Kickback Defense Claim: It’s Politics, Not Payoffs : Courts: Laguna Hills man’s attorney says Japanese business practices will be on trial next week. In all, 24 have been charged in the American Honda case.

The attorney for the businessman accused of engineering an $11-million kickback scheme at American Honda Motor Co. says he will put Japanese business practices and trade relations on trial Tuesday when the racketeering and fraud case gets underway.

In what might be called a “Rising Sun” defense, after novelist Michael Crichton’s criticism of Japanese business in his thriller of the same name, the lawyer for Stanley James Cardiges said he will argue that the Laguna Hills man did nothing during his tenure with Honda that his superiors in Torrance and Japan did not condone.

Cardiges, 49, was American Honda’s senior vice president of sales until 1992.

Government prosecutors will argue that Cardiges helped pay for his $760,000 custom hilltop home, its lavish furnishings and his $1,000 suits and gold watches by collecting as much as $5 million in kickbacks from auto dealers desperate to get Honda franchises or larger allocations of the company’s hottest-selling cars during the boom years of the 1980s. It was a time when the most popular Hondas and Acuras--sold by the company’s luxury car division--often fetched premium prices of $2,000 to $3,000 above the retail sticker price.

“There will be testimony about all sorts of goings-on, including surreptitious meetings where thousands of dollars stuffed into paper bags changed hands,” said one federal official involved in the case, which will be tried in U.S. District Court in Concord, N.H.

Prosecutors said they believe this is the biggest commercial bribery case in U.S. history. But Cardiges’ Sherman Oaks attorney, Philip D. Israels, said it is about politics, not payoffs.

Michael J. Connolly, the assistant U.S. attorney leading the prosecution, refuses to comment on Israels’ claim that the case should be nothing more than a civil matter between Honda and the defendants. Israels said the decision to seek federal prosecution “has more to do with failed U.S. foreign and economic policy than with anything having to do with Jim Cardiges” or co-defendants John Billmyer and Dennis Josleyn.

Cardiges, a 15-year Honda veteran who was appointed senior sales vice president in 1988, abruptly resigned in 1992. He is charged with racketeering, mail fraud, conspiracy and witness tampering. Billmyer, 65, of Raleigh, N.C., was Cardiges’ predecessor as senior vice president of sales from 1972 until his retirement in 1988. He is charged with conspiracy to commit mail fraud. Josleyn, 47, of Penn Valley in Northern California, was a West Coast sales manager for the company from 1983 until 1992. He is charged with racketeering, mail fraud and conspiracy.

In all, 19 former Honda executives, four former auto dealers and a Yorba Linda advertising agency operator have been charged with felonies in the case, which involved alleged bribery and kickback scams spanning a decade and involving dealerships in 30 states. All but five--including the three men whose trial starts Tuesday and two former dealers indicted last week, have pleaded guilty and await sentencing. Those who pleaded guilty could be called to testify in the trial, which prosecutors said should last three months.

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The former Honda officials have been charged with demanding kickbacks, gifts, silent partnership interests--even payment of their children’s college tuition--to award Honda franchises and to guarantee shipments of cars to preferred--some say prepaid--dealers in violation of Honda rules that all dealers be treated equally when cars are in short supply.

Connolly said the federal government is involved because the alleged fraud was committed through interstate commerce and the mail as well as by telephone.

Israels maintains that the government has collected evidence during its ongoing, two-year investigation that Honda officials in Japan condoned such activities. But he suggests that the Justice Department is holding it back as part of a government effort to pressure Honda and other Japanese auto makers into agreeing to U.S. demands for more Japanese purchases of U.S.-made auto parts--an issue that is the subject of ongoing trade negotiations.

“The U.S. is still working on accords with Japan, and isn’t it curious, when you consider timing of this investigation and the information that I believe the government has, that the names on this indictment” don’t include anyone in Honda’s Japanese hierarchy, Israels said.

A spokesman for American Honda characterized the defense attorney’s claims as “ridiculous.” If Honda officials knew and approved of the scheme, said Kurt Antonius, “then Honda would be a defendant in the case rather than a victim.”

But Israels said he will argue that “the government repeatedly says in its indictment that what was going on was a violation of Honda’s internal conflict of interest policy, so why is our government trying to enforce Honda policy? Why isn’t this a civil matter? I suggest that a federal criminal courtroom is not the place to implement foreign or economic policy.”

The Commerce Department, which is conducting the automotive trade talks with Japan, declined to comment on Israels’ allegations.

