Carlos Ghosn Prepares for the Trial of His Life

"(Bloomberg Businessweek) -- After two decades spent logging more air miles than virtually any other corporate leader, these days Carlos Ghosn rarely leaves a small slice of central Tokyo. The longtime head of Nissan Motor Co. and Renault SA lives alone in a modest house near the expat hub of Roppongi, getting around by taxi and on foot. Although he still keeps a detailed calendar, his days have never been less full, leaving plenty of time for strolls and bike rides through the city’s winding streets..Ghosn’s routine might seem lonely, but he’s rarely alone. Unmarked sedans tail him wherever he goes, close enough to make their presence obvious. If he enters a park or a restaurant, men in dark clothes get out of the cars and follow him on foot. A video camera is trained on his front door, allowing the Tokyo prosecutor’s office to keep tabs on who comes to see him. At the end of each month, he’s required to provide a list of everyone he’s met with, whether in a restaurant, at home, or at his lawyer’s office..Ghosn makes the short trip to see his legal team a few times a week to consult with them and respond to emails. According to the terms of his release from jail earlier this year, he isn’t allowed to use a computer anywhere else, and he can carry only a flip phone. Nor has he been permitted to spend more than one night away from his house without a judge’s permission or, apart from a single one-hour videoconference in November, to see or communicate with his wife, Carole..These conditions will persist well into 2020, when Ghosn begins the first of two trials for what prosecutors and his former colleagues at Nissan call a pervasive pattern of financial misconduct and raiding of corporate resources for personal gain. He denies wrongdoing, saying he’s the victim of a plot by Nissan executives and Japanese government officials to prevent further integration with Renault. A guilty verdict in either case could put the 65-year-old in a Japanese prison through the 2020s..A little more than a year ago, it was unthinkable that Ghosn might fall so far. As chairman of the Renault-Nissan-Mitsubishi alliance, which produces more than 10 million vehicles a year, he was as elite an executive as it’s possible to be. Over the years he constructed a formidable personal brand, presenting himself as a sort of auto industry Jack Welch who, after saving one of Japan’s best-known companies and revitalizing a storied French counterpart, was poised to lead the world’s transition to electric mobility. He met regularly with world leaders, was celebrated at business schools on four continents, and received at least three paychecks, which totaled almost $17 million in 2017. At the ultimate gathering of the globalized economy’s champions, the annual World Economic Forum in Davos, Switzerland, no one seemed more at home..But since Ghosn was arrested in November 2018, his power has proven remarkably ephemeral. Despite his vast Rolodex, almost no major business or political figure has spoken out on his behalf. The government of France, one of three countries where he holds citizenship, has essentially washed its hands of him. Renault’s leaders have appeared indifferent to his fate, while executives at Nissan have worked to put him in jail..It’s practically unprecedented, in this era of winner-take-all capitalism, for someone who’s reached the top to fall so precipitously. The last time a chief executive of comparable stature went to prison was during the wave of white-collar prosecutions that followed the collapse of Enron, back when George W. Bush was in the White House. Ghosn’s downfall could indicate that this immunity is wearing off and that the forces of populism and nationalism are coming for globalizers like him. But such sweeping trends don’t fully account for his predicament. Rather, his is a deeply individual story, of a man who clawed his way from obscurity to the pinnacle of global business before crashing down..More than two dozen people spoke with Bloomberg Businessweek about Ghosn’s career and the events that ended it. Many asked not to be identified so they could speak more freely. They painted a picture of a gifted but bloodless manager who accumulated remarkably few true friends as he built a corporate empire against formidable odds. For his subordinates, insecurity was a daily reality: One after another, potential successors found their progress stymied or their paths to power abruptly cut off. Ghosn, meanwhile, inexorably gained responsibilities, titles, and pay, whatever the results. At the time of his arrest, he was chairman, CEO, or both at three major public companies. And he was planning to put himself at the center of an even more powerful entity that could control them all..Ghosn’s trials will be a challenge far greater than any he faced in the business world. He’s preparing to defend more than just his freedom. He’s also seeking to prove that, in almost 20 years at the top, his privileges were the well-deserved rewards of a visionary who’d repeatedly done what no one else could. That he really was who he portrayed himself to be: the indispensable man..Ghosn spent much of his career