="line-height: 1.22em; ">state of California for importing uncertified Volkswagen Beetles from <br style="line-height: 1.22em; ">Mexico. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">Schneider joined ZAP while it was going through bankruptcy <br style="line-height: 1.22em; ">proceedings. The idea was that Schneider, as a car guy with steady <br style="line-height: 1.22em; ">income, would help the company move from electric scooters and bikes <br style="line-height: 1.22em; ">to selling full-blown electric cars. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">ZAP purchased Schneider's business with stock (which it also used<br style="line-height: 1.22em; ">to pay off its creditors), giving him 39 percent of the company and <br style="line-height: 1.22em; ">making him the largest single shareholder. Since Starr held on to<br style="line-height: 1.22em; ">16 percent of ZAP, the pair were now in control of the company. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">In April 2003, ZAP relocated its headquarters to one of the most <br style="line-height: 1.22em; ">historically significant buildings in Santa Rosa, which the company <br style="line-height: 1.22em; ">purchased with stock, warrants (the right to buy stock at a preset <br style="line-height: 1.22em; ">price), and a $2 million note. In fact, according to SEC filings, <br style="line-height: 1.22em; ">after the bankruptcy ZAP began using stock to cover a range of <br style="line-height: 1.22em; ">expenses, from legal fees and advertising to "janitorial services." <br style="line-height: 1.22em; ">As it happened, Schneider and Starr had written themselves employment <br style="line-height: 1.22em; ">agreements still in effect today that allowed them to issue stock <br style="line-height: 1.22em; ">freely: Every year, each receives "a grant of stock options or <br style="line-height: 1.22em; ">warrants equal to 1 percent of the outstanding common stock of ZAP." <br style="line-height: 1.22em; ">In other words, the more shares ZAP issues, the greater the number of <br style="line-height: 1.22em; ">options or warrants the duo gets annually. "This is the sort of thing <br style="line-height: 1.22em; ">that can happen when the officers of a company control its board of <br style="line-height: 1.22em; ">directors," says Huddleston, the former SEC enforcement branch <br style="line-height: 1.22em; ">chief. "Investors should realize that, unless they're prepared to <br style="line-height: 1.22em; ">read and understand SEC filings, they can't possibly understand what <br style="line-height: 1.22em; ">they're getting into with a company like this." <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">Although Schneider boasted about how little he was paid as CEO of a <br style="line-height: 1.22em; ">publicly traded company ($74,100 in 2003, ZAP's first full year of <br style="line-height: 1.22em; ">business after emerging from bankruptcy), the truth was that his <br style="line-height: 1.22em; ">portfolio, like Starr's, was expanding. Schneider's holdings of <br style="line-height: 1.22em; ">stock, warrants, and options ballooned from the 2,822,222 shares he <br style="line-height: 1.22em; ">received after the bankruptcy deal to more than 14 million in 2004. <br style="line-height: 1.22em; ">Starr's holdings rose from around 1 million shares to more than 5 <br style="line-height: 1.22em; ">million during this period. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">Such massive issuances of purchase rights dilute the stock, of <br style="line-height: 1.22em; ">course. In fact, even as their holdings increased, the percentage of <br style="line-height: 1.22em; ">Starr and Schneider's stake in the company had actually slightly <br style="line-height: 1.22em; ">declined. And all those warrants and options weren't worth very much <br style="line-height: 1.22em; ">at the beginning of 2004, when ZAP stock was trading at a mere 60 <br style="line-height: 1.22em; ">cents a share. But soon a wave of press releases promised new <br style="line-height: 1.22em; ">business connections and potential acquisitions. That was on top of <br style="line-height: 1.22em; ">the introduction of new vehicles, like the remarkable $99,000 fuel-<br style="line-height: 1.22em; ">cell Worldcar that ZAP said it would soon be