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Bribe case steers Honda to court Dealers' lawsuits say company allowed scheme to blossom

THE BALTIMORE SUN

To car dealers around the country hoping for plentiful shipments of hot-selling Honda Accords and Civics, Stanley James Cardiges was the answer to their prayers. They had a nickname for the Baltimore-raised auto executive with the soft smile and the smooth voice.

They called him "Car-Jesus."

With the wave of a hand, the American Honda Motor Co. senior vice president could deliver truckloads of the popular imports to dealers willing to shell out something extra. In return, dealers from Maryland to California showered him and other Honda employees with ruby rings and Rolex watches, stacks of cash and expense-paid trips to Colorado and the Caribbean.

William Schuiling, a dealer whose auto empire includes Brown's Honda City in Glen Burnie, gave Cardiges so much money, the Honda executive testified last year, that he lost count. Schuiling was not charged with any criminal wrongdoing.

"He gave me a lot of money," Cardiges said. "A whole lot."

A year after Cardiges and 18 other employees were convicted in the largest commercial corruption case in U.S. history, Honda is facing a flurry of lawsuits in federal court in Baltimore alleging that it allowed the scheme to blossom into a $15 million bribery racket.

Nearly 50 dealers from around the nation, including several from the Baltimore-Wash-ington region, are claiming that they lost millions in sales because they didn't pay bribes. The result, they say, was that the cars they needed to stay competitive were diverted to dealers willing to part with cash and kickbacks.

"Bribes were being paid all over the map," says James P. Ulwick, one of the many lawyers representing dealers who say they didn't pay and suffered the consequences.

The lawsuits -- filed around the country and consolidated in Baltimore -- allege that Honda executives at the highest levels looked the other way while their employees accepted the bribes during the 1970s and 1980s.

$2,000 over sticker price

It was a time when Hondas were the hottest-selling cars in America, fetching as much as $2,000 over the sticker price. Dealers couldn't keep them on their lots. The demand created the perfect climate for corruption, according to court records, trial testimony, interviews and FBI field reports.

The suits pending in Baltimore also claim that certain dealers, including Schuiling, profited from the scheme because they were able to secure larger allotments and wider selections than their competitors. The suits say dealers also made Honda executives silent partners in exchange for licenses to open new dealerships.

The Honda dealership in Annapolis got its start that way, after a Honda executive received a secret stake in the operation, according to court records and FBI reports.

Honda denies that its top executives knew anything about the schemes. Attorneys for the California-based company have asked Chief U.S. District Judge J. Frederick Motz to dismiss the case, saying that the plaintiffs can't prove they lost any money and that the company was not involved in a case that would come under the Racketeer Influenced and Corrupt Organizations Act (RICO). If the case does come under RICO, it could mean Honda would have to pay triple damages.

Motz has not ruled on the Honda request, but if his comments from the bench are any indication, Honda lawyers could face a long legal fight.

"If there is a RICO case," Motz said during a recent hearing, "this is it."

There are other troubles on the horizon for Honda.

Five former employees convicted in the bribery scheme have offered to settle with the plaintiffs and testify against Honda about how the payoffs worked. Schuiling also has offered to settle, pledging his cooperation and testimony against Honda, along with a $1.2 million payment to the plaintiffs.

He is the first of the dealers named in the lawsuits to cooperate. Other dealers and former Honda employees named as defendants are expected to follow, making deals to lower their legal and financial liabilities in exchange for their help against Honda.

At a hearing Friday, Motz will determine whether the settlements should be accepted by the plaintiffs and other dealers, who are trying to create a class-action case on behalf of more than 1,000 current and former Honda dealers. The class-action proposal is pending before the judge.

Honda issued a statement last week saying that a criminal trial in New Hampshire last year established that corrupt Honda employees concealed the scheme from the highest ranks of the company.

"American Honda has complete faith that at the conclusion of this unfortunate litigation, the company will again, as in New Hampshire, be found to have been victimized and defrauded by this group of unscrupulous former employees and Honda dealers," the statement says.

The bribery case began nearly 20 years ago with a whisper and a wink between business associates and mushroomed into a nationwide shakedown scheme, according to the court records and FBI field reports.

Some of the earliest bribes were in the mid-Atlantic region. A recent court pleading filed by the plaintiffs called the Baltimore-Washington area "one of the dirtiest" Honda sales zones.

The scheme has been traced to two key Honda executives -- Stanley James Cardiges from Baltimore and his mentor, John "Jack" Billmyer, a gregarious car salesman who was based in New Jersey. Billmyer was convicted of fraud last year.

After graduating from Towson State University and becoming a Baltimore schoolteacher in the late 1960s, Cardiges wound up in sales, first with IBM, then with Ford. In 1977, a newspaper ad caught his eye. Honda was looking for a Baltimore-Washington sales representative.

Cardiges was hired on the spot. The man who hired him was Billmyer.

The first 'gifts'

Within a year, Cardiges received one of his first "gifts." It came from Schuiling, a Pontiac dealer in Northern Virginia at the time, FBI reports say. Schuiling paid some bills for Cardiges, and Cardiges helped Schuiling secure his first Honda dealership.

"Schuiling paid bills in the amount of $7,000 to $8,000 a few times," an FBI report says.

Over the years, their relationship flourished. Schuiling was becoming one of the biggest car dealers in the nation with lots that flew the "Brown" name on banners with heart-shaped logos.

