Defense Plans ‘Rising Sun’ Strategy in Honda Trial : Autos: The lawyer for the man accused in the kickback scheme plans to turn spotlight on Japanese business practices.
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 under way in Concord, N.H.
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 says 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 car 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 say they believe this is the biggest commercial bribery case in U.S. history. But Cardiges’ Sherman Oaks attorney, Philip D. Israels, will argue that it is about politics, not payoffs.
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. John 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. Dennis 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 car 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.
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 dealers. The alleged shipment arrangements would have been in violation of Honda rules that all dealers be treated equally when cars are in short supply.
Michael J. Connolly, the assistant U.S. attorney leading the prosecution, said the federal government is involved because the alleged fraud was committed through interstate commerce and the mail as well as by telephone.
Israels said 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 Billmyer and Josleyn.
He 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 leverage 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 the 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.
Connolly refuses to comment on Israels’ claim. The Commerce Department, which is conducting the automotive trade talks with Japan, also declined comment.
But 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.”
And 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’ argument is hard to believe.
“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.
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. The initial indictments followed in March, 1994.
Times staff writer Greg Johnson and the Associated Press contributed to this report.