as an outsider. He was born in Porto Velho, Brazil, a mining hub deep in the Amazon, to a Lebanese family. They eventually returned to Beirut, and as Ghosn neared university age his Francophile mother urged him to continue his studies in Paris. A hardworking student with a sharp mind for math, he was accepted in the mid-1970s to the École Polytechnique, the capital’s storied engineering school. Polytechniciens, as graduates are known, are some of the most coveted hires in France, and Ghosn went on to senior positions at tiremaker Michelin and, eventually, Renault..While his credentials were impeccable, he never really fit in with the Parisian business elite. He became a French citizen only in 1998, and he and his then-wife, Rita, who’s also Lebanese, rarely attended the dinner parties and galas to which they were frequently invited. For fun, they played bridge. His boss at Renault, a patrician Frenchman named Louis Schweitzer, sponsored him to become a member of Le Siècle, an exclusive club of politicians and businesspeople, but he almost never attended its meetings. Nor did Ghosn have much of a track record in corporate grand strategy. His specialty was operations, the nitty-gritty of factory floor efficiencies..After Renault acquired a third of Nissan’s shares in 1999, it dispatched Ghosn to Tokyo, where he would serve as the Japanese company’s chief operating officer. At first it looked like a suicide mission. With more than $35 billion in debt, Nissan had been within days of bankruptcy when it agreed to Renault’s rescue plan. It was regarded by many industry experts as unfixable..What happened next became a staple of business school case studies. Nissan was at the time producing more than 40 models, few of which were of much interest to consumers, and was maintaining a vast, inefficient supplier network. Ghosn slashed costs, introduced fresh designs, and overhauled manufacturing processes, shocking workers accustomed to indifferent management by visiting assembly lines to verify that his decisions were being implemented. Nissan went from near-death to profitability faster than virtually anyone thought possible, and in each of Ghosn’s first four full years at the company—he became CEO in 2001—it posted record sales..Nicknamed “7-11” for his reputed hours, he prided himself on putting in more time than anyone around him, studying the company’s operations in such detail that he could recall even obscure production metrics off the top of his head. Nothing was too small to escape his notice. On one occasion, he argued for removing a vehicle’s back-seat cigarette lighter, saving about a dollar on each assembly..Gradually he became less hands-on, particularly after 2005, when he was named CEO of Renault as well. The appointment drew skepticism, and not only because Ghosn would get two salaries. Schweitzer, who’d initiated the Renault-Nissan partnership, never envisioned the same person holding both roles. “It’s not manageable to handle two very different companies 10,000 kilometers away,” he says. “You’d fly all the time at the expense of time spent in the field.” Another of Ghosn’s senior colleagues, the longtime Renault executive Patrick Pélata, also disagreed with the decision; he and Ghosn later had a heated discussion over whether it was possible to do both jobs effectively, according to a person familiar with the exchange. (A spokeswoman for Ghosn said no such discussion took place, calling the account “categorically untrue.”).Ghosn began dividing his time among Tokyo, Paris, and the companies’ sprawling global operations, with every moment scheduled by a corps of assistants. He formed few close relationships. Even colleagues he’d known for years addressed him as “Mr. Ghosn” and avoided discussing anything but business. An executive who worked alongside Ghosn for more than a decade says there was no such thing as an informal catch-up. For every face-to-face meeting, the executive was expected to prepare a presentation or report and to follow a detailed agenda..In the place where Ghosn spent as much time as any other, the cabin of his corporate jet, he was usually alone, with only the crew permitted to accompany him. If someone asked why, they received a variation of the same answer. The plane was Ghosn’s private space—not just a means of transport, but a home..Ghosn was also at home at the annual Davos forum in the Swiss Alps, where politicians, bankers, and CEOs gather each January to network and cut deals. A regular by the early 2000s, he later joined its governing board, one of the most prestigious cliques in global business..As the forum became more central to Ghosn’s image, some colleagues fretted that he was relying too much on conversations there to generate strategic ideas. One of the most dramatic examples occurred in 2007, when he took a meeting with Shai Agassi, an Israeli software executive attempting to reinvent himself as an electric-vehicle entrepreneur. Chaperoned by former Prime Minister Shimon Peres, Agassi was pitching an embryonic plan to wire Israel for mass EV adoption. His startup, Better Place, wanted to use an unproven technology that, instead of forcing drivers to wait while their battery recharged, would