Dealers fighting to control N.J. Honda store
Former NFL star, 2 rivals locked in legal battle
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EDITOR'S NOTE: This article has been corrected to clarify that dealer Don Lia is based in New York, but not Albany.
LOS ANGELES -- They threw a big party when former New York Giants linebacker Jessie Armstead opened his Honda store in Hamilton, N.J., in June 2009.
At the VIP grand opening, attended by about 20 members of the Giants, Armstead told the local newspaper that he had frequently driven friends and family members to Hamilton -- a few miles east of Trenton -- and stopped at a large field on U.S. Highway 130.
"People thought I was losing my mind when I would bring them out here and say, 'This is where my dealership's going,'" the former NFL star told the Star-Ledger at the time. "A year went by and [former Giants' defensive end] Michael Strahan said, 'Don't tell us no more. We don't believe a dealership is ever going to come.' But there's one here today."
These days Hamilton Honda is thriving, but there also has been a firestorm of controversy over how the franchise was awarded and who really is behind it.
Lawsuits in New Jersey and New York -- which could lead to perjury and racketeering charges for some involved -- allege that Honda awarded the franchise to Armstead and his partner in 2004 as a minority-owned group, when the venture was actually backed by New York-based dealer Don Lia.
David Davis, owner of Willis Honda in nearby Burlington, N.J., wanted to expand his territory, but Honda gave the open point to Armstead, who would own 51 percent of the store, and Michael Saporito, a former dealership executive with Huntington (N.Y.) Honda, which Lia owns.
Davis' suit maintains that Armstead and Saporito were secretly backed by Lia and that they abused minority-ownership statutes to secure the dealership.
'180 degrees different'
When the franchise was awarded, Lia, Saporito and Armstead swore under oath that Lia had nothing to do with the enterprise, the suit alleges. Now a separate lawsuit filed recently by Lia in New York accuses Saporito and Armstead of freezing Lia out of the Hamilton dealership's profits, after Lia invested $10 million in the startup.
Lia's suit against Saporito and Armstead is "180 degrees different" from the testimony given by the trio in 2003 and 2004 when Willis Honda protested Honda's intention to give Saporito and Armstead the franchise, said Eric Chase, the attorney representing Willis Honda and Davis.
As a result, Lia's case may uncover perjury and fraudulent actions in the attempt to secure the new point, Chase said.
Lia was implicated in Honda's bribery scandal in the early 1990s. In the nationwide case filed in federal court in 1994 he was one of many dealers alleged to have paid bribes to American Honda executives in exchange for preferable treatment by Honda. Some Honda executives served prison sentences. Like most of the dealers whose names were linked to the investigation, Lia was not charged with wrongdoing.
Armstead, 40, who is black, retired from the NFL in 2004. In January 2011 he received one of three Dealer of the Year awards presented at the annual Urban Wheel Awards ceremony during the Detroit auto show.
The Willis and Lia lawsuits seek unspecified monetary damages.
The Willis suit contends that because Armstead is black, Saporito and Lia were allowed to use New Jersey minority-ownership laws to bypass state franchise statutes that normally should have granted the nearest open point to Willis Honda.
The suit contains documents sent to American Honda stating that Armstead had put $1.015 million into the new venture to have a 51 percent interest in the dealership, while Saporito had put in $200,000 for the 49 percent interest.
In testimony in 2003, when Willis objected to the new point's proposed ownership, Saporito said he had received seed money for the dealership from a home equity loan and by borrowing from family members.
When asked if any money had come from Lia, Saporito said that he had sold some adjoining land to Lia at a $3 million profit, but that Lia had no stake in the dealership or its real estate. In separate testimony at the time, Lia confirmed Saporito's statements.
What's more, although Armstead supposedly put more than $1 million into the venture, he testified in 2003, in connection with the Willis suit, to bringing only "a couple thousand dollars, probably like three or four thousand dollars" to the venture.
$10 million ... for what?
Lia's suit against Saporito and Armstead also seeks to obtain control of the Hamilton point. Lia claims that he invested all the seed money -- more than $10 million -- through Saporito and Armstead to launch Hamilton Honda. And he says he has notarized agreements from 2003 and 2006 that grant him 75 percent ownership of the dealership and 100 percent ownership of the underlying real estate.
Lia claims that Saporito and Armstead have stopped sending him "rightful distributions ... with millions of dollars currently unpaid and no managerial control." He claims the initial agreement granted him "on demand" 75 percent control of the dealership, which Saporito has declined to grant.
Lia's attorney, Steven Cohn, said: "There are agreements that are signed. The agreements are clear on their face that shows a relationship between Lia, [Saporito] and Armstead."
Although Lia's initial filing did not include the signed partnership agreements with Saporito and Armstead, Cohn said: "They will be produced at the appropriate time."
Lia also claims Saporito and Armstead are now leveraging Hamilton Honda to pursue opening other dealerships in the tri-state area of New York, New Jersey and Connecticut.
Cohn declined to comment on the case brought by Willis Honda against Lia, other than saying: "Willis is free to allege anything they want to allege."
American Honda spokesman Jeffrey Smith said that Honda does not comment on pending litigation.
Jeffrey Brown, attorney for Saporito and Armstead, said in an e-mail: "There is no merit to the claims asserted in either lawsuit and a vigorous defense will be pursued against each." He declined further comment.
Last week, Willis Honda filed a motion to combine the two suits under one judge's jurisdiction. A ruling on the motion is expected this month.
Jamie LaReau contributed to this report
You can reach Mark Rechtin at mrechtin@crain.com. -- Follow Mark on 