Both men profited from the relationship, according to court records and the FBI reports. Schuiling paid Cardiges about $60,000 a year for seven years. He called the payments consulting fees. Cardiges had a different explanation.

"In your own judgment, Mr. Cardiges, did you provide consulting services which warranted $60,000 a year?" federal prosecutor Michael Connolly asked during a criminal trial last year.

"Absolutely not," Cardiges said.

"Did you do anything for Mr. Schuiling that went over and above your responsibilities to American Honda Motor Co.?"

"No," he said.

Schuiling, who was never charged but is named as a defendant in several lawsuits, declined to comment. One of his attorneys said that she has spoken to Cardiges since his testimony and that he has modified his statement about the $60,000 payments.

"He said he provided some consulting services," attorney Stephanie Harvey said. "But he would probably stand by his statement that it wasn't worth $60,000 a year."

Cardiges continued his rise at the corporation, following his mentor Billmyer to California. In 1981, Cardiges became sales manager of Honda's Los Angeles region, the most prestigious Honda beat in the nation at the time.

Remembering his friends

He didn't forget his friends back East.

One of those friends was Santo George Poling, another Towson State student turned car salesman. In the early 1980s, Cardiges asked Poling whether he was interested in opening a Honda dealership in Annapolis.

"There was incredible money to be made," Poling testified last year. Like many other dealers involved, he was granted immunity from prosecution in exchange for his testimony.

Cardiges told Poling that he wanted him to open the Annapolis dealership with one of the Honda executive's friends, William Page. Page, a car dealer, had realized earlier that Honda was the future of auto sales in the 1970s and 1980s, when fuel economy was the rage.

There was one caveat attached to the Annapolis deal.

Cardiges wanted Robert Rivers, then a Honda executive, to receive a secret 20 percent partnership, according to court records. For Rivers -- who later pleaded guilty to corruption and was sentenced to two years in prison -- it was the first kickback of his career. He is one of the former executives planning to cooperate with the dealers suing Honda.

In 1983, Honda of Annapolis opened, and the kickbacks to Cardiges continued, according to court records and FBI reports. Poling testified that he gave $5,000 Neiman-Marcus gift certificates to Cardiges and Billmyer as Christmas gifts.

Cardiges also helped Poling open an Acura dealership in Glen Burnie. Cardiges testified that Poling gave him a secret stake in that dealership but that he never saw a profit.

Poling did not return messages. His attorney, Steven A. Allen, called his client a "minor player" and said Poling, who no longer has an interest in any Honda or Acura dealerships, "was as much a victim in this" as anyone else.

Page has not been named in the lawsuits and did not return phone messages. He still holds interests in several Honda dealerships on the East Coast, including the Annapolis dealership. Rignal W. Baldwin, an attorney for Page, said that when his client found out about the secret deal with Rivers involving the Annapolis dealership, he terminated it.

While Cardiges made his climb at Honda and moved into a $770,000 home in Laguna Hills, Calif., he didn't forget another friend back East, David Trainer.

Trainer wanted to sell a Honda dealership he owned in Perryville. Cardiges put Trainer in touch with Poling, who bought the dealership with Page. Cardiges then helped Trainer open two Honda dealerships in Pennsylvania.

In return, Trainer made payments to Cardiges totaling almost $200,000, according to FBI reports and court testimony.

Trainer, retired and living in Delaware, declined to comment. He was granted immunity from prosecution in return for his help. His lawyer, Jack C. Phillips, said Trainer told the FBI everything he knew about the payments.

'Part of doing business'

"It was part of doing business," Phillips said. "He did not have to be a rocket scientist to realize that he didn't have a choice -- not if he wanted to get his allotment of cars."

While shipments of Hondas were flowing to Trainer and others, other dealers were having trouble getting cars.

Luby Honda in Baltimore was one of them.

Former Luby owner Betty Waghelstein claims in a lawsuit pending in federal court that she was unaware of the scheme and was squeezed out by area dealers such as Schuiling and Poling. In 1994, she sold the dealership on East Monument Street, one of the first Honda dealerships in Maryland when it opened in 1973.

"The cars were being diverted to dealers who were paying bribes," said Donald R. Strickland, an attorney for Waghelstein.

The bribery scheme started to unravel in New Hampshire, where claims of criminal wrongdoing and perjury started to surface during a lawsuit filed against Honda by Richard M. Nault, a Honda dealer.

The judge referred the claims to federal prosecutors and FBI agents.

After a grand jury handed up nearly two dozen indictments, Cardiges pleaded guilty to mail fraud last year and cooperated with prosecutors. He testified against Billmyer and former Honda executive Dennis Joselyn.

Both men were convicted. Billmyer was given a five-year sentence, Joselyn a six-year sentence.

Cardiges, who lost nearly everything he had after his conviction, declined to discuss the case from federal prison in Lompoc, Calif., where he is serving a five-year term.

During the criminal case, dealers were stunned to learn of the extent of the scheme. One, Frank Borman, a former astronaut and Eastern Airlines executive who opened a Honda dealership in Las Cruces, N.M., has since filed a lawsuit against Honda.

"To learn that criminal activity of this scope and magnitude had permeated many of the highest executives in the distribution system of one of the world's major automobile manufactures was more than I initially thought would be the truth," Borman said last week.

"We now know differently."

Pub Date: 7/21/96

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