However, for the most part Victor Palmer was far less bold on the stand of the bankruptcy hearings. Investigators often found him evasive, he responded with vague answers or claims not to remember details. This behavior ultimately did not help his case, nor did his attempt to flee Kalamazoo in the midst of the proceedings. The escape was foiled thanks to Palmer having sent his baggage to the Michigan Central Station early. Court officials were thus alerted of his planned flight and were waiting for him at the station.
Palmer had good reason to flee. Despite his accounts to the press, the actual evidence was piling up against him. As the investigation concluded, prosecutors agreed that he was the financial brains of the firm, that he and the Lays had misled the creditors, and that the velvet payroll had been the creation of Palmer and the younger Lays. At the conclusion of the bankruptcy hearing Palmer, as well as the younger Lay brothers, disparagingly dubbed “The Lay Boys” in the press, would be targeted for legal prosecution. Frank B. Lay would face financial penalties and M. Henry Lane escaped prosecution.
Victor Palmer appeared before a Federal Grand Jury in Grand Rapids on 3 March 1914. He was charged with fraudulent use of the mail by sending out false financial statements on three separate occasions. The trial lasted until 11 April 1914, during which it was clear that Palmer was a broken man. It came as no surprise that he was found guilty and sentenced to two years at Leavenworth, Kansas. He departed Kalamazoo on 19 June 1914, amid a gathering of curious and well-wishers. Palmer would not return to Kalamazoo until March 1915, when he was called to testify in the trials of Frank and George Lay Jrs. However, upon arrival in the courtroom, Palmer pleaded the fifth.
The case against “the Lay Boys” would not be settled until the end of 1917. Both brothers were tried separately for embezzlement linked to the velvet payroll, and both were found guilty in April 1915. However, both verdicts were appealed and tied up in the courts until 16 December 1917 when the brothers entered guilty pleas. They were subjected to a cash settlement to the creditors instead of a prison sentence.
The demise of the Michigan Buggy Company cast a dark cloud over Kalamazoo for several years. The city’s name had been linked to a well-publicized scandal, hundreds of jobs were lost, and the city’s hopes for a piece of the emerging auto industry were dashed. But just as Michigan Buggy had recovered from fires, so would Kalamazoo recover from the failure of Michigan Buggy.
The happy result of M. Henry Lane’s ouster from Michigan Buggy’s presidency was that he emerged from the bankruptcy without serious legal and financial penalties. In 1916, after the dust had settled, Lane founded the Lane Motor Truck Company with partner W.A. Cook. The firm enjoyed a brief success, and was able to secure lucrative government contracts during the First World War. An estimated four hundred and fifty trucks were ultimately produced a stone’s throw from the ex-Michigan Buggy plant. But in March 1919, due to declining health, Lane sold the company to H. M. Crawford, owner of the Lull Carriage Company. Lane later retired to California where he died in 1930 from injuries sustained in an automobile accident. Crawford reorganized the Lane and Lull firms as the Kalamazoo Motors Corporation, producing trucks out of the old Lane factory. Kalamazoo Motors Corporation lasted until 1924.
Due to their continued leadership roles in Michigan Buggy, the Lay family faired considerably worse. As a result of the legal prosecution of his sons, as well as his financial difficulties, Frank Lay was deeply embittered by the experience. Unlike Lane, he never returned to the manufacture of vehicles. Instead, after the bankruptcy, he bought a farm in Allegan County and raised pedigree cattle and thoroughbred horses. He died in Kalamazoo in 1933. His sons went to Detroit where they continued work in the automobile business. Frank Lay Jr. remained there, but George eventually returned to Kalamazoo.
Victor Palmer’s two year prison sentence was reduced for good behavior, and he returned to Kalamazoo on 17 January 1916. He had weathered most of the blame for the collapse of Michigan Buggy. The experience had taken a dramatic toll on his health. He passed away on 14 January 1924 at the age of 53.