(Bloomberg) -- A court in Japan found former Nissan Motor Co. director Greg Kelly guilty of helping Carlos Ghosn underreport compensation in 2017, but cleared the American of charges for other years and gave him a suspended sentence, drawing a line under one of the most shocking corporate takedowns of the past decade.
In a decision welcomed by the U.S., Chief Judge Kenji Shimotsu suspended Kelly's six-month sentence in his ruling Thursday, bringing to an end 17 months of proceedings that essentially served as a proxy trial against the former Nissan chairman. The two auto executives were arrested in Tokyo on the same day in November 2018 and charged with various financial misconduct offenses.
Kelly's lawyers said they will appeal the ruling, even though the verdict is a rare partial victory in a country where prosecutors win virtually all court cases. At the same time, it also gives authorities enough space to claim victory in a trial that was clouded by doubt over whether the alleged crimes warranted such aggressive action. While Kelly is free to return to the U.S., prosecutors may also choose to appeal the ruling.
Kelly, 65, was left alone to defend himself after Ghosn staged a spectacular escape from Japan at the end of 2019, making his way by private jet to Lebanon, where he now resides. Kelly, who formerly oversaw human resources and legal affairs at Nissan, argued that there wasn't an agreement to pay Ghosn, as well as no requirement to disclose any such compensation and that his former boss was never paid.
Kelly, in a statement, said he was “shocked” by the ruling. “I acted in Nissan's best interests and didn't participate in any illegal activities,” he said. “I am innocent on all counts.”
Ghosn, speaking in a video conference from Beirut, said he was relieved for Kelly and described the decision as a “face-saving” ruling for Japan. “He had to stay three years and four months, maintained as a hostage, with a vicious arrest and one month of solitary confinement,” Ghosn said. “Greg Kelly is obviously innocent.”
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Wearing a dark suit and red striped tie, Kelly sat quietly through most of the hearing, taking notes. His wife, Dee, was seated nearby.
The judge said Ghosn received paid and unpaid compensation, and that the grand total should have been reported. Kelly was acquitted of charges related to Ghosn's pay before 2017 because he wasn't aware of the unreported renumeration, according to the chief judge. However, he said that in fiscal 2017 Kelly was aware that Ghosn's total pay wasn't disclosed and played a role in granting discounted stock options worth about 750 million yen ($6.5 million) more than reported compensation.
For fiscal 2011 through fiscal 2016, Shimotsu ruled that Ghosn and Toshiaki Onuma, who ran the secretarial office for Nissan's executives and testified for the prosecution in return for immunity, were aware their actions amounted to false reporting. Ghosn gave instructions to Onuma and kept his compensation a “tightly guarded secret,” the judge said. Ghosn's “personal greed” was behind the compensation scheme, he said, adding that the case “not only shocked the business community, but society at large.”
Nissan, also a defendant in the case, was ordered to pay a 200 million-yen fine by the three-judge panel at the Tokyo District Court. Lawyers for Nissan, which didn't dispute the charge of financial misconduct, outlined the harm done to the company, both financially and to its reputation. The carmaker bears responsibility and the case revealed its “dysfunctional governance,” the judge said.
Rahm Emanuel, the U.S. ambassador to Japan, welcomed the suspended sentence. “We are relieved that the legal process has concluded, and Mr. and Mrs. Kelly can return home,” he said in a statement.
Prosecutors had sought a sentence of two years in prison, arguing that Kelly had a central role in helping Ghosn hide remuneration of more than 9 billion yen, equal to about $78 million. They argued that Kelly played a critical and essential part in coming up with measures to avoid disclosure of income and finding other ways to pay Ghosn.
The Tokyo Public Prosecutors Office said in a statement that they were disappointed that some of their charges were not accepted by the court, and that they would consider their next steps after deliberation.
The arrests of Ghosn and Kelly triggered shock waves that reverberated through Nissan and its global carmaking alliance with Renault SA and Mitsubishi Motors Corp. Nissan's profits slumped to a decade low, and score-settling fueled an exodus of other top executives. The turmoil left the company in a weaker position as it seeks to navigate an industry that's being disrupted by a shift toward new-energy vehicles and self-driving cars.
The two Americans who helped Ghosn flee from Japan were convicted and are now serving time in Japan. Nissan's former global general counsel said he was dismissed from the company after questioning the subsequent internal investigation into Ghosn's alleged conduct, the carmaker's corporate governance and the conduct of others within the company.
“The Japanese judicial system is entirely broken,” said James Wareham, Kelly's U.S. lawyer at Fried Frank Harris Shriver & Jacobson. “They have a 99.6% conviction rate because they ‘convict' westerners who are proven innocent at trial.”
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