2 Ex-American Honda Executives Convicted : Courts: At least $15 million in cash and goods were taken in a kickback scheme by sales executives. Civil suits by some dealers are expected.

Two former top executives of American Honda Motor Co. were found guilty Thursday in a massive bribery scheme involving dealers around the nation, ending a jury trial that prosecutors called the largest commercial bribery case in U.S. history.

The verdicts were handed down against Dennis R. Josleyn and John W. Billmyer in a federal court in Concord, N.H., after a four-month trial. They did not dispute taking the bribes but argued that the practice was acceptable behavior in Honda’s corporate culture--a position both the car maker and prosecution strongly denied.

Honda issued a statement saying the verdicts “close the book on a painful and difficult period in our history” and showed that the convicted executives “deceived our company and abused our reputation.”

Josleyn, 48, was convicted of racketeering, fraud and conspiracy and faces up to 35 years in prison.

Billmyer, 66, was convicted of conspiracy and faces up to five years of imprisonment. Sentencing is scheduled for Aug. 28.

At least $15 million in cash and goods were taken between 1978 and 1992 by a group of Honda sales executives led by Stanley James Cardiges, an executive vice president from Laguna Hills who worked at the firm’s Torrance headquarters.

Prosecutors said the bribery ring demanded the payments from dealers in return for extra allotments of hard-to-get Honda and Acura models and for lucrative Honda franchises. The scam reached its peak in the 1980s when hot-selling Hondas were in short supply.

The verdicts against Josleyn and Billmyer opened the door for what is expected to be a flood of additional civil suits against American Honda by dealers not involved in the bribery ring. They are expected to claim that they suffered huge financial losses because of the favoritism shown to those who did pay bribes.

“Even if Honda didn’t know about it, that ignorance doesn’t protect the company from liability for improper acts its managers committed within the scope of their employment,” said Jesse H. Choper, a professor of corporate law at UC Berkeley.

At least 30 dealers’ damage suits already have been filed nationwide against American Honda, and Los Angeles attorney Lawrence Silver said Thursday that he expects to file “a number” of new cases within a week.

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A federal grand jury originally indicted 24 people in the case--20 of them former managers who worked at offices around the country. Only Josleyn, of Penn Valley, Calif., and Billmyer, of Raleigh, N.C., stood trial, however.

Charges against two Honda dealers have been dropped and the others--including Cardiges--pleaded guilty before the trial started in late February. A federal investigation is continuing on the East Coast, said Assistant U.S. Atty. Michael Connolly. Evidence gathered during the probe is being referred to authorities in other jurisdictions as well. Connolly, who headed the prosecution team in New Hampshire, declined to provide any other information.

The trial, he said, proved that a group of renegade executives “harmed American Honda Motor Co.” He dismissed defense allegations--and testimony--that the company’s president and others who were not indicted knew of the bribery ring as early as 1983 but did not act until an in-house investigation began in 1991.

Defense attorneys said they plan to appeal the verdicts. Josleyn attorney Mark Sisti said he was “surprised and greatly disappointed” that the jury wasn’t swayed by defense testimony.

Many dealers and other auto industry insiders now say there were plenty of clues around that something was amiss at American Honda in the 1980s.

“It was common knowledge that something was going on,” said Scott Tassone, finance director at Costa Mesa Honda. “You’d see a bunch of sales reps wearing $1,000 suits who were only making $2,500 a month, and you had to wonder, how’d that happen?”

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Another Orange County Honda dealer found out about the bribes after going broke and has filed a $17-million suit against American Honda, claiming the company is directly responsible for his 1993 bankruptcy.

Roger Miller, who bought a Huntington Beach Honda franchise in 1986, says in his suit that he believes the record $7 million he paid for the dealership was fraudulently inflated because it was based on the dealerships’ ability to sell cars that it got by paying bribes. The American Honda officials who approved the sale to Miller included Cardiges and Billmyer, who knew of the bribes because they were recipients, Miller’s suit says. Both former owners are deceased.

Miller contends that he was not solicited to pay bribes after acquiring the dealership and became a victim of unfair competition from those who did pay to get extra cars.

Miller could not be reached for comment Thursday.

His attorney, Silver, said the guilty verdicts could result in dozens of more suits against Honda. Silver was reached by telephone while meeting in New York with a group of present and past Honda dealers who are considering claims against the import company.

Honda officials declined to comment Thursday on the civil cases.

“The Honda case certainly shows that company’s internal controls at the time were inadequate, with no checks and balances in place to stop this kind of thing,” said auto industry consultant George Peterson, president of Auto-Pacific Group in Santa Ana. “But it also shows this was isolated to American Honda and didn’t have links to other Japanese auto companies.”

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The verdicts came after seven days of deliberation and four months of trial in the New Hampshire federal courtroom.

The bribery and kickbacks involved dealers and Honda sales and marketing officials in more than 30 states and spanned more than a decade from the late 1970s to the early 1990s, peaking in the 1980s when Hondas, and later the company’s luxury Acura cars, were in hot demand and often were sold for thousands of dollars over the sticker price.

At least one person testified that dealerships could bring almost instant wealth to those fortunate enough to obtain them.

The defense never denied that the men accepted cash and gifts from dealers. Instead of trying to sweep his actions under the table, Josleyn’s attorneys argued that what he did was accepted by American Honda’s senior management as an appropriate way of doing business and of augmenting Honda’s reputedly penurious salaries at the time.