use robotic arms to bolt in a fresh one. The company would prove the concept at home, then take it global..Agassi had only a white paper laying out the basics of the system, with no real engineering work behind it. To make it a reality, he would need technology and support from a large carmaker. Earlier that day, one of Nissan’s main competitors had turned Agassi down, yet Ghosn—who in other venues demanded reams of careful analysis before committing to a new direction, particularly a potentially expensive one—agreed to a collaboration on the spot. “He said, ‘I’ve read the white paper, and I’m on board,’ ” Agassi recalls. Under the terms of the deal he and Ghosn later formalized, Nissan would provide batteries, Renault would supply the cars, and Better Place would construct the charging infrastructure..Ghosn’s subordinates at Nissan were opposed to diverting resources from existing EV plans to an exotic technology designed by a company with no automotive experience. So, lacking participation from the Japanese side of the alliance, Renault took sole ownership of the Israeli tieup and made plans to source the batteries elsewhere. The project was ultimately a flop: Better Place never successfully commercialized its technology, and within a few years it entered a downward spiral that culminated in bankruptcy..The affair was embarrassing, but it didn’t pose a threat to Ghosn’s upward trajectory. That took a more serious misstep. In January 2011 he went on France’s most watched evening newscast to make an explosive allegation: that three Renault executives had been leaking confidential information from its EV program. The French government, which takes a keen interest in industrial espionage and also happens to be Renault’s largest shareholder, hadn’t been briefed on the company’s investigation, which had suggested the stolen secrets ended up in China. Ministers were furious..Ghosn’s claims quickly unraveled. The accused executives sued for defamation, issuing denials of remarkable specificity. Less than two months after Ghosn’s TV appearance, Paris prosecutors publicly declined to pursue charges against them, describing the evidence as nonexistent. Renault had to admit that the espionage allegations were groundless—they appeared to have been an elaborate hoax that fooled Ghosn—and later paid settlements to the fired employees. The finance minister, Christine Lagarde, was among the officials who practically demanded Ghosn’s head, saying that the people responsible for the fiasco “must depart.”.Ghosn agreed to give up his bonus in penance, but he had other ideas about who should leave. In April he accepted the resignation of his COO and second-in-command, Pélata. The removal calmed calls for Ghosn to go; it also took out a potential successor and the closest thing Ghosn had to a peer. The two had been in the same class at the Polytechnique, and Pélata had accompanied Ghosn to Nissan in 1999 before taking over operations at Renault. One former executive says Pélata was the only person at either company he heard call the boss “Carlos.”.Over the next few years, plausible replacements for Ghosn kept leaving as he entrenched himself. When Pélata’s successor, Carlos Tavares, left in 2013, going on to take over Renault’s longtime French rival, PSA Peugeot Citroën, Ghosn responded by abolishing the COO position, traditionally seen as a tryout for the top job, at Renault and then at Nissan. The following year yet another heavy-hitting Nissan manager, Chief Planning Officer Andy Palmer, left to become CEO of Aston Martin..As all this was happening, Renault-Nissan was becoming more complicated than ever. Ghosn had expanded the alliance to include major operations in China and Russia, and he’d made aggressive moves into electric and autonomous vehicles. But with some of the carmaker’s most experienced and capable senior managers leaving, it depended more and more on just one man at the top—which was just how Ghosn seemed to like it. And with great power came great compensation..In 2010, Japanese regulators introduced a new requirement that companies disclose executive salaries in excess of 100 million yen ($920,000). Nissan had opposed the move, perhaps because Ghosn proved to be Japan’s highest-paid CEO by far. The following year he received 987 million yen, in addition to about €4.4 million ($4.9 million) from Renault, including stock options—not enormous sums by the standards of top-level U.S. salaries, which could be in the $20 million range, but genuinely shocking in Japan. As local critics sometimes pointed out, the pay of Akio Toyoda, president of Toyota Motor Corp., by any standard a more successful carmaker, only modestly exceeded the 100 million-yen threshold..Managing the disclosures soon became a major preoccupation for Nissan. The company would formally report Ghosn’s compensation numbers at annual shareholder meetings in June, accompanied by a comparison of auto industry CEO earnings. That document was probably the most closely vetted piece of paper Nissan put out all year; a former executive recalls that it would go through as many as 15 drafts. Ghosn was generally shown to be trailing his rivals, but the numbers didn’t