Four former executives of Torrance-based American Honda Motor Corp. and a Philadelphia lawyer were named in a suit charging that they sought to defraud two business executives of $250,000 to acquire a Honda franchise to be opened in Hammonton, N.J.
The suit, filed Wednesday in U.S. District Court for the Eastern District of Pennsylvania, asks for $10 million in punitive damages and $5 million in compensatory damages.
The suit stems from a major criminal investigation by the U.S. attorney that resulted in the March 14 indictment of 13 former Honda officials for extortion and racketeering. All of the executives named in the Philadelphia suit were among those indicted by the U.S. attorney, said the Bala-Cynwyd, Pa., law firm Furman & Halpern, which is representing the plaintiffs.
The former Honda executives named in the Wednesday suit are Senior Vice President Stanley Cardiges of Laguna Hills, who worked for Honda from 1977 to 1992; John Billmyer of Raleigh, N.C., who worked for Honda from 1970 to 1988; Western Regional Sales Manager Robert N. Rivers of Irvine, who worked for Honda from 1979 to 1993, and Roger Novelly of Medford, N.J., who was employed by Honda from 1981 to 1993.
A spokesman at American Honda said the company would not comment on the suit.
According to the suit, businessmen Joe Flynn and the late Robert Mendelsohn retained Philadelphia lawyer Raymond Hovsepian to assist them in acquiring the Hammonton Honda franchise. Hovsepian represented himself as an expert in automotive franchise law with special knowledge of Honda because of his longstanding representation of the Martin Organization, one of the largest automotive dealerships in Delaware Valley, Pa., the suit said.
With Hovsepian's legal assistance, the Martin Organization, which is currently owned and operated by the estate of Martin L. Lustgarten, acquired numerous Honda and Acura dealerships nationwide.
The suit alleges that, after retaining Hovsepian and forwarding to Honda an application for the Hammonton franchise, Flynn and Mendelsohn received a letter from Hovsepian demanding a $250,000 kickback in return for a letter of intent that would have virtually guaranteed them the Hammonton franchise. Hovsepian allegedly told the plaintiffs that the $250,000 would be split equally among himself and four Honda executives.
When Flynn and Mendelsohn refused to pay the kickback, the lawsuit alleges, Honda refused to process the application. The Hammonton franchise was never awarded to Flynn and Mendelsohn.
The suit also alleges that Honda either knew about or was recklessly indifferent to unlawful conduct spanning 12 years and involving high-level employees and officers. Moreover, the suit charges that, even after Honda became aware of the illegal conduct in 1991, the company failed to remove the executives and officers involved in the alleged scheme.
Thirteen former executives of American Honda were either indicted or pleaded guilty March 14 in a New Hampshire district court for accepting money and gifts in exchange for choice dealerships and hard-to-get cars.
American Honda said at the time that it was "outraged and saddened" by the indictments and guilty pleas, which were announced by federal prosecutors in Concord, N.H. Honda said that it would take legal action to recover damages from all former officials who defrauded the company.
Honda also said that it was formulating a financial disclosure policy for all senior executives who make major decisions. The measure may be unprecedented in the auto industry, the company said.
The former executives allegedly gave or received about $10 million in gifts, bribes and kickbacks from 1979 to 1992. As many as 40 dealers among American Honda's 1,300 Honda and Acura dealerships were involved, federal prosecutors said.
The indictments are the result of a 1991 lawsuit against American Honda by Richard Nault, a former Concord, N.H., Acura dealer. Nault charged that Honda executives gave a rival dealer in Nashua, N.H., preference in choosing which cars to sell. That suit was settled last year, reportedly for more than $5 million. But testimony in the case opened a nationwide investigation by the FBI that led to the indictments and guilty pleas in New Hampshire.