Honda executives accused of fraud

March 15, 1994|By Boston Globe

CONCORD, N.H. -- Thirteen former executives of American Honda Motor Co. have been charged by federal prosecutors in a $10 million kickback scheme involving nearly every aspect of auto sales.

In what prosecutors called the first step in a nationwide federal investigation of Honda sales practices, five men were charged yesterday with racketeering and fraud in federal grand jury indictments and eight more entered guilty pleas to conspiracy charges, U.S. Attorney Paul M. Gagnon said.

Prosecutors said the eight who pleaded guilty are cooperating with the investigation.

"There are allegations of bribes and payoffs from the West Coast to the East Coast," said Michael J. Connolly, the assistant U.S. attorney supervising the prosecution. He indicated more charges are pending, but declined to say whether dealers and others who made the payoffs would be prosecuted. Between 30 and 40 dealers out of the more than 1,300 in American Honda's nationwide dealer network regularly made payments and gifts to Honda sales executives and their supervisors, Mr. Connolly said. In return, the dealers got new dealerships, allocations of scarce car models and other benefits.

They nicknamed the practice "passing the football."

"The bribe schemes allegedly involved approximately $10 million in cash kickbacks and gifts of cars, real estate and expensive jewelry," Mr. Gagnon said.

The investigation began a year ago, after one Honda dealer, Richard M. Nault of Manchester, N.H., filed suit in Concord against American Honda, charging that it had forced him out of business by failing to deliver all the cars he had been promised.

Pretrial interviews with witnesses revealed that one of Mr. Nault's competitors, P. Thomas Bohlander of Detroit, owner of Sunnyside Acura of Nashua, N.H., had given a car to a Honda manager and paid $17,000 in college tuition for the manager's son.

The case was settled out of court in March, and some reports said Mr. Nault was paid $5 million in damages. Judge Steven J. McAuliffe sealed the record and sent it to the U.S. attorney's office for criminal prosecution. That was the first indication federal investigators received of the practices, Mr. Connolly said.

American Honda of Torrance, Calif., described itself as "saddened and outraged" by the charges. In response, the U.S. subsidiary of the Japanese auto giant yesterday announced TC sweeping ethics policy that it said was unprecedented in the U.S. auto industry. It includes financial disclosure requirements for senior executives and an annual requirement that the company's 17,500 U.S. employees sign the firm's conflict of interest policy.

"These illicit acts represent a betrayal of trust that harmed the company and defrauded American Honda of millions of dollars," said Thomas Elliott, executive vice president of American Honda. He pointed out that 12 of those named in the charges are former employees and the one still on the payroll had been fired yesterday.

The payoffs, court papers said, took place during the 1980s and early 1990s.

Among the former zone managers who pleaded guilty to conspiracy charges was Hugh P. Cooper of Wilmington, N.C.

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