calm the criticism..The disapproval frustrated Ghosn, according to the former executive and another person who worked closely with the CEO. Ghosn was convinced that relative to the value he created—and the pay he might command from the automakers that had attempted to poach him over the years—shareholders were getting a good deal. He was also taking more interest in the fruits of his success. He’d divorced his first wife in 2012; his new companion, Carole Nahas, an elegant Lebanese-born New Yorker, encouraged him to collect contemporary art, and they later commissioned a 120-foot yacht, the Shachou, Japanese for “boss.” In 2016 they celebrated their wedding with a Marie Antoinette-themed party at the Palace of Versailles..Ghosn’s current problems trace back in part to the new disclosure rules. He and law enforcement officials agree that, from about 2010 on, he had subordinates calculate two numbers for his compensation from Nissan: one that was actually paid and a higher amount that wasn’t. Ghosn’s lawyers have argued that this second total represented “the amount of compensation Mr. Ghosn would have rightfully been able to receive” had public opinion in Japan permitted him to be paid in line with his true value. They cast the difference between the two figures as “the amount Mr. Ghosn sacrificed for Nissan,” saying it was intended to serve only as a reference for future negotiations with the company or a rival automaker..The calculations form the basis for two of the four criminal charges against Ghosn, as well as a civil complaint by the U.S. Securities and Exchange Commission. Japanese prosecutors and the SEC both claim that he fully intended to receive the extra cash—from $2 million to $15 million a year, totaling more than $140 million, according to the U.S. agency—and that he sought to hide it from shareholders. Ghosn considered “multiple ways to pay the undisclosed portion of his compensation through Nissan-related entities without public disclosure,” as well as having it paid out in “consulting fees” after his eventual retirement, the SEC wrote in its complaint. According to the commission, he also attempted to backdate letters so he could get additional money through a long-term incentive plan for executives that he hadn’t previously been part of..Ghosn settled with the SEC in September, agreeing to a $1 million penalty without admitting wrongdoing. As his lawyers are quick to point out, the very notion of “unpaid compensation” has an oxymoronic quality, but even if Ghosn’s account of his actions is accurate, it suggests a vast self-regard. Despite being one of the best-paid people on the planet, he made sure to put on record what he thought he was really worth..In 2017, with his stature still at its peak, Ghosn gave up the CEO role at Nissan, handing over day-to-day operations to Hiroto Saikawa, a former purchasing executive. Ghosn continued steering overall strategy as Nissan’s chairman while occupying the same role at Mitsubishi Motors, which had joined the alliance the previous year. At Renault he was still both chairman and CEO, and as a condition of its continued support for his leadership the French government told him it expected him to spend the bulk of his time in Paris..With a significant portion of his remaining schedule set aside for travel elsewhere, Ghosn was left with only a week in Tokyo each month. Typically he arrived on Mondays, speeding to his Nissan-provided apartment for a shower and a change of clothes before beginning a packed itinerary of meetings, speeches, and product launches. By Friday night or Saturday morning, he was gone. One former executive compares the flurry of activity to a hurricane blowing through. But when Ghosn departed, another former executive says, things tended to slow down considerably, with decisions deferred and timelines extended..There’s no question Ghosn’s attention was increasingly elsewhere. In 2018 he began working intensively on a plan to create a holding company that would control Renault and Nissan, transforming them into arms of a single automotive company. He’d considered similar structures before, but according to a person familiar with the proposed arrangement, this time he had in mind an attractive additional component: Fiat Chrysler Automobiles. FCA, based in London, had long looked like a promising merger partner, with a strong U.S. presence and brands such as Maserati and Jeep. If it could be included in the Renault-Nissan-Mitsubishi alliance, the union would produce far more cars than any other automaker, providing the kind of scale Ghosn had long argued was essential to invest in new technologies and keep up with rivals..Past flirtations had run aground on a major problem: Ghosn had never gotten along with Sergio Marchionne, FCA’s CEO and the author of a turnaround at least as impressive as Nissan’s. But after Marchionne died suddenly in July 2018, Ghosn saw an opportunity to make a deal with FCA’s controlling investor, John Elkann of the billionaire Agnelli family. Ghosn soon sketched out a rough structure. FCA, according to the person familiar with the plan, could take a significant stake in either the new holding company or Renault, perhaps displacing