Honda can be sued for scheme Ruling is victory for dealers who say bribes hurt business

August 31, 1996|By Scott Higham | Scott Higham,SUN STAFF

In a key ruling for Honda dealers who claim their businesses were damaged or ruined by a company-wide bribery scheme, a federal judge in Baltimore decided yesterday that the automaker can be sued for racketeering and antitrust violations, and that high-ranking Honda executives in Japan should be included in the case.

The ruling has the potential of becoming a big financial blow to one of the most popular foreign car manufacturers. It clears the way for the Honda dealers who claim they didn't pay bribes in exchange for shipments of cars to sue both the American Honda Motor Co. and its Japanese parent, Honda Ltd.

The dealers claim they lost millions of dollars in sales because they didn't pay bribes to Honda employees who controlled the allocations of popular models during the 1970s and 1980s, when Hondas were selling for thousands of dollars above the manufacturer's sticker prices.

The ruling also creates the possibility that the dealers could win millions from Honda if they ultimately convince a civil jury that company executives at the highest levels condoned and even profitted from the $15-million bribery scheme. Racketeering and anti-trust cases can result in triple damages for plaintiffs.

"We're very pleased," said Richard McNamara, a lawyer who represents 11 dealers nationwide who claim they were cut off from steady supplies of hot-selling Honda Accords and Civics because they didn't pay bribes.

"This case is far from concluded," Honda attorney Jeffrey Smith said.

A year after 19 Honda employees were convicted in the largest commercial criminal bribery case in U.S. history, the automaker is facing more than 50 civil law suits from Honda dealers, including several in the Baltimore-Washington region. The suits, filed first in courthouses throughout the country, have

been consolidated into one case in U.S. District Court in Baltimore.

The lawsuits claim that the company engaged in a pattern of racketeering and anti-competitive behavior because of the widespread bribery scheme. The suits also say that Honda executives knew about the scheme, and that the company should be held responsible for the dealers' alleged losses.

Dealers who did pay bribes -- cash, jewelry, expense-paid vacations -- were rewarded with plentiful shipments of Hondas, the suits say. Some of those dealers were convicted in the criminal case and many are named as defendants in the civil suits.

Honda lawyers filed a series of motions to dismiss the case. rTC They told Chief Judge J. Frederick Motz that Honda executives were not aware of the scheme, that the scheme did not amount to racketeering on the part of the company and that no anti-trust issues were at stake.

The lawyers also argued that Honda Ltd. in Japan had no involvement in the case.

For the most part, Motz sided with the dealers. He ruled that their racketeering case could proceed, and decided that one claim of anti-trust violations should be dropped from the case. But he ruled that the dealers could proceed under another complicated antitrust theory.

Moreover, Motz said Honda Ltd. and its Japanese executives should be part of the case.

In a separate 11-page ruling, the judge took another important step in the case, deciding that three high-ranking Honda executives in Japan must come to Baltimore and give the dealers' lawyers sworn depositions.

The bribery case first surfaced in a New Hampshire courtroom in 1993, when testimony in a civil suit against Honda turned to kickback claims. A federal judge halted the case and referred the allegations to the FBI, which began a national investigation.

Motz's ruling made it clear that there is a difference between the criminal case and the civil claims pending in Baltimore. The dealers who say Honda leadership was part of the bribery scheme have a long way to go to prove their case in federal civil court.

"It is facts, not allegations, that will finally determine the outcome of this litigation," the judge wrote.

Pub Date: 8/31/96

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