(Bloomberg) -- Carlos Ghosn was a jet-setting captain of industry, the C-suite superhero who helped save struggling automakers in France and Japan. That's why his arrest in Japan on allegations of financial misconduct on Nov. 19, 2018, while he was chief executive of Renault SA and chairman of Nissan Motor Co., came as such a shock. After serving two lengthy stints in jail before being released on bail, all the while professing his innocence and saying the deck had been stacked against him, Ghosn managed to slip out of the country and find sanctuary in Lebanon, where he was raised and has citizenship. Scrutiny of his actions, and the fairness of Japan's legal system, continues.
1. What are the allegations?
Ghosn, 67, was indicted in Tokyo on charges of under-reporting about $80 million in compensation and income during the decade before his arrest. Ghosn's pay had been called out before in Japan, where executive compensation is a touchy topic. He'd had a high profile in the country since 1999, when Renault entered into its partnership with Nissan. Assigned to turn around the Japanese icon, Ghosn reduced purchasing costs, shut factories, eliminated 21,000 jobs and invested the savings into 22 car and truck models in three years.
2. Why the focus on 2010 to 2014?
Starting in 2009, when Japan required companies to make executive compensation public, Ghosn's reported pay fell to roughly half what he had been making before, but his deferred compensation ballooned, according to people familiar with the investigation. Japanese law requires remuneration to be reported in the year it's fixed, even if the payout happens later. (There are similar rules in Europe.) Ghosn was also charged with three counts of breach of trust, two of which allege that he used foreign corporate entities in 2017 and 2018 to funnel $5 million from Nissan into accounts that he controlled and used to purchase a yacht and support a technology investment fund started by his son, Anthony. The charges carry a maximum sentence of 10 years in prison. (In September 2019, Nissan and Ghosn settled claims by U.S. regulators that they failed to disclose more than $140 million in pay to Ghosn. His attorneys said they wanted to put that matter behind them to focus on the criminal case in Japan.)
3. Will Ghosn ever be put on trial?
Unclear. Lebanon could try him on the allegations from Japan, though Ghosn is regarded by many Lebanese as a national hero. (Ghosn has citizenship in Brazil, where he was born, as well as in Lebanon and in France, where he revived Renault as executive vice president from 1996 to 1999.) Japan may attempt to get him back, though it doesn't have an extradition treaty with Lebanon -- which, in any case, doesn't extradite its citizens. In Japan, Ghosn had been out on bail since April 2019 under stringent conditions -- including that he not leave the country -- while preparing his defense. He had pleaded not guilty to all charges, and his trial was supposed to start in the first half of 2020.
4. Who else was charged?
Nissan was indicted over the saga as well, and was ordered by a Tokyo court to pay a 200 million-yen ($1.7 million) fine. The company said it strengthened its corporate governance and compliance, and filed amended financial statements. Former Nissan executive Greg Kelly -- known as Ghosn's gatekeeper and confidant -- was found guilty March 3 on some charges related to helping him under-report income, but was given a six-month suspended jail sentence. Lawyers for Kelly, an American, argued that the former director had no motive to hide any compensation for Ghosn and no knowledge of any plans to repay Ghosn for reduced income. The suspended sentence was welcomed by the U.S.'s ambassador to Japan, Rahm Emanuel.
5. What does Ghosn say?
“I have not fled justice -- I have escaped injustice and political persecution,” he said in statement soon after his arrival in Lebanon. He called the Japanese justice system “rigged” and said he had been deprived of “basic human rights,” including the presumption of innocence. Ghosn previously accused the Japanese government and Nissan of conspiring against him; his lawyer, Junichiro Hironaka, released a video in which Ghosn said “backstabbing” Nissan executives wanted him out because they feared their “autonomy” was under threat. In court in early 2019, Ghosn said the agreements for deferred pay were non-binding “draft proposals” and so didn't need to be disclosed. His French lawyer said Ghosn didn't get the deferred pay and there is no certainty he ever would have. Addressing a news conference in Lebanon in January 2020, Ghosn said he would stand trial “in any country where I believe I can receive a fair trial,” but didn't think that was the case in Japan.