importing. All the <br style="line-height: 1.22em; ">attention helped push ZAP's stock to $1.85 a share by May. The share <br style="line-height: 1.22em; ">price jumped to $2.60, though, after Schneider announced later that <br style="line-height: 1.22em; ">month that DaimlerChrysler Smart cars all but unavailable in <br style="line-height: 1.22em; ">America would soon be sold through "ZAP dealers in select states." <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">In the fall of 2004, Steven Kim, an analyst at the Bank of New York, <br style="line-height: 1.22em; ">flew to California to hear Steve Schneider lay out the company's <br style="line-height: 1.22em; ">ambitious Smart car plan. Kim was so impressed that he decided to <br style="line-height: 1.22em; ">take a pay cut of more than 50 percent and relocate to become ZAP's <br style="line-height: 1.22em; ">director of investor relations. He was convinced that the stock <br style="line-height: 1.22em; ">options he received as a signing bonus would more than make up the <br style="line-height: 1.22em; ">difference in his salary. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">For the first few months, the news was good. ZAP had managed to <br style="line-height: 1.22em; ">purchase roughly 100 imported Smart cars from a US dealer and <br style="line-height: 1.22em; ">reported that they were being converted to meet US emissions <br style="line-height: 1.22em; ">standards at a plant in Southern California. Once it secured approval <br style="line-height: 1.22em; ">from the EPA, ZAP planned to begin selling Smart cars to American <br style="line-height: 1.22em; ">customers by mid-2005 at the latest. The only sour note, Kim says, <br style="line-height: 1.22em; ">came when several institutional investors he knew refused to buy ZAP <br style="line-height: 1.22em; ">stock, citing the company's history of promising things it couldn't <br style="line-height: 1.22em; ">deliver. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">In January 2005, Schneider created a sensation at the annual <br style="line-height: 1.22em; ">convention of the National Automobile Dealers Association. Standing <br style="line-height: 1.22em; ">in front of a gleaming new Smart car, Schneider offered dealers the <br style="line-height: 1.22em; ">opportunity to take delivery of the micro-vehicles within the year, <br style="line-height: 1.22em; ">and returned to Santa Rosa claiming $55 million in purchase orders. <br style="line-height: 1.22em; ">Soon, investors all over the country began to pony up as much as <br style="line-height: 1.22em; ">$150,000 to secure their territorial rights as ZAP dealers. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">Though ZAP still hadn't sold any Smart cars, Schneider was styling <br style="line-height: 1.22em; ">himself as an auto industry big shot. He and Starr tooled around <br style="line-height: 1.22em; ">Santa Rosa in cars that were hardly the eco-vehicles ZAP promoted a <br style="line-height: 1.22em; ">Porsche for Schneider and a BMW for Starr. And under Schneider's <br style="line-height: 1.22em; ">leadership, ZAP started recruiting a team of attractive young <br style="line-height: 1.22em; ">women. "Get Known as a ZAP! Girl," urged the heading on an <br style="line-height: 1.22em; ">application asking for both a full-body photo and head shot. At <br style="line-height: 1.22em; ">zapgirls.org, the company depicted the life of a ZAP! Girl as one of <br style="line-height: 1.22em; ">almost constant parties and public promotions. Photo galleries <br style="line-height: 1.22em; ">provided "the Latest, Hottest Pics of ZAP! Girls in Action." <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">The ZAP! Girl-in-chief was Renay Cude, who, according to former <br style="line-height: 1.22em; ">employees, including a president and a director of consumer products, <br style="line-height: 1.22em; ">had been engaged in a romantic relationship with the married <br style="line-height: 1.22em; ">Schneider for several years. (Cude declined to comment for this <br style="line-height: 1.22em; ">article.) The two allegedly became involved during the Chapter 11 <br style="line-height: 1.22em; ">reorganization, when Cude was working for the attorney who <br style="line-height: 1.22em; ">represented