the French government as the most powerful shareholder if Ghosn could persuade it to sell. Ghosn could be the company’s CEO and Elkann its chairman; Saikawa, who’d frustrated Ghosn in his brief time running Nissan, would probably be gone. (FCA declined to comment.).The potential deal also represented, finally, a sort of succession plan. Ghosn, the person says, saw himself retiring after a few years getting the new company on its feet, choosing a replacement with Elkann, who would stay on as chairman to provide continuity. And Ghosn, who’d entered the car business with no connections, no pedigree, and a difficult-to-pronounce surname, would leave the industry as one of its true greats..On the afternoon of Nov. 19, 2018, Saikawa was chairing a regular gathering of Nissan’s top operational managers at its head office, which occupies a modern skyscraper on the Yokohama waterfront. Partway through, according to a person familiar with the meeting, Saikawa suddenly stopped the discussion and called for a few senior executives to join him in another room. There, he relayed some astonishing information: Ghosn had just been arrested at Tokyo’s Haneda airport on suspicion of violating financial laws. Greg Kelly, a board member who’d previously been in charge of Ghosn’s office, had been taken into custody at almost the same time..Saikawa presented the news as a surprise, but he’d been aware it was coming. For months, a small group of Nissan executives had been investigating Ghosn and passing their findings to prosecutors. Ghosn’s lawyers have argued that this investigation was ginned up to derail his holding company plans, which they claim aroused the ire of a nationalist group bridging Nissan and the powerful Ministry of Economy, Trade and Industry. Nissan said in a statement to Businessweek that it uncovered “substantial evidence of blatantly unethical conduct” by Ghosn and that Tokyo prosecutors acted independently against him. (Kelly denies breaking the law or behaving improperly.).Whatever the probe’s origins, Nissan’s immediate response to Ghosn’s arrest inflicted even more damage on its longtime leader. That evening it held a press conference in which Saikawa presented the case against Ghosn as essentially proven. In the ensuing weeks, employees at times seemed to be acting as agents of law enforcement. In Lebanon, company lawyers took possession of a laptop containing files that now form a key part of the prosecution; in Brazil, a staffer seized documents from Ghosn’s assistant..Executives perceived as close to Ghosn, almost all of them non-Japanese, were also sidelined. In early January, according to a person with knowledge of the events, Chief Performance Officer José Muñoz, whom Ghosn had been considering as a potential replacement for Saikawa, arrived at Nissan’s U.S. headquarters in Tennessee following a vacation and was told he was being put on an indefinite leave of absence. Another senior manager who’d advanced rapidly under Ghosn, human resources chief Arun Bajaj, was also abruptly placed on leave. (Both men have since left Nissan, and neither has been accused of wrongdoing.).Ghosn was initially indicted on three charges—two for the pay disclosures and a third for “breach of trust,” relating to Nissan’s assumption, during the 2008-09 financial crisis, of underwater foreign exchange contracts on behalf of its CEO. He finally won bail in early March after firing his original legal team, which had repeatedly failed to secure his release. True to form, he swiftly tried to put himself back at the center of events. Still technically a member of Nissan’s board, he sought court permission to attend one of its meetings to answer the allegations against him. The Tokyo District Court denied his request..Next he tried to get his side of the story out to the public. The 108 days he’d spent inside Tokyo’s central jail were the furthest he’d been from direct media exposure in a long time; in his old life, at, say, a busy auto show, he might give 10 or more interviews in a day, hitting talking points again and again with unfailing precision. On Wednesday, April 3 he tweeted that he would hold a press conference in eight days, to “tell the truth about what’s happening.” It never took place. The next morning, just before dawn, a team arrived at his home to arrest him on another breach of trust charge, this time related to allegations he’d taken payoffs from a dealer group in Oman..This charge seemed far more serious than earlier ones. Prosecutors claimed that, of $15 million in dealer incentives Nissan had paid to an Omani distributor called Suhail Bahwan Automobiles (SBA), $5 million found its way back to Ghosn. None of the prior indictments had alleged such a direct looting of Nissan, and the new accusation seemed to sap even the minimal support he’d retained. In Paris, Finance Minister Bruno Le Maire described Ghosn in a TV interview as just another citizen in trouble abroad, entitled to “the presumption of innocence, no more, no less, and to consular protection.” Renault, meanwhile, provided French prosecutors with details of other payments to the Middle East that it said raised “concerns.”