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Ghosn case: Unprecedented trial without ringleader

  • September 10, 2020
  • , Sankei , p. 10
  • JMH Translation

The trial of Gregory Kelly, 63, former Nissan director, and Nissan as a corporation, accused of violating the Financial Instruments and Exchange Act (misrepresentation of securities reports), will start on Sept. 15 at the Tokyo District Court. During an interview with the Sankei Shimbun, defendant Kelly pleaded not guilty and expressed his intention to put up an all-out fight. Former Nissan Chairman Carlos Ghosn, 66, who was indicted for violating the Financial Instruments and Exchange Act and the Companies Act (special breach of trust), fled to Lebanon at the end of last year. This unprecedented trial without the presence of the “ringleader” is attracting attention. 


During an exclusive interview with the Sankei Shimbun, Defendant Kelly plead not guilty. The following is a summary of the interview:


Question: What transpired on November 19, 2018, when the Special Investigation Department of the Tokyo District Public Prosecutors Office arrested you and defendant Ghosn?


Kelly: I was scheduled for neck surgery in the U.S. but Nissan insisted that “by all means I return to Japan,” so I decided to return. I arrived in Japan on a chartered plane specially arranged by Nissan. When the car I was riding in made a stop on the highway, all of a sudden a prosecutor and an interpreter got in and took me to a detention house. All the while I didn’t know what was going on.


Q: In what matter did the interrogation proceed?


K: The prosecutor tried to trap me in various ways. The prosecutor often told me, “Unless you tell me something that is counter to your interest, I will not believe whatever you tell me.” He let me glance at a document and asked me questions. When I asked him to show me the document, he said, “If I show this to you, you’ll make up a convenient story.” He did not allow me to see the document. Gradually, the prosecutor tried to make me feel guilty for not remembering what happened eight years ago (when I allegedly started under reporting compensation).


Q: The disclosure of executive compensation became mandatory from fiscal 2009. How did you handle that?


K: Defendant Ghosn instructed me to seek a way to receive compensation without disclosing it while adhering to the law. Defendant Ghosn said, “My greatest concern is the French government because it is a major shareholder in Renault, which has a capital tie-up with Nissan, and it does not intend to pay me compensation according to market value.” He was worried about pressure from the French government.


Q: How much was defendant Ghosn’s compensation?


K: Only defendant Ghosn can know that as he had the right to decide.This is speculation on my part, but I believe his compensation was originally 2 billion yen, and was reduced to about 1 billion yen. I didn’t know the exact amount of his compensation, so I had no way to conspire with defendant Ghosn.


Q: Why did you conclude a contract to pay defendant Ghosn a consulting fee after his resignation?


K: Ghosn fought to energize Nissan and protect its independence, yet he received only 50 percent of his compensation. This posed a management risk. Apart from defendant Ghosn’s instructions regarding compensation, I proposed he be payed a consulting fee to prevent him from moving to another company after his resignation. It was not a formal contract.


Q: How is your family doing? What are your thoughts on defendant Ghosn?


K: My wife stays with me, which is reassuring, but I left my mother, who has an incurable disease, and my beloved grandchildren in the U.S. I can’t wait for the trial to end and to go home. I have been deprived of my freedom by a false charge. I can understand why defendant Ghosn fled, but I also wish he could testify that I am innocent in court.


Fugitive Ghosn pleads innocent, no trial in sight


By Minoru Yoshihara


In Lebanon, Ghosn has been enjoying freedom, pleading his innocence many times in interviews with the media and appearing before the press with a snow-tanned face from skiing. Led by the Ministry of Foreign Affairs and the Ministry of Justice, the Japanese side has been moving forward with arrangements for Ghosn’s extradition. This, however, requires the Lebanese government’s cooperation, and how this situation will unfold remains uncertain.


“The conviction rate (in Japan) is 99.4%,” said Ghosn at a press conference in the Lebanese capital Beirut on Jan. 8 soon after his escape. He presented his personal view that he would be found guilty even if he were innocent. Using as proof the fact that Japan has a high conviction rate, he said that he would not be given a proper judicial decision. He also avoided giving testimony on the core of the incident. The conviction rate is high in Japan because prosecutors do not bring an indictment unless they are confident there will be a guilty verdict. Nonetheless, Ghosn continued to unilaterally criticize Japan’s judicial system, perhaps because he aims to bring world opinion on his side.


Even half a year after he fled, no progress has been made on his extradition. Behind this is the custom in international law for nations not to hand over their citizens to the law enforcement authorities of a foreign country. Ghosn has Lebanese nationality, and Japan does not have a “criminal extradition treaty” with Lebanon.