Schneider. The affair was an open secret at ZAP <br style="line-height: 1.22em; ">headquarters, where Cude rose rapidly through the ranks. She had <br style="line-height: 1.22em; ">earned an associate's degree in general education from Santa Rosa <br style="line-height: 1.22em; ">Junior College but now served as ZAP's corporate secretary. She also <br style="line-height: 1.22em; ">had a seat on the ZAP board, which included Starr and Schneider among <br style="line-height: 1.22em; ">its five members, allowing the trio to exercise control of the <br style="line-height: 1.22em; ">company. And Cude, now 31, received the same generous package of <br style="line-height: 1.22em; ">options and warrants as Schneider and Starr. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">While ZAP execs worked at getting the Smart cars it already owned to <br style="line-height: 1.22em; ">pass US emissions standards, company reps traveled to Germany on <br style="line-height: 1.22em; ">March 21, 2005, to propose a direct relationship with <br style="line-height: 1.22em; ">DaimlerChrysler. Daimler executives heard the pitch but said they <br style="line-height: 1.22em; ">wouldn't consider a deal until ZAP signed a nondisclosure agreement <br style="line-height: 1.22em; ">and revealed more about its plans. Schneider refused to sign the <br style="line-height: 1.22em; ">agreement. Instead he simply submitted a purchase order to Daimler <br style="line-height: 1.22em; ">for 76,500 Smart cars worth more than $1 billion. Never mind the <br style="line-height: 1.22em; ">fact that ZAP had only a few million in cash and the garage it was <br style="line-height: 1.22em; ">using to bring Smart cars up to US standards could convert only <br style="line-height: 1.22em; ">15,000 vehicles a year. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">The audacious move was met with silence. "Steve heard nothing," Kim <br style="line-height: 1.22em; ">recalls. "It was obvious the company was blowing him off." Early on <br style="line-height: 1.22em; ">the morning of May 24, 2005, ZAP turned up the pressure, publicly <br style="line-height: 1.22em; ">announcing the deal with a florid press release. Later that day, <br style="line-height: 1.22em; ">DaimlerChrysler informed Reuters that the company had no idea what <br style="line-height: 1.22em; ">Schneider was talking about. Two weeks later, DaimlerChrysler made <br style="line-height: 1.22em; ">its first formal statement regarding ZAP. Ulrich Walker, head of <br style="line-height: 1.22em; ">DaimlerChrysler'<wbr style="line-height: 1.22em; ">s Smart division, said he and his associates had <br style="line-height: 1.22em; ">decided not to sell any Smart cars to ZAP. The automaker had taken a <br style="line-height: 1.22em; ">closer look at the California company, Walker explained, and "decided <br style="line-height: 1.22em; ">that we do not want to have any kind of business relationship with <br style="line-height: 1.22em; ">ZAP, either now or in the future." <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">By June, after touting its Smart car distributorships for more than a <br style="line-height: 1.22em; ">year, ZAP had sold just one of the vehicles. Nevertheless, Schneider <br style="line-height: 1.22em; ">told the Press Democrat that ZAP was negotiating with unidentified <br style="line-height: 1.22em; ">secondary dealers for the purchase of Smart cars to meet US demand <br style="line-height: 1.22em; ">and even claimed ZAP would begin delivering vehicles to dealers <br style="line-height: 1.22em; ">within the week. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">Eventually, ZAP would manage to buy and sell just over 300 Smart cars <br style="line-height: 1.22em; ">through the gray market. But without Daimler's support, ZAP wouldn't <br style="line-height: 1.22em; ">come close to delivering as many cars as the company had promised. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">In October, ZAP sued DaimlerChrysler in Los Angeles County Superior <br style="line-height: 1.22em; ">Court. In the complaint, ZAP claimed that it had been "systematically <br style="line-height: 1.22em; ">targeted for destruction by one of the world's largest auto industry <br style="line-height: 1.22em; ">conglomerates.