The Inspector tells Michael Drake about him being smuggled out of Romania as a child for his own protection - I think the Inspector calling him the "last descendant" means that Michael was a viewed as a "pure blood", born in Romania and so the last surviving descendant of the original all-Romanian line of the family - the rest of whom had presumably been killed by an angry mob?
Michael then met and married an American woman and then had his family in the USA and so looking at it in a very snobby and aristocratic way, his son is not truly a Romanian descendant and the line has been "diluted"...either that, or you're 100% correct - it's a massive plot hole!
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