Industry Expert Says He Told Honda of Bribes : Automotive: J. David Power confirms he warned the car maker’s top executive in 1984 about a kickback ring within the firm. Also, a former O.C. dealer has blamed the alleged scheme for his bankruptcy.
A new accusation that American Honda Motor Co. knew about widespread bribery by its top sales executives surfaced Monday when market research guru J. David Power said he warned its president in 1984 about a kickback ring operating within the company’s sales force.
Power, founder of the authoritative J.D. Power & Associates automotive market research firm in Agoura Hills, confirmed through a spokesman a trade magazine report that he warned Honda’s then-president Yoshihide Munekuni eight years before Honda launched its own investigation.
Power is expected to testify next week for the defense in an ongoing federal criminal fraud trial of two former American Honda executives.
Meantime, a former Orange County Honda dealer blamed the alleged bribery scheme for his 1993 bankruptcy and identified a network of other Southern California Honda dealers as bribe payers.
American Honda on Monday reiterated its denial of involvement in the bribery scheme and declined to comment on Power’s statements, which appeared in an interview published in the trade journal Automotive News.
It has maintained that it learned of the scheme only in late 1991 and launched an internal investigation in 1992, which led to the removal of Stanley James Cardiges, the company’s former executive vice president for sales, and numerous lesser executives.
Power said that after he told Munekuni of the bribery scheme, the company president called in Honda’s lawyers to hear the charges.
Power’s comments should come as a welcome boost for defense attorneys in the criminal fraud trial of former Honda executives Dennis Josleyn of Penn Valley, Calif., and John W. Billmyer of Raleigh, N.C.
It also was welcome news for former Corona del Mar auto dealer Roger Miller, who is suing American Honda for $17 million.
The civil fraud suit, filed in Orange County Superior Court last week, is the 30th to be filed nationally by outraged dealers. They contend that their businesses suffered in the 1980s when they were short of hot-selling Hondas and Acura luxury cars while competitors who paid bribes to the company’s sales executives got all the cars they could sell.
“How many shells does it take to sink the ship?” Miller’s lawyer, Lawrence Silver of Los Angeles, said Monday when told of Power’s comments.
Miller’s suit contends that Honda is liable for the bankruptcy of Roger Miller Honda in Huntington Beach because it knew that the previous owners had pumped up their sales with cars obtained by paying bribes.
Cardiges was one of the American Honda executives responsible for approving the transfer of the franchise to Miller and is now a key government witness in the fraud trial after pleading guilty in February to racketeering, conspiracy, fraud and witness tampering.
A Laguna Hills resident, Cardiges, who faces up to 35 years in prison, has testified that he accepted more than $35,000 in bribes to provide extra cars to the two former owners--both now deceased--who sold the Huntington Beach dealership to Miller. Government officials have said he received $5 million in kickbacks from dealers nationwide.
It is important for the dealers suing Honda in civil court to show that the company knew of the bribes because that makes them victims of Honda’s unwillingness to act against Cardiges and the others.
Cardiges may have helped both the plaintiffs in the civil cases and the criminal defendants by testifying several weeks ago that he suspected that his superiors knew of the bribery scheme but chose for years to ignore it, apparently because the executives involved were helping Honda score major sales successes.
Silver said Monday that Miller was not solicited to pay bribes after acquiring the Huntington Beach dealership for a record $7 million in 1986. That, he said, made Miller subject to unfair competition from dealers who did pay bribes.
“Whatever benefits our predecessors (at the Huntington Beach dealership) got apparently then went to these other dealers,” Silver said. “And the benefits they got that boosted their sales disappeared for my client, who was harmed drastically by all of this.”
The suit cites Cardiges’ testimony in the federal trial as it identifies a number of Southern California dealerships that allegedly gave Cardiges cash, cars, jewelry and other items during the 1980s.
Among them were Norm Reeves Honda in Cerritos, Scott Robinson Honda in Torrance, Canyon Honda in Anaheim Hills, Quaid Imports in Riverside and Alhambra Honda. Most of the dealers either declined comment or were unavailable Monday.
At Alhambra Honda, however, vice president Tony Iskandar said he does not believe the dealership ever paid bribes to get cars. Iskandar didn’t start working at the dealership until 1989 but said that even then the dealership was too small to have mattered.
“We probably had, like, 30 cars,” he said. “After this happened, we know why we didn’t get extra cars.” Iskandar said that even though the dealership was chronically short of Hondas throughout the 1980s, “there was not much we could do.”
He said that when Honda representatives used to visit “we would take them out to lunch (and) we always paid for it. Now they insist on paying.”
At Canyon Honda, general manager Bill Vazac said he could not comment because he wasn’t employed there at the time the alleged bribe was paid.
The dealership is owned by North Carolina mega-dealer Rick Hendrick, whose Hendrick Management Organization has been a central figure in the case almost from the start. Hendrick has not been charged with any crime, but several former American Honda executives including Cardiges have testified that he gave them gifts and cash.
In February, the Justice Department issued a subpoena for records from Hendrick Management, which owns 89 dealerships and is the nation’s largest Honda and Acura dealer group with 28 franchises.
In the federal trial underway in New Hampshire, Billmyer, Cardiges’ predecessor as Honda’s top U.S. sales executive, and former western regional sales manager Josleyn are accused of participating in a decade-long scheme in which Honda dealers and would-be dealers paid more than $10 million in cash and goods to a group of American Honda executives in return for franchises or preferential allotments of cars.
A total of 30 people, most of them former Honda executives, have been indicted in the case and 26 have pleaded guilty.
Defense attorneys have argued that while Billmyer and Josleyn accepted gratuities from grateful dealers, their activities were known and condoned by their superiors at the Japanese car importing company.
Federal prosecutors are arguing that Honda was an unwitting victim and was defrauded by a group of rogue executives whose actions violated Honda’s own code of ethics as well as state and federal laws. The government is expected to wrap up its case this week and defense attorneys have said they will take a week to present their case.
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Times staff writer Chris Woodyard contributed to this report.
