Bribe case steers Honda to court Dealers' lawsuits say company allowed scheme to blossom

July 21, 1996|By Scott Higham | Scott Higham,SUN STAFF Sun research librarian Susan Waters contributed to this article.

To car dealers around the country hoping for plentiful shipments of hot-selling Honda Accords and Civics, Stanley James Cardiges was the answer to their prayers. They had a nickname for the Baltimore-raised auto executive with the soft smile and the smooth voice.

They called him "Car-Jesus."

With the wave of a hand, the American Honda Motor Co. senior vice president could deliver truckloads of the popular imports to dealers willing to shell out something extra. In return, dealers from Maryland to California showered him and other Honda employees with ruby rings and Rolex watches, stacks of cash and expense-paid trips to Colorado and the Caribbean.

William Schuiling, a dealer whose auto empire includes Brown's Honda City in Glen Burnie, gave Cardiges so much money, the Honda executive testified last year, that he lost count. Schuiling was not charged with any criminal wrongdoing.

"He gave me a lot of money," Cardiges said. "A whole lot."

A year after Cardiges and 18 other employees were convicted in the largest commercial corruption case in U.S. history, Honda is facing a flurry of lawsuits in federal court in Baltimore alleging that it allowed the scheme to blossom into a $15 million bribery racket.

Nearly 50 dealers from around the nation, including several from the Baltimore-Wash-ington region, are claiming that they lost millions in sales because they didn't pay bribes. The result, they say, was that the cars they needed to stay competitive were diverted to dealers willing to part with cash and kickbacks.

"Bribes were being paid all over the map," says James P. Ulwick, one of the many lawyers representing dealers who say they didn't pay and suffered the consequences.

The lawsuits -- filed around the country and consolidated in Baltimore -- allege that Honda executives at the highest levels looked the other way while their employees accepted the bribes during the 1970s and 1980s.

$2,000 over sticker price

It was a time when Hondas were the hottest-selling cars in America, fetching as much as $2,000 over the sticker price. Dealers couldn't keep them on their lots. The demand created the perfect climate for corruption, according to court records, trial testimony, interviews and FBI field reports.

The suits pending in Baltimore also claim that certain dealers, including Schuiling, profited from the scheme because they were able to secure larger allotments and wider selections than their competitors. The suits say dealers also made Honda executives silent partners in exchange for licenses to open new dealerships.

The Honda dealership in Annapolis got its start that way, after a Honda executive received a secret stake in the operation, according to court records and FBI reports.

Honda denies that its top executives knew anything about the schemes. Attorneys for the California-based company have asked Chief U.S. District Judge J. Frederick Motz to dismiss the case, saying that the plaintiffs can't prove they lost any money and that the company was not involved in a case that would come under the Racketeer Influenced and Corrupt Organizations Act (RICO). If the case does come under RICO, it could mean Honda would have to pay triple damages.

Motz has not ruled on the Honda request, but if his comments from the bench are any indication, Honda lawyers could face a long legal fight.

"If there is a RICO case," Motz said during a recent hearing, "this is it."

There are other troubles on the horizon for Honda.

Five former employees convicted in the bribery scheme have offered to settle with the plaintiffs and testify against Honda about how the payoffs worked. Schuiling also has offered to settle, pledging his cooperation and testimony against Honda, along with a $1.2 million payment to the plaintiffs.

He is the first of the dealers named in the lawsuits to cooperate. Other dealers and former Honda employees named as defendants are expected to follow, making deals to lower their legal and financial liabilities in exchange for their help against Honda.

At a hearing Friday, Motz will determine whether the settlements should be accepted by the plaintiffs and other dealers, who are trying to create a class-action case on behalf of more than 1,000 current and former Honda dealers. The class-action proposal is pending before the judge.

Honda issued a statement last week saying that a criminal trial in New Hampshire last year established that corrupt Honda employees concealed the scheme from the highest ranks of the company.

"American Honda has complete faith that at the conclusion of this unfortunate litigation, the company will again, as in New Hampshire, be found to have been victimized and defrauded by this group of unscrupulous former employees and Honda dealers," the statement says.

The bribery case began nearly 20 years ago with a whisper and a wink between business associates and mushroomed into a nationwide shakedown scheme, according to the court records and FBI field reports.

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