<wbr style="line-height: 1.22em; ">" More specific charges included defamation and unfair <br style="line-height: 1.22em; ">business practices; ZAP was seeking more than $500 million in <br style="line-height: 1.22em; ">damages. DaimlerChrysler filed a motion to dismiss the lawsuit, <br style="line-height: 1.22em; ">declaring that ZAP's behavior revealed "both the sham nature of its <br style="line-height: 1.22em; ">purported business and a lack of trustworthiness that is nothing <br style="line-height: 1.22em; ">short of stunning." Daimler's filing also said that the company's <br style="line-height: 1.22em; ">Smart division never had any intention of engaging in a partnership <br style="line-height: 1.22em; ">with ZAP, despite ZAP's "misleading press release clearly issued to <br style="line-height: 1.22em; ">create the false impression that ZAP would have a steady supply of <br style="line-height: 1.22em; ">Smart vehicles." In June 2006, a superior court judge ruled that ZAP <br style="line-height: 1.22em; ">had no jurisdiction to sue Daimler in a California court. (ZAP lost <br style="line-height: 1.22em; ">its appeal and is taking its case to the California Supreme Court.) <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">Meanwhile, ZAP was turning to other ventures. Just prior to filing <br style="line-height: 1.22em; ">the lawsuit, the company announced it had signed an agreement to <br style="line-height: 1.22em; ">become the exclusive US distributor for the Obvio 828, a Brazilian <br style="line-height: 1.22em; ">subcompact under development that would run on gas, pure ethanol, or <br style="line-height: 1.22em; ">a blend of the two. ZAP said it planned to start selling <br style="line-height: 1.22em; ">the "trybrid" in 2007. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">Disillusioned, Kim was preparing to resign when he learned the <br style="line-height: 1.22em; ">company had hired a new consultant: Max Scheder-Bieschin. "I did some <br style="line-height: 1.22em; ">research on Max and found he had amazing credentials,<wbr style="line-height: 1.22em; ">" says Kim, who <br style="line-height: 1.22em; ">was impressed with his track record at Deutsche Bank in Germany. "I <br style="line-height: 1.22em; ">thought I'd stick around and see what happened." <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">A tall, trim triathlete with an easy smile and elegant manners, <br style="line-height: 1.22em; ">Scheder-Bieschin grew up in New York, earned his bachelor's in <br style="line-height: 1.22em; ">economics at Stanford, and worked for several years in Europe. He <br style="line-height: 1.22em; ">moved to Sonoma County in 2005 at the behest of his wife, who had <br style="line-height: 1.22em; ">family nearby, and followed the Smart fiasco at ZAP through the pages <br style="line-height: 1.22em; ">of the Press Democrat. "I thought I could be of assistance," says <br style="line-height: 1.22em; ">Scheder-Bieschin. Like others before him, Scheder-Bieschin loved the <br style="line-height: 1.22em; ">idea of building a profitable company on a foundation of <br style="line-height: 1.22em; ">environmental idealism. "I am for electric vehicles," he <br style="line-height: 1.22em; ">explains. "The electric motor is just a much more efficient <br style="line-height: 1.22em; ">technology than the internal combustion engine, far superior in terms <br style="line-height: 1.22em; ">of emissions and noise. We as a society will go that way eventually." <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">Scheder-Bieschin became ZAP's president in December 2005. Six months <br style="line-height: 1.22em; ">later he was in negotiations with the brokerage and investment firm <br style="line-height: 1.22em; ">National Securities for an infusion of $15 million to $20 million to <br style="line-height: 1.22em; ">help ZAP further develop its vehicle line. But, like so many before <br style="line-height: 1.22em; ">it, the deal fell through. There were several reasons, according to <br style="line-height: 1.22em; ">both Scheder-Bieschin and National Securities. The first was that <br style="line-height: 1.22em; ">Schneider and Starr refused to tear up their stock-contingent <br style="line-height: 1.22em; ">employment agreements. "Those two have a staked interest in <br style="line-height: 1.22em; ">continuing