'The Lonely Star of Carlos Ghosn', published in November '19, one year after Mr. Ghosn's arraignment, and, as it turned out, one month before his escape from Japan, painted a sobering future for the Alliance between French Renault and Japan's Nissan
With the verdict in the trial of Mr. Ghosn's associate, Greg Kelly, expected in March '22 after an incredible 3 years and 3 months, a watershed moment is looming
On November 19, 2018, Carlos Ghosn, CEO of Renault
They had to wait three weeks to hear explicit charges.
According to these charges, dated December 10 2018, and January 11, 2019, Mr. Ghosn was accused of, and Mr. Kelly was complicit in making false statements about Mr. Ghosn’s annual compensation for eight consecutive years from April 2010 to March 2018 and in concealing from Japanese tax authorities 9.3 billion yen ($82 million) in deferred income over that period
Separately, in February and in April 2019, Mr. Ghosn was charged with “breach of duty”, for having enlisted – according to prosecution - two Middle Eastern billionaires, Suhail Bahwan of Oman and Khaled Juffali of Saudi Arabia, to help him launder Nissan money for his personal gain through the use of Nissan’s “CEO reserve” fund
Stretching credibility, the later charges will be discussed briefly but the focus should stay on the original indictments as Mr. Kelly's trial, finally, nears its end
Because they are critical with regard to Mr. Ghosn's legal position, the charges levied against Mr. Kelly are the real – and the only – deal
Laying bare what – if anything – holds in these charges, the smoke will be lifting slowly on an affair which had been engineered minutely, was supposedly fool-proof but went astray
In this review, the charges levied in February and in April 2019 against Mr. Ghosn are set aside because they have no relation with Mr. Kelly's predicament and also because the facts stretch credibility
According to the charges, Mr. Ghosn had enlisted two Middle East billionaires, Messrs. Bahwan and Juffali, to launder money owned by Nissan on his behalf
These wealthy individuals, who entertained a long-term business relationship with Nissan, seemed improbable partners in such a scheme, if it ever existed…,
Furthermore, there is a record of transfer authorizations by Nissan’s executive committee, both at Renault
And finally, Nissan
(Mr. Ghosn acknowledges that Mr Bahwan and Mr Juffali did lend him money during a personal cash crunch, qualified by him as irrelevant to the case. The Nissan transfers were fully authorized payments for services on behalf of Nissan, and cannot be confused with his private transactions, according to Mr. Ghosn)
In effect, the trial, which went under way on Sept. 2020, will serve as proxy for Mr. Ghosn who fled Japan in December 2020
In September ’21, the prosecution called for a 2-year jail sentence for Greg Kelly during their closing arguments – with a verdict expected in March 2022
Intent on extorting a confession, the Japanese prosecutors had probably expected that Mr. Ghosn and Mr. Kelly would cave under the psychological pressure of their brutal imprisonment and solitary confinement (37 days for Mr. Kelly and 109 days for Mr. Ghosn) and admit ‘guilt’, opening the door to some sort of leniency, facilitating their early departure from Japan…or not...
According to Mr. Ghosn, in an interview led by Roger Schreffler (Asia Times) and in his own words
“Look, the prosecutor who was interrogating me in Japan was telling me all the time, ‘Mr Ghosn, you need to confess because if you do not confess, it’s going to get worse for you.’ It didn’t work.
So, he said, ‘Okay, if you don’t confess, it’s going to be bad for your wife. We’re going to go and try to find something” on her. “He clearly mentioned her.
“And then he said, ‘You need to confess for your children,’ and then ‘for your sisters. You need to feel responsible for your family. If you confess, you can avoid lots of problems.’ He said it.”
Whatever may be said of Mr. Ghosn’s character, push-over was not a defining feature and his denial of the charges levied against him was steadfast, as was, more remarkably still, Mr. Kelly’s determination to hold the line
Upon his arrival from the airport on November 18, 2018, the same day as Mr. Ghosn, Greg Kelly was arraigned at a prearranged stop on the East Kanto Expressway, where several members of the Tokyo prosecutors’ office entered and commandeered his vehicle.
As reported by Roger Schreffler, Mr. Kelly was driven to the Tokyo Detention House in Kosuge, a small village in the northeastern part of Greater Tokyo. Immediately strip-searched in front of several prison officials, Mr. Kelly was forced to change into a light blue prison suit. His daily interrogations started almost immediately…
In a speech before the US Senate in September 2020, the characterization by Senator Roger Wicker of Mississippi of the events as “cruel,” “unfair,” “harsh” and “shameful” may be an understatement, and undoubtedly a case of maximum psychological pressure
More troubling still, according to Mr. Schreffler
Specifically, according to our sources, he [Mr. Kelly] spent five weeks in solitary confinement, 37 days to be exact, in the dead of winter in an unheated cell, initially without winter clothing. On a number of nights, temperatures fell into the 30s Fahrenheit [-1°Celsius]
Lights would be on in his cell 24 hours per day, and during the day he would have to sit in the corner, legs stretched forward, not allowed to stand up and walk around for exercise.