“You cannot commit an act of fraud against someone if you know they know you’re doing it,” Josleyn attorney Paul Twomey told jurors in his closing argument.

The jury, however, didn’t buy it.

Prosecutors spent almost two years building their case.

The government’s investigation was spawned by a 1991 civil suit in which a New Hampshire dealer alleged that Honda’s Acura division failed to deliver his allocation of the luxury cars because he refused to pay a bribe. That case later was settled, but testimony presented in court prompted the judge to ask the U.S. attorney’s office and FBI to investigate possible criminal activities.

Connolly said that investigators determined that only about 35 of American Honda’s 1,200 Honda and Acura dealers had been involved in the kickback schemes.

But those dealers coughed up a substantial amount of money--testimony to the value of a Honda franchise in the booming ‘80s.

Cardiges, who prosecutors portrayed as kingpin of the bribery scheme, kept a carefully constructed record of bribes that he received, logging each onto the pages of a special black leather ledger he kept locked in a cabinet in the office of his plush home in the exclusive Nellie Gail Ranch section of Laguna Hills.

The ledger, seized by government investigators when he was indicted in March, 1994, showed that Cardiges had taken in almost $5 million over a 10-year period. He joined American Honda’s sales division in 1973 and replaced Billmyer as head of the unit--responsible for nationwide sales of Honda cars to dealers--in 1988.

Among the “gifts” that Cardiges logged were mortgage payments on two homes; several new cars, including a $40,000 Mercedes-Benz; an assortment of gold watches, shopping sprees in Hong Kong, a fur coat for his wife and hundreds of thousands of dollars in cash.

Billmyer received mortgage payments, a swimming pool, expensive suits and cash, while Josleyn pocketed cash kickbacks from dealers and from an advertising company run by his brother--who also was indicted and who pleaded guilty to a conspiracy charge.

While defense lawyers said Josleyn and Billmyer simply were doing what their bosses expected them to do to pick up extra cash, prosecutors countered that the two men were driven by simple greed.

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Times staff writer Ross Kerber contributed to this story.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Cars, Bribes and Corruption

The American Honda bribery investigation, one of the largest in U.S. automotive history, spanned 30 states and led to the indictment of 24 people. Of the 24, authorities say 20 had pleaded guilty, charges against two were dismissed and two more were found guilty Thursday. Key individuals and events in the investigation and trial:

FOUND GUILTY THURSDAY

Dennis R. Josleyn * Residence: Penn Valley, Calif. * Age: 48 * Position: Western zone sales manager * Charges: Mail fraud, conspiracy and racketeering

John W. Billmyer * Residence: Raleigh, N.C. * Age: 66 * Position: Senior vice president for sales * Charges: Conspiracy to commit fraud

O.C. GUILTY PLEAS

Seven of those indicted were from Orange County:

Stanley James Cardiges * Residence: Laguna Hills * Position: Senior vice president * Charges: Key prosecution witness after pleading guilty to racketeering, conspiracy and fraud

Robert N. Rivers * Residence: Irvine * Position: Western regional manager * Charges: Pleaded guilty to racketeering

Mark L. Benson * Residence: Corona del Mar * Position: Zone sales manager, former co-owner of Costa Mesa Honda/Infiniti * Charges: Pleaded guilty to mail fraud

Edward A. Temple * Residence: Newport Beach * Position: Zone sales manager, former co-owner of Costa Mesa Honda/Infiniti * Charges: Pleaded guilty to conspiracy Robert A. Mazzitelli * Residence: Foothill Ranch * Position: Zone sales manager * Charges: Pleaded guilty to conspiracy

Thomas A. Caulfield * Residence: Foothill Ranch * Position: Assistant advertising manager * Charges: Pleaded guilty to conspiracy

Gary Donald Josleyn

* Residence: Yorba Linda * Occupation: Advertising agency owner (brother of Dennis Josleyn) * Charges: Pleaded guilty to conspiracy

KEY DATES

1991: New Hampshire Acura dealer files civil lawsuit against Torrance-based American Honda, alleging it failed to deliver his allocation of Acuras because he refused to pay bribe. Suit sparks FBI investigation and Honda internal probe.

1994: Federal prosecutors indict five former American Honda executives, charging they provided preferential treatment to dealers in exchange for bribes and kickbacks. Eight other former executives plead guilty. American Honda officials say they are “outraged and saddened” by alleged criminal activity.

February, 1995: Stanley James Cardiges enters surprise guilty plea moments before his joint trial with John W. Billmyer and Dennis R. Josleyn; becomes key witness against two former executives.

Feb. 27: Josleyn’s attorney claims Japanese business practices at American Honda advocated kickbacks and bribery.

April 4: Cardiges testifies that top American Honda officials knew about kickbacks and accepted gifts themselves. Under cross-examination he admits he had no firsthand knowledge of any gifts.

April 17: Auto industry expert J. David Power testifies he told Honda’s top executive about kickback ring in 1983, eight years before Honda began its own investigation.

May 5: American Honda is ordered to release records of internal probe into kickback scheme.

May 12: Jury deliberations begin.

June 1: Dennis Josleyn and Billmyer found guilty. Honda faces numerous lawsuits, including class-action suit filed by dealers claiming kickback scheme harmed franchises.

Source: Times reports; Researched by JANICE L. JONES / Los Angeles Times