6. What explains Ghosn's tension with Nissan?
By the time of his arrest, Renault's decades-old partnership with Nissan had become strained, and Nissan's then-CEO, Hiroto Saikawa, was seeking to rebalance what he and others at the Japanese company viewed as a relationship increasingly tilted in favor of the French carmaker and its most powerful shareholder, the French state. Ghosn had been pushing for an outright merger, which Saikawa and others opposed. Nissan ousted Ghosn as chairman three days after his initial arrest, and the alliance's other Japanese partner, Mitsubishi Motors Corp., removed Ghosn soon after. The swiftness of those moves fueled conspiracy theories that Ghosn had been the victim of a palace coup in an attempt to curb French influence. (Saikawa has called such theories absurd. In a further twist, he himself was forced out by the board in September 2019 after a scandal over his own pay.)
7. What has Renault done?
France's largest carmaker said it alerted French authorities after finding some of Ghosn's expenses “involve questionable and concealed practices and violations of the group's ethical principles.” Results of an audit ordered by Renault and Nissan of their joint subsidiary, Amsterdam-based RNBV, were sent to French prosecutors. That report identified 10.9 million euros ($12 million) in questionable spending by Ghosn and others. A spokesman for Ghosn said all the expenses were “authorized and tied to legitimate business purposes.” Ghosn stepped down as Renault chairman and chief executive on Jan. 23, 2019.
8. What is Ghosn's gripe with Japan's legal system?
After his first arrest, Ghosn spent more than 100 days in jail and was released on bail of 1 billion yen ($9 million) -- among the highest ever in Japan -- only to be rearrested a month later on new charges. He was granted bail again after three weeks. Initial conditions included restrictions on the use of his mobile phone and the internet. He could only use a computer offline at his lawyer's office and had cameras monitoring his house. His second release had similar conditions, which the court said were “meant to prevent the destruction of evidence.” While Ghosn was in jail, his wife criticized what she called his “harsh treatment” and said he'd lost 15 pounds (7 kilograms). She said the family wasn't allowed to contact him and that he underwent hours of questioning daily with only limited opportunities to confer with his legal team. Speaking for more than two hours in Lebanon in January, Ghosn called the legal system “anachronistic” and “inhumane,” citing his solitary confinement, hours of interrogation and lack of prescribed medication.
9. Is this how Japan's legal system is supposed to work?
For the most part, yes. Suspects in Japan routinely endure lengthy pre-trial detentions and repeated grillings by prosecutors without a lawyer present. Periodically rearresting a suspect on suspicion of new charges allows prosecutors to keep the suspect in custody while attempting to build a case or secure a confession. Bail is the exception more than the rule, and judges are less likely to grant bail to those who fight the charges. Legal experts say this is all a strategy to secure a confession. Tight budgets and a culture of wanting to save face mean that prosecutors usually pursue only those cases they are sure to win. In 2015, a trial was requested in just 7.8% of cases overseen by the public prosecutor's office. That helps explain why more than 99% of cases that go to trial end with a conviction; in England and Wales, for comparison's sake, the conviction rate is 87%.
10. Is there anything wrong with that?
Maiko Tagusari, secretary-general of the Center for Prisoners' Rights, said the Ghosn case has highlighted “serious failings” in Japan's criminal justice system. Amnesty International said it has persistently “raised concerns about the lack of rules or regulations regarding interrogations” during pre-trial detentions. The Japan Federation of Bar Associations has called for recording of interrogations. In response, the Japanese government says there are “strict judicial reviews at each stage” to balance the human rights of suspects with the needs of investigators.
The Reference Shelf
- Japan's Supreme Court outlines the nation's criminal justice system.
- Ghosn's escape might make bail even harder to get for foreign suspects in Japan's legal system.
- A look back at Ghosn's rise and fall and at how the global alliance he built moved on without him.
- A legal essay in the Japan Times about Ghosn's arrest.
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