Former Nissan Motor Co Chairman Carlos Ghosn, right, arrives at the Tokyo District Court on May 23, 2019, the day preparatory court procedures in his case started. Photo: AFP / The Yomiuri Shimbun

A little over a year ago, in November, 2018, Carlos Ghosn, architect of Nissan’s revival two decades earlier, was ushered from his plane at Tokyo’s Haneda Airport and eventually to the Tokyo Detention House.

There, he was subjected to weeks of interrogation without the presence of his lawyers (a constitutional violation in Japan) and held in a tiny cell for