The French authorities are in the same situation with their investigation of French automaker Renault, which Ghosn used to chair. Although Lebanon is a former suzerain state [of France], Ghosn has not cooperated when he has been asked to appear for police questioning.


The political situation in Lebanon continues to be unstable. In addition to the spread of COVID-19 and Lebanon’s announcement that it would default on its foreign debt payment in March, there was a massive explosion [in Beirut] in August. Lebanese Prime Minister Hassan Diab announced the resignation en masse of his cabinet and then resigned. International Development Center of Japan advisor Yoshiki Hatanaka, an expert in the political and economic situation in the Middle East, says, “Turmoil continues. It is hard to imagine that the Lebanese government will hand over Ghosn. It seems that Ghosn is even saying to those around him, ‘Things are okay. (I will not be extradited to Japan or France.)’”


Ghosn’s trial is virtually impossible. Will the truth of the case be explicated in the trial of Gregory Kelly without the ringleader?


Prosecutors’ office believes it can prove Kelly was a tool of Ghosn


Defendant Kelly did not include in the securities report defendant Ghosn’s executive compensation he would receive in the future. The prosecution believes that defendant Kelly and others conspired to conceal defendant Ghosn’s high compensation by under-reporting it in securities reports. Defendant Kelly has plead not guilty, saying, “I did not conspire with defendant Ghosn.” A senior prosecutor, however, expressed confidence in obtaining a conviction, saying, “Defendant Kelly acted as defendant Ghosn’s tool and carried out the crime.”


According to the indictment, defendant Ghosn’s executive compensation for the period from fiscal 2010 to 2017 was about 17 billion yen including the amount he would receive after his resignation (unpaid compensation). However, the indictment states that defendant Kelly allegedly conspired with defendant Ghosn to submit a report with the amount about 9.1 billion yen less than 17 billion yen.


According to prosecutors’ argument, defendant Kelly and the former head of the secretary’s office, who accepted a plea bargain with the prosecution, discussed how defendant Ghosn could receive his executive compensation without disclosing it. Defendant Ghosn instructed them to do so, according to the prosecutors, because the disclosure of executive compensation became mandatory from fiscal 2009.


Sources familiar with the matter said that in March 2010 defendant Ghosn returned about 700 million yen of his 1.6 billion yen in compensation for fiscal year 2009 that he had already been paid out of concern that he would be criticized for high compensation. He also postponed receiving the unpaid portion and under-reported his compensation as 891 million yen in the securities report for fiscal 2009.


In order to pay back the returned compensation to defendant Ghosn without disclosing it, defendant Kelly, instructed by defendant Ghosn, instructed the former head secretary to find out whether a group management company of Nissan and Renault in the Netherlands could handle the payment. Defendant Kelly also instructed an executive officer to set up an unconsolidated subsidiary in the Netherlands for the payment. The prosecution entered into a plea bargain with the two individuals (the former secretary and the executive officer) and obtained their statements and documents on the condition that they would not be arrested.


Defendant Ghosn preferred to receive the unpaid compensation for fiscal 2010 and beyond after his resignation without using a separate company. The pretext was the payment in the form of consulting fees and an agreement not to take a position at a competitor. Several contracts and other documents relating to defendant Ghosn’s post-retirement compensation were also created, some of which were allegedly signed by him.


Although defendant Kelly argues that he thought the compensation was actually reduced and that post-retirement consulting fees were not “fixed compensation” that should be included in securities reports. But a senior prosecutor said, “It makes no sense to argue that the payments Kelly and others cooked up were ‘not fixed.” He stressed that “funds were even allocated [for the payment].”


The trial is expected to focus on the credibility of testimony by the former head secretary and others under the plea bargain agreement, which will play the central role in the prosecution’s proof.


Under-reporting of executive compensation in securities reports has not been proven in the past as a violation of the Financial Instruments and Exchange Act. There is some debate as to whether executive compensation constitutes a “misstatement of a material matter” subject to criminal penalties, and whether such a “minor offense” with no noticeable harm is punishable.


A former prosecutor said: “The Financial Instruments and Exchange Act is a law that protects investors. Turning a deficit into a profit would be a material misstatement to deceive investors, but would the amount of defendant Ghosn’s compensation, 1 billion yen or 2 billion yen, affect investors’ decisions?” In this way, the former prosecutor expressed doubt about the case itself.


In response, a senior prosecutor argued that “the deliberate act of hiding the amount of 9.1 billion yen is exactly an act of deceiving investors.”

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