A Southern California auto executive at the center of a $15-million Honda kickback and bribery scheme entered a surprise guilty plea Tuesday, moments before the start of his trial in New Hampshire on federal racketeering, conspiracy and mail fraud charges.
Stanley James Cardiges of Laguna Hills, former senior vice president of sales for American Honda Motor Co., admitted that he took payoffs from Honda dealers for more than a decade in return for giving them preferential treatment, but he maintained that his co-defendants had orchestrated the scheme.
Cardiges was accused of accepting about $5 million in cash payments and goods, including five Rolex watches, six new cars, a fur coat, business suits, $25,000 in furniture and a $25,000 down payment for a vacation home in Big Bear.
Under the agreement, Cardiges faces up to 35 years in prison and a fine of up to $1 million. But his agreement to cooperate with federal investigators is expected to reduce his sentence substantially.
The trial of co-defendants John Billmyer, 65, of Raleigh, N.C., and Dennis Josleyn, 47, of Penn Valley, Calif., has been postponed until Feb. 22 to give prosecutors time to interview Cardiges and the other defendants a chance to prepare rebuttals.
In cases such as this, the defense is certain to attack the "turncoat" witness as someone whose testimony was bought by the prosecution in return for lenient treatment, said Sanford Kadish, a criminal law professor and former dean of the UC Berkeley School of Law.
The plea agreement, which was first proposed over the weekend, caught the prosecution and co-defendants off guard. Late last week, Philip D. Israels, the Sherman Oaks attorney representing Cardiges, had promised to mount an impassioned defense that would indict Japanese business practices in the United States and show that Cardiges did nothing that his superiors in the company did not condone.
But Cardiges on Tuesday made no mention of anyone higher in the Honda organization. He sat impassively in court, conferring with co-counsel Steve Lyons as the judge read the 49-page indictment.
American Honda, which has been portrayed throughout the two-year probe as a victim of a fraud engineered by rogue executives, issued a brief statement saying it "has worked closely" with prosecutors during the investigation and is "indebted to them for their diligence in exposing this complex criminal conspiracy that defrauded" the company.
Government prosecutors had alleged that Cardiges was a ringleader who benefited most from the money paid to a group of nearly 20 renegade Honda officials during the 1980s by dealers and would-be dealers seeking preferential treatment.
The kickback scheme took place at a time when the Japanese auto maker's cars were in great demand and short supply. Dealers with Honda franchises could--and often did--command premiums of $2,000 to $3,000 above the retail sticker price for the most popular models, and selling Hondas was considered an almost foolproof way to make money.
Cardiges, 49, is the 16th former American Honda official to plead guilty to felony charges arising from what Assistant U.S. Atty. Michael J. Connolly said Tuesday was a continuing probe into business dealings that lasted throughout most of the 1980s and involved Honda officials and dealers in 30 states.
A total of 24 people, including four Honda dealers, a Pennsylvania attorney and a Yorba Linda advertising executive, have been indicted in the case; 20 have now pleaded guilty.
Josleyn's attorney, Paul Twomey, said he and lawyers for Billmyer "are looking now to see what effect this (guilty plea) will have on our case."
He said Josleyn intends to go to trial and "will put his innocence before a jury of 12 Americans. He is not going to let Mr. Cardiges or the government prosecutors judge his innocence." Cardiges' attorneys could not be reached for comment.
They may have been split over strategy, however: Israels apparently wanted to try the case even as Lyons, Cardiges' trial attorney in New Hampshire, was preparing the plea bargain proposal.
The case unfolded in New Hampshire because a dealer in Concord and Manchester sued Honda in federal court there, claiming he had been treated unfairly. Allegations of graft during the federal trial prompted the judge to ask for a criminal investigation.
"When all the turmoil started and the FBI was interviewing everyone, there was lot of concern among dealers about who was involved," said Houston auto dealer Ramsay Gillman, the U.S. Honda dealers' representative on the board of the National Auto Dealers Assn. "People worried how far up and down the chain would it go and whether their dealerships or their contact with the manufacturer was going to be affected."
"Now what's happening is that Honda apparently has got its own house in order," Gillman said. "So there is renewed faith in Honda's field personnel and we have a level playing field (for all dealers), and that has been a very positive result--although it took a while to get there."
In its statement, American Honda said the former employees who have pleaded guilty "violated standing Honda policies that require honest and ethical conduct. Their reprehensible actions misused the trust placed in them by our company and abused our reputation."
"We will work hard to apply the lessons learned from these unfortunate events," it added.