.Japan’s criminal justice system is built on confessions, and early in Ghosn’s legal battle some of his advisers joked about the challenge of finding a defense lawyer in Tokyo who’d ever won at trial. Among the few is 74-year-old Junichiro Hironaka, whom Ghosn hired in February. Hironaka has a reputation for eviscerating prosecutors’ cases; newspapers long ago nicknamed him “the Razor.” Still, he’s wary of overpromising. “There is a substantial possibility that we can win an acquittal. But we are not at the stage of being able to say for sure,” he says. “The most important thing is that Mr. Ghosn himself is totally clear that he is innocent, and that we are convinced of that so we can fight in court. And we are.”.Ghosn’s case has been divided into two trials. In the first, on the two pay disclosure charges, he’ll be in the dock alongside Kelly and Nissan itself—an awkward situation, given the company’s evident eagerness to see him convicted. The second, in which Ghosn will be the sole defendant, will deal with the two breach of trust charges. Both relate to his ties with wealthy businessmen in the Middle East, Khaled Juffali in Saudi Arabia and Suhail Bahwan in Oman..The basics of the financial transactions involving Nissan, Ghosn, and the two men’s companies aren’t really in question, but prosecutors and defense disagree drastically on what those arrangements meant. The Juffali charge involves a series of foreign currency swaps Nissan assumed in late 2008, after the bank that sold them to Ghosn demanded collateral he didn’t have. A few months later, Juffali helped arrange a letter of credit that allowed Ghosn to take them back. Prosecutors claim that $14.7 million in subsequent payments from Nissan to the Saudi’s company were compensation for this favor; Ghosn insists they were legitimate fees and reimbursements for helping Nissan calm tensions with a Saudi distributor and assisting with plans for a new factory. (In a statement, Juffali’s firm said the payments were “for legitimate business purposes” and that its work “provided discernible financial benefits” to Nissan’s operations.).The Bahwan charge similarly concerns payments everyone agrees Nissan made to SBA, which distributes its cars in Oman and elsewhere in the Arab world. The payments were categorized as rewards for hitting or exceeding sales targets, standard practice for dealer groups. According to investigative documents reviewed by Businessweek, starting in 2015 a senior executive at SBA, Divyendu Kumar, began putting millions of dollars into Good Faith Investments, a Beirut company co-founded by Ghosn’s longtime local lawyer. The documents indicate that Good Faith in turn transferred funds to Shogun Investments, a vehicle Ghosn used for investing in startups, and also sent cash to the Virgin Islands company that purchased the Shachou..Investigators allege that Ghosn was essentially receiving kickbacks, using Kumar to funnel Nissan’s money back into his own pocket. People familiar with Ghosn’s legal strategy claim there’s no connection between the carmaker’s payments to SBA and Kumar’s transfers to Good Faith; rather, they say, Kumar had plenty of his own money and was eager to invest alongside Ghosn, whom he viewed as a smart businessman. (SBA and Kumar didn’t respond to requests for comment.).The transactions connected to the Oman charge were unique in another important respect. Carole Ghosn is a shareholder of the Virgin Islands company, and Ghosn’s son, Anthony, is a manager of Shogun Investments. In the eyes of the authorities, that could make them co-conspirators. Prosecutors seized Carole’s Lebanese passport during the raid to bring Ghosn back into custody, but they didn’t take her U.S. one, allowing her to swiftly depart. Anthony has also stayed away from Japan. The spokeswoman for the Ghosn family says that neither Carole nor Anthony has ever been arrested or charged and that both “strongly deny any suggestion of wrongdoing.”.The precise nature of Nissan’s payments to Juffali and SBA is obviously of critical importance. They were accounted for in Nissan’s budget under the “CEO Reserve,” a section created around 2009, roughly the same time frame in which Ghosn needed the Saudi’s help, to denote exceptional or unexpected expenses. Ghosn’s lawyers argue that despite the reserve fund’s name, payments needed approval from several senior executives in addition to the boss. They also point out that the payments to SBA continued once Saikawa replaced Ghosn as CEO. According to a former executive familiar with Nissan’s financial practices, dealer incentives were subject to particularly rigid review, with signatures required from a lengthy chain of managers, and they had to be initiated from the region where they were to be paid, not at headquarters..In part, the breach of trust cases may turn on whether Ghosn had sufficient power within Nissan to subvert these internal mechanisms to his own ends. Given his unquestioned dominance of the company, arguing that he didn’t will be tricky, but that’s what his lawyers intend to do..This strategy presumes, of course, that Ghosn can get a fair trial in a Japanese courtroom. His allies fear he can’t. Beating a criminal charge in Japan, where courts have a nearly 