to issue more and more shares to anybody," Scheder-<br style="line-height: 1.22em; ">Bieschin says. "No bank is going to loan money to a company run that <br style="line-height: 1.22em; ">way." Another problem was that ZAP's board was controlled by the <br style="line-height: 1.22em; ">company's executives rather than independent outsiders. But what <br style="line-height: 1.22em; ">really killed the deal was ZAP's refusal to address these <br style="line-height: 1.22em; ">issues. "ZAP's management made absolutely no effort to correct any of <br style="line-height: 1.22em; ">the problems we pointed out to them," says a National Securities <br style="line-height: 1.22em; ">official involved in the negotiations who asked not to be identified. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">As he watched the deal fall through, Scheder-Bieschin realized how <br style="line-height: 1.22em; ">little influence he had, even as president. Melissa Brandao, hired by <br style="line-height: 1.22em; ">Scheder-Bieschin to serve as ZAP's director of consumer products, <br style="line-height: 1.22em; ">felt similarly powerless. She says Starr not only interfered with her <br style="line-height: 1.22em; ">sales, but he and Schneider also refused to honor warranty claims on <br style="line-height: 1.22em; ">recently introduced Xebras, leaving her to deal with irate customers. <br style="line-height: 1.22em; ">After six months at ZAP, Brandao says, the only time she felt <br style="line-height: 1.22em; ">enthusiasm for her job was when someone brought in one of the old <br style="line-height: 1.22em; ">Zappy scooters built by Jim McGreen for service. "They were 10 years <br style="line-height: 1.22em; ">old but beautiful, like vintage cars," she recalls. "They make the <br style="line-height: 1.22em; ">stuff ZAP sells now look like crap." <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">"From a fundamental standpoint, the company has never been at a <br style="line-height: 1.22em; ">better place," Schneider told reporters at the San Francisco <br style="line-height: 1.22em; ">International Auto Show in November 2005. The company's display <br style="line-height: 1.22em; ">unapologetically included a Smart car alongside the flex-fuel Obvio, <br style="line-height: 1.22em; ">the fuel-cell Worldcar, and the all-electric Xebra. Schneider urged <br style="line-height: 1.22em; ">investors "not to wait another second" before purchasing ZAP stock. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">Not everyone was impressed. Larry Martin, a Bay Area investor in <br style="line-height: 1.22em; ">clean-air companies, told the Press Democrat that ZAP had marketed "a <br style="line-height: 1.22em; ">fabulous dream" but that "consistently, the results have disappointed <br style="line-height: 1.22em; ">us." And Wayne Schenk, owner of Subaru Santa Cruz, who had signed up <br style="line-height: 1.22em; ">as a ZAP dealer, also complained to the paper that ZAP has issued "a <br style="line-height: 1.22em; ">million press releases on stuff that has never happened." By the end <br style="line-height: 1.22em; ">of 2005, ZAP's stock price was back down to 26 cents. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">Starr and Schneider, though, would demonstrate once again the power <br style="line-height: 1.22em; ">of PR. On March 22, 2006, USA Today ran a story that sympathetically <br style="line-height: 1.22em; ">chronicled ZAP's efforts to sell the Smart car in domestic markets. <br style="line-height: 1.22em; ">The day the article came out, ZAP's stock price shot up, closing at <br style="line-height: 1.22em; ">$1.23. That same day, SEC records show, Schneider cashed out 200,000 <br style="line-height: 1.22em; ">warrants. (He also notified the commission of nine other transactions <br style="line-height: 1.22em; ">dating back to January 2005 for which he had yet to file paperwork.) <br style="line-height: 1.22em; ">Two days later, Renay Cude exercised 75,000 ZAP options at a price of <br style="line-height: 1.22em; ">25 cents per share. During the next three weeks, as ZAP's stock price <br style="line-height: 1.22em; ">climbed steadily, Cude sold that same number of shares in eight <br style="line-height: 1.22em; ">separate transactions for an average price of over $2 per