Japanese-American trade specialist Richard Drobnick, USC’s vice provost for international affairs and director of the university’s Center for International Business, said that Israels is arguing the unbelievable.

“It’s a ridiculous supposition because it implies a level of sophistication, coordination and secrecy within the U.S. government that just isn’t there,” Drobnick said. “It supposes intensive coordination” among several agencies “and assumes that this could be done without anything leaking out.”

Drobnick also argues that the company simply had no motive--that it did not gain any influence or financial profit from the alleged activities. Indeed, there is testimony gathered during the investigation that some of the indicted former American Honda officials pocketed money that dealers paid to send their sales agents to seminars supposedly sponsored by Honda, which means the auto company actually lost money.

Israels is waiting for the trial to offer up any evidence he might have to support his assertion that Honda officials in Japan condoned the kickback scheme.

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But a former Southern California car dealer who said he has never been questioned by federal investigators has publicly claimed that he was told in the early 1980s that he would have to pay bribes to become a Honda dealer--and that he told Honda officials in Japan about it.

Robert S. Estes, 81, is retired now, but the Brentwood resident once owned a chain of domestic and foreign-car franchises in Los Angeles and served as president of the California Automobile Dealers Assn.

He said in interviews with The Times last spring and again last week that he had applied for the Honda franchise in Beverly Hills and was called by another dealer about six months later and told “that all the paperwork was done and set and that I was going to become a Honda dealer, but that there was one thing I hadn’t been told.”

Estes said he asked what that was “and he told me I would have to pay a surcharge of $150 per car to some of the Honda executives for their promotional work.” Estes said he was never given any names because “I told them to kiss off . . . I’d never bought a dealership in my life and I wasn’t going to start.”

Estes said that he called Honda’s headquarters about the matter and told a member of the corporate staff “that there was a scam going over here and that dealers had to make under-the-table payments to get a franchise.”

He said he was told that company founder Soichiro Honda had retired but “that they would certainly tell him about it. But I never heard anything more.” Honda retired in the late 1970s.

Antonius, the American Honda spokesman, said that Honda officials here and in Japan would have ordered an investigation if Estes’ allegations were known. He declined further comment “because all of this is going to trial . . . (and) we don’t want do anything that might jeopardize the government’s case.”

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The case, which began with New Hampshire dealer Richard Nault’s 1989 federal lawsuit against American Honda for dropping him as a dealer, escalated in 1993 when the judge--concerned about bribery allegations raised during testimony in the suit--recommended that federal authorities investigate. Nault’s multimillion-dollar case was settled for an undisclosed sum in 1993.

During testimony in February, 1993, another New Hampshire dealer said he received his dealership after giving David Pedersen, a former Acura zone manager for New England, a new Acura Integra and $17,197 in college tuition for Pedersen’s son.

Two years earlier at the trial, Pedersen had testified that he had never received anything from anyone. But Damien Budnick, a former Acura district sales manager, later testified that he once delivered $100,000 from a Honda dealer in Cocoa Beach, Fla., to Pedersen. Pedersen pleaded guilty in July to a racketeering charge for accepting bribes and faces up to 20 years in prison; Budnick pleaded guilty in April to obstruction of justice for initially lying to investigators. He could be sentenced to serve up to 10 years in prison.

Connolly said the Florida dealer wasn’t charged because he cooperated with authorities.

The initial indictments against Cardiges, Billmyer, Josleyn and most of the other defendants were issued in March, 1994, in what Connolly and fellow Assistant U.S. Attorney Don Feith have said they believe to be the largest commercial bribery case in U.S. history.

Paul Twomey, Josleyn’s New Hampshire-based attorney, said he has been admonished by the judge in the case not to publicly discuss the defense strategies Israels is raising. But in a previously published interview, Twomey had maintained that his client, too, is being used as a scapegoat “for the business practices of Honda.”

However, the defense strategy for Billmyer apparently will eschew politics and rely on old-fashioned legal wrangling, said his attorney, David Long of Raleigh, N.C.

Billmyer, who is accused only of conspiracy to commit mail fraud, retired from American Honda on March 30, 1988. “Our defense is going to be focused on attacking the conspiracy theory,” Long said. “And we also will contend that if there was (a conspiracy), Mr. Billmyer withdrew upon his retirement” and was indicted a year after the five-year statute of limitations expired.

The government’s position is that Billmyer committed an act of conspiracy in March, 1989, less than five years before he was indicted. But “we disagree and will fight that one tooth and nail,” Long said.

Times staff writer Greg Johnson and the Associated Press contributed to this report.