100% conviction rate, is exceedingly difficult. Prosecutors there enjoy a range of procedural advantages unavailable to Western counterparts. For example, rules requiring prosecutors to disclose potentially exculpatory evidence aren’t well-developed, and in many cases the prosecution can introduce evidence obtained without a proper warrant..With so much domestic and international attention on the case, the Tokyo prosecutor’s office—which declined requests for comment on this story—“can’t afford to lose,” Hironaka says. “So they’re using every tool they can to disadvantage us.” Hironaka’s team has complained about nondisclosure of evidence, as well as the tailing of their client, which they say is illegal, and leaks to media outlets..Hironaka also argues Nissan is “working hand in hand” with prosecutors to secure a conviction. Japanese authorities have confirmed that two executives—Hari Nada, a lawyer who led the internal investigation of Ghosn’s affairs, and Toshiaki Onuma, who helped Ghosn calculate his “unpaid” compensation—have received plea bargains in exchange for testimony. Ghosn’s legal team suspects Saikawa and other employees may have made similar deals. Hironaka suggests Nissan may actually want to be convicted in the pay disclosure trial—as a corporate entity, its penalty would be a fine—to help ensure that Ghosn is also found guilty. It’s already facing a 2.4 billion yen civil fine over the same issue. (Nissan declined to comment on its employees’ dealings with prosecutors and said of its own indictment that it “takes this situation extremely seriously.” It also expressed its “deepest regret” for the actions that led up to it.).“Why did this happen?” Hironaka asks. “Did this investigation begin because [Nissan] knew Mr. Ghosn had committed some kind of crime? Or did they try to find something Mr. Ghosn had done wrong in order to oust him and paralyze him?”.On Oct. 31, two major carmakers unveiled just the kind of globe-spanning deal Ghosn had thought essential. Fiat Chrysler, the company he’d wanted to join forces with, agreed to merge with Peugeot. Tavares, who’d left Renault as Ghosn was extending his reign, will be CEO of the combined entity, which will produce about as many cars each year as General Motors Co. Elkann will be chairman..Neither of the companies Ghosn helped build is in shape to take on an aggressive new competitor. Renault is being run by a caretaker CEO: In mid-October it fired Ghosn’s immediate replacement, Thierry Bolloré, whose relations with Nissan were tense. Shortly afterward, Renault reported plunging deliveries in emerging markets and slashed its outlook for revenue and profitability..Nissan, meanwhile, is navigating a crisis as severe as any since 1999. Its shares have dropped by about a third since last November, and in the first half of the fiscal year its revenue fell almost 10%, due in part to a slump in U.S. sales. Hundreds of talented engineers, particularly those with in-demand EV expertise, have left for other employers, according to a senior executive. It’s also trying to move on from yet another scandal. In September the company disclosed that Saikawa—who’d spent the better part of a year condemning his predecessor’s greed—had asked Kelly in 2013 to look for ways to pay him more. In response, Nissan said, Kelly altered the exercise date for Saikawa’s stock-based compensation, recalculating it to give him 47 million yen he wasn’t entitled to. Saikawa was forced to resign. (A lawyer for Kelly said Nissan’s claim his client was responsible for the payment is “a flat-out, demonstrable lie. He had no authority to do it, and did not do it.”).None of this will matter to Ghosn’s fate, which is now out of his hands. And while his situation may be, at least in part, the result of an especially brutal power struggle, the speed and magnitude of his undoing is hard to separate from how he operated. He retained control for so long that when resentments reached a breaking point, they were channeled into an unprecedented explosion. After that, the people he worked alongside proved no more loyal to him than he’d been to them..Jim Press encountered Ghosn at the lowest ebb of the American car industry. As vice chairman of Chrysler, Press took part in discussions on a tieup between Nissan and the storied Detroit automaker before its 2009 bankruptcy. He went on to work as a senior adviser to the Renault-Nissan alliance for almost a decade. Press is now one of a tiny number of former colleagues willing to speak publicly on Ghosn’s behalf. Ghosn, he argues, “was basically shanghaied into jail.”.He concedes, though, that as Ghosn neared his third decade in charge, he might have become perilously isolated. “I think he got blindsided by not understanding the level of discontent,” Press says. “You learn who your real friends are when the party ends.” —With Ma Jie and David Welch.To contact the editor responsible for this story: Jeremy Keehn at jkeehn3@bloomberg.net, Daniel Ferrara.©2019 Bloomberg L.P."

Carlos Ghosn Prepares for the Trial of His Life

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Carlos Ghosn Prepares for the Trial of His Life

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