share, <br style="line-height: 1.22em; ">netting more than $150,000. These cashed-out shares were soon <br style="line-height: 1.22em; ">replaced. On August 11, 2006, ZAP awarded Schneider, Cude, and Starr <br style="line-height: 1.22em; ">an additional 355,424 in warrants and 355,424 in options part of <br style="line-height: 1.22em; ">their yearly compensation package, which would come to just over <br style="line-height: 1.22em; ">$500,000 each. In fact, even though Schneider had unloaded more than <br style="line-height: 1.22em; ">a million and a half shares in 2005 and 2006, his total holdings of <br style="line-height: 1.22em; ">warrants, stock, and options reached 15 million in April 2006. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">By early 2007, Kim, Scheder-Bieschin, and Brandao had all resigned <br style="line-height: 1.22em; ">their positions. Brandao filed a sexual discrimination complaint <br style="line-height: 1.22em; ">against ZAP with the state of California, alleging that she had been <br style="line-height: 1.22em; ">underpaid because of her gender and that Starr had verbally abused <br style="line-height: 1.22em; ">her. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">Scheder-Bieschin says that Starr and Schneider have been insulated <br style="line-height: 1.22em; ">from criticism because of the business they are in. "Steve plays the <br style="line-height: 1.22em; ">game that nobody's ever gonna be tough on us because we're the EV <br style="line-height: 1.22em; ">guys.'" (Indeed, Robert Taicher, a consultant for ZAP, called Wired <br style="line-height: 1.22em; ">editors as this story was in process, asking the magazine to tread <br style="line-height: 1.22em; ">lightly on ZAP, given that "we're in the green space.") "Gary Starr <br style="line-height: 1.22em; ">and Steve Schneider have likely done more damage to the EV industry <br style="line-height: 1.22em; ">than Detroit and the Japanese combined," Scheder-Bieschin says. "And <br style="line-height: 1.22em; ">the failure of this industry to thrive has affected everything from <br style="line-height: 1.22em; ">global warming to the war on terror. How do you put a price on that?" <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">Brandao thinks the EV industry itself bears some responsibility for <br style="line-height: 1.22em; ">ZAP's depredations. "Nobody wants to talk about how bad ZAP is," she <br style="line-height: 1.22em; ">says. "Everybody wants the EV space to be protected from scandal or <br style="line-height: 1.22em; ">bad publicity." <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">There have been a few official complaints, however. In addition to <br style="line-height: 1.22em; ">Cronk's grievance to the SEC, Gottlieb, the San Diego-area ZAP <br style="line-height: 1.22em; ">dealer, also filed a report with the agency, alleging that senior ZAP <br style="line-height: 1.22em; ">executives had misled him when he purchased 100,000 shares of ZAP <br style="line-height: 1.22em; ">stock in exchange for a dealership territory. So far, though, Wired <br style="line-height: 1.22em; ">has found no evidence that the SEC has followed up on either <br style="line-height: 1.22em; ">complaint. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">Meanwhile, ZAP continues to do what it always has: claim it is on the <br style="line-height: 1.22em; ">verge of delivering the dream. In February 2007, Schneider officially <br style="line-height: 1.22em; ">unveiled plans for the ZAP-X supercar at the National Automobile <br style="line-height: 1.22em; ">Dealers Association convention in Las Vegas, telling potential <br style="line-height: 1.22em; ">dealers and customers that they could place a $25,000 deposit on the <br style="line-height: 1.22em; ">vehicle. The ZAP-X, Schneider said, would be based on a car design by <br style="line-height: 1.22em; ">Lotus, much like the Tesla Roadster electric sports car, which had <br style="line-height: 1.22em; ">been unveiled six months earlier. A Lotus Engineering official <br style="line-height: 1.22em; ">confirms that Lotus made a deal with ZAP allowing the Santa Rosa firm <br style="line-height: 1.22em; ">to use Lotus' gas-powered APX prototype as a physical model for a new <br style="line-height: 1.22em; ">car, but that was all. And