Honda executives accused of long-running fraud

March 15, 1994|By Doron P. Levin | Doron P. Levin,New York Times News Service

CONCORD, N.H. -- Federal prosecutors are uncovering a long-running fraud in which American executives of the Honda Motor Co. pocketed more than $10 million in bribes and kickbacks paid by car dealers.

In return, the dealers received permission to open lucrative dealerships and obtained scarce Honda automobiles that they could sell at a large profit.

Some of the payments came in the form of college tuition for the son of one former Honda executive, as well as gifts like Rolex watches, jewelry and barbecue grills for other Honda officials. But prosecutors said that the largest amount of cash and gifts went to Honda's top sales executive in the United States, Stanley James Cardiges, who served as a senior vice president of American Honda Motor Co., Honda's U.S. sales organization, until he retired in 1992.

Mr. Cardiges, 48, who was arrested Friday at his home in Laguna Hills, Calif., funneled tens of thousands of dollars in payments from dealers through a furniture store, the prosecutors said yesterday. The store applied the money as credit for furniture that Mr. Cardiges purchased, they added.

Mr. Cardiges was indicted by a federal grand jury, whose indictments were unsealed here yesterday and announced at a news conference called by the prosecutors. He is one of five former Honda executives identified in the indictments, which included his predecessor in the top sales job. All have been arrested and were charged with various forms of fraud, as well as racketeering and conspiracy charges.

Eight other former Honda executives also agreed to plead guilty in U.S. District Court yesterday to federal crimes connected to the illegal payments. Michael Connolly, an assistant U.S. attorney in Concord who led the investigation, said the eight executives agreed to cooperate in a widening investigation in return for recommendations of leniency in sentencing.

The scheme now seems to have involved, during the last 14 years, dozens of Honda dealerships across the nation, as well as dealers for Honda's Acura luxury-car division.

In a statement yesterday, Honda portrayed itself as a victim of a criminal conspiracy of its employees. The Japanese automaker said it had been defrauded of "millions of dollars," which it intended to recover with "aggressive legal action."

Corrupt practices by Honda officials were almost certainly facilitated by the sensational demand for Honda's cars throughout the 1980s. Starting in 1981, the importation of Hondas and other Japanese cars was limited by a voluntary restraint agreement between Japan and the United States. That agreement, meant to ease competitive pressure on the Big Three automakers, created a risk-free environment for Honda dealers, who could sell at a profit nearly every car they could get.

Many dealers kept long waiting lists of buyers for each Honda they received, and often sold the cars for thousands of dollars above the sticker price.

Since all dealers wanted more cars, Honda supposedly distributed its cars equitably, on the basis of how quickly dealers sold what they had. But some dealers were apparently willing to bribe the Honda executives in charge of distribution for extra vehicles and additional franchises.

Last year, the government decided to start an inquiry of numerous allegations against Honda sales managers and executives after testimony by one of them in a civil suit in New Hampshire filed by Richard M. Nault, a Honda dealer, against the automaker.

Mr. Nault contended that his Acura dealership in Manchester, N.H., failed and his franchise agreement was terminated because he was unable to compete with an Acura dealership in Nashua that he said was receiving extra cars.

The Nashua dealer, Thomas Bohlander, acknowledged that he had made payments and gave gifts to David L. Pedersen, a former Acura zone manager. Mr. Bohlander testified that he paid college tuition for Mr. Pedersen's son amounting to $17,197 and gave Mr. Pedersen a 1987 Acura Integra as a gift, but he said that the gifts were simply tokens of his friendship.

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