Because he needed neck surgery, Kelly was constantly in pain. He was only allowed to leave his cell during daily interrogations with prosecutors and several times per week, for less than an hour at a time, for outside exercise. He was only allowed to shower two times per week.
Daily interrogations, our sources revealed, averaged five to six hours with no lawyer present. We were told that the prosecutors pressed Kelly to incriminate Ghosn. He didn’t…
In the days following his incarceration, it is fair to assume that Mr. Kelly felt victimized as there appeared to be no cause for his indictment
Consequently, and following normal procedure, Mr. Kelly requested legal support from his employer, Nissan
Turning Kelly’s call down initially, Nissan eventually recommended a lawyer who, according to Mr. Schreffler’s sources, urged Kelly to plea bargain and confess
Feeling he had nothing to ‘confess’, Mr. Kelly chose instead one of Japan’s best defense lawyers, Yoichi Kitamura, who had taken on Japan’s “hostage justice” system in the past and won.
The timing suggests that the Japanese prosecution had to move ahead with charges (on December 10) after failing for 3 weeks to obtain Greg Kelly’s supportive incrimination of Mr. Ghosn, weakening their case considerably, and perhaps fatally – the first turning point in the affair
In a sense, both Mr. Ghosn and Mr. Kelly had it ‘easy’ because, as is expected to emerge from Mr. Kelly’s trial, they had documented proof of speaking the truth and the prosecutors knew this as well (from day one) …
Much delayed for unknown reason, the trial was bound to shed light on the central issue regarding concealment from tax authorities of large sums between 2010 and 2018
Charges hinge on the allegations that income for pre-retirement services was concealed by Mr. Ghosn, with complicity of Mr. Kelly
Mr. Ghosn and Mr. Kelly have countered that, indeed, there had been discussions which actually led to documents drafted by Nissan lawyers in November 2011 (two proposals), September 2013 and June 2015
The gist of the different proposals was to create a contractual framework post-retirement for Mr. Ghosn and all four proposals were signed by Hiroto Saikawa, Chief Competitive Officer and Executive Director and the later two by Mr. Kelly
Mr. Ghosn did not sign and neither of the proposals was submitted to Nissan’s Board
The proposal would protect Nissan’s interests by securing a contract, including a non-compete clause, with their CEO after retirement, given the fact that Mr. Ghosn had been head-hunted by General Motors, Ford and Volkswagen
Age 59 in 2013, it is not unreasonable to assume that Mr. Ghosn was holding out, playing hardball as his reputation in the car industry allowed him to
For the record, GM CEO, Mrs. Barra, benefitted in 2020 from a pay package of $23.7 million (of which $2 million in salary and the balance in various stock options and incentives)
Mr. Ghosn had in 2010 accepted the halving of his salary to $10 million, given the difficult situation of Nissan at the time.
Unsurprisingly, Mr. Ghosn attempted to recover some of the moneys he had to give up in 2010 and, failing to achieve his purpose as soon as Nissan’s business turned positive because of Japanese regulations, he fell back on the next best option which was to set the value of a ‘non-compete’ and ‘consultancy’ agreement by the time he retired
The value of a ‘non-compete’ and ‘consultancy’ agreement, by the time Carlos Ghosn retired, is precisely what the June 2015 proposal – signed by Hiroto Saikawa and by Greg Kelly – spells out in a 15 page document
Mr. Saikawa was to succeed Mr. Ghosn following his arraignment and agressively characterized Messrs Ghosn and Kelly as “masterminds” (shubō-sha) of financial crmes at the press conference on the evening of the arrests...
Refering to the proposal, Mr. Saikawa would later say he didn’t understand what he had signed
The document was not signed by Mr. Ghosn, perhaps holding out for a ‘better deal’ (this is our personal assumption) and was not submitted to Nissan’s board. No money ever left Nissan’s ledger
To further clarify its interpretation, Hari Nada, head of the CEO’s office at the time, Senior Vice President and effectively Mr. Ghosn’s accuser, who was involved in drawing up the June 2015 proposal, confirmed during a July 3, 2019 interview in the offices of Nissan lawyers, Latham & Watkins that
- the fees outlined in the proposal had always been designed for post-retirement services
- though Greg Kelly may have sized the payments to Carlos Ghosn under the post-retirement consulting and non-compete agreements by reference to the ‘haircut’ (ref. to the amount by which Ghosn had voluntarily reduced his compensation), the services were all to be performed in the future
Maybe unwittingly, Hari Nada punched a hole in the hull of Nissan's - and the Japanese prosecutors' - case by confirming the value of Carlos Ghosn's non-compete clause for Nissan and the specific terms of the proposed agreement which did not need payment disclosure as director compensation, if only post-retirement services were being compensated
Because this assertion has to be the focus of Mr. Ghosn's and Mr. Kelly's defense, the explanation proferred by their accuser himself, and the 2015 proposal, prepared and signed by Nissan executives, could be viewed as the second turning point as events are spinning out of control
This cycle of events, the questionable decisions made by the French and Japanese governments in the name of sovereign rights, and plain greed displayed by many, will be discussed in the follow-up report : 'the Reckoning'