the deal, as far as he knows, has gone <br style="line-height: 1.22em; ">dormant. Though the APX could conceivably be adapted to an electric <br style="line-height: 1.22em; ">motor, the exec told Wired, the expense and engineering challenge <br style="line-height: 1.22em; ">would be enormous. Would it be possible to manufacture and sell such <br style="line-height: 1.22em; ">a vehicle for ZAP's promised price of $60,000? "That depends," the <br style="line-height: 1.22em; ">exec replied with a laugh, "on whether you want to make money or lose <br style="line-height: 1.22em; ">money." <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">Regardless of the limited nature of the official relationship between <br style="line-height: 1.22em; ">Lotus and ZAP, Lotus CEO Albert Lam was clearly impressed with the <br style="line-height: 1.22em; ">California company. In September, Lam brokered a joint venture <br style="line-height: 1.22em; ">agreement between ZAP and Youngman Automotive Group, a Chinese bus <br style="line-height: 1.22em; ">maker, that ZAP says will allow it to get the fabled ZAP-X on <br style="line-height: 1.22em; ">American roads in 2009. Lam who had been with Lotus four years <br style="line-height: 1.22em; ">left the company a month later and signed on with Starr and <br style="line-height: 1.22em; ">Schneider, first as a new member of the ZAP board, then as part of <br style="line-height: 1.22em; ">ZAP's management team. (Lam didn't respond to Wired's requests for an <br style="line-height: 1.22em; ">interview.) Almost as soon as he arrived, ZAP unveiled specs for a <br style="line-height: 1.22em; ">second high-performance electric vehicle a three-wheel, 322-<br style="line-height: 1.22em; ">horsepower two-seater called the Alias. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">The Alias, ZAP says, will be built and marketed by the venture <br style="line-height: 1.22em; ">jointly run by ZAP and Youngman Automotive Group. The name of this <br style="line-height: 1.22em; ">partnership is Detroit Electric, a brand originally created by the <br style="line-height: 1.22em; ">Anderson Electric Car company, which existed between 1907 and 1939. <br style="line-height: 1.22em; ">Detroit Electric (now located in California and run by Lam) says it <br style="line-height: 1.22em; ">will be bringing a whole range of electric vehicles to market in the <br style="line-height: 1.22em; ">next 14 months. "Our plan is to launch with a 12-meter pure electric <br style="line-height: 1.22em; ">transit bus, the ZAP Alias, and two family sedans as early as the <br style="line-height: 1.22em; ">summer of 2009," Lam said in a press release. Analysts familiar with <br style="line-height: 1.22em; ">the Alias say delivering even that car on this timeline is unlikely, <br style="line-height: 1.22em; ">given that ZAP is reportedly still looking for suppliers to design <br style="line-height: 1.22em; ">components to make the car feasible. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">In February, after losing more than $500,000 on his dealership, Ehab <br style="line-height: 1.22em; ">Youssef was preparing a lawsuit against ZAP when the company offered <br style="line-height: 1.22em; ">to settle his claim for 50,000 shares of ZAP stock. Youssef declined, <br style="line-height: 1.22em; ">and a few weeks later ZAP filed a suit of its own claiming that <br style="line-height: 1.22em; ">Youssef hadn't lived up to the terms of his ZAP dealership contract. <br style="line-height: 1.22em; ">At press time, the matter was pending in Sonoma County Superior <br style="line-height: 1.22em; ">Court, and Youssef was preparing a counter claim. Earlier, Youssef <br style="line-height: 1.22em; ">had talked to a number of other dealers about a possible class action <br style="line-height: 1.22em; ">case. Among those who considered joining was John Martin, a <br style="line-height: 1.22em; ">schoolteacher from Austin, Texas. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">Martin says he met Schneider once, in spring 2006, when "I flew to <br style="line-height: 1.22em; ">California to sign the papers and write a check." He says he made it <br style="line-height: 1.22em; ">clear that he had limited funds less than $160,000 from savings and <br style="line-height: 1.22em; ">a small inheritance. Company officials assured Martin that this would <br style="line-height: 1.22em; ">be enough to get "up and running." <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">After quitting his job, Martin leased a prime Austin location and <br style="line-height: 1.22em; ">spent much of his remaining cash remodeling and rewiring the building <br style="line-height: 1.22em; ">for his new dealership. He was thrilled by the publicity his October <br style="line-height: 1.22em; ">2006 grand opening generated among the local media. Attracted by <br style="line-height: 1.22em; ">stories in the newspaper and on TV, dozens of potential customers <br style="line-height: 1.22em; ">showed up at the dealership that first week, though Martin could <br style="line-height: 1.22em; ">offer them little more than a ride in the Xebra sedan he had <br style="line-height: 1.22em; ">purchased as his personal car ZAP had failed to deliver any <br style="line-height: 1.22em; ">vehicles for him to sell. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">In December 2006, Martin laid off his staff and became a one-man <br style="line-height: 1.22em; ">operation. He received his first shipment of Xebras shortly before <br style="line-height: 1.22em; ">Christmas. But by then, Martin explains, he had realized how quickly <br style="line-height: 1.22em; ">the Xebras ran out of charge. "When I had to tell people about the <br style="line-height: 1.22em; ">range, I could see it in their eyes," Martin recalls. "This was the <br style="line-height: 1.22em; ">deal killer." <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">Martin sold one Xebra in January 2007, two in February, and three in <br style="line-height: 1.22em; ">March. "Then business just dried up completely," he says. Martin's <br style="line-height: 1.22em; ">first customer, an attorney, had to have his car hauled back to the <br style="line-height: 1.22em; ">dealership for warranty repairs four times in the first month. Martin <br style="line-height: 1.22em; ">managed to remain optimistic, he says, because he knew that the new <br style="line-height: 1.22em; ">Obvio model was supposed to begin arriving from ZAP sometime in the <br style="line-height: 1.22em; ">spring. "But of course the Obvio never came," Martin says, and he was <br style="line-height: 1.22em; ">forced to close the doors of his new business at the beginning of <br style="line-height: 1.22em; ">August. By then, his $160,000 was gone. The lawyer who bought that <br style="line-height: 1.22em; ">first Xebra from Martin sent a threatening letter to ZAP on Martin's <br style="line-height: 1.22em; ">behalf, and ZAP replied by promising to repay at least some of the <br style="line-height: 1.22em; ">money he had lost. Then Martin heard nothing for five months ZAP <br style="line-height: 1.22em; ">didn't return his calls. Finally, in January, as Wired prepared this <br style="line-height: 1.22em; ">story for print, ZAP settled with Martin, giving him 50,000 shares of <br style="line-height: 1.22em; ">ZAP stock in exchange for his agreement not to sue and not to talk to <br style="line-height: 1.22em; ">the media. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">Martin was able to get his teaching job back, but the school soon had <br style="line-height: 1.22em; ">to lay him off. Strapped for cash, he had to pull two of his three <br style="line-height: 1.22em; ">young daughters from the private school where they had been enrolled <br style="line-height: 1.22em; ">since kindergarten. (Parents, teachers, and friends took up a <br style="line-height: 1.22em; ">collection to pay the tuition of his oldest daughter.) As of January, <br style="line-height: 1.22em; ">Martin was supporting his family by working construction during the <br style="line-height: 1.22em; ">day and delivering pizzas in the evening. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">"I wanted so much to believe," he says. <br style="line-height: 1.22em; "><br style="line-height: 1.22em; ">Randall Sullivan (<a href="mailto:randysul%40aol.com" style="line-height: 1.22em; color: rgb(30, 102, 174); ">randysul@aol.<wbr style="line-height: 1.22em; ">com</a>) wrote about the rise and fall of <br style="line-height: 1.22em; ">game device outfit Gizmondo in issue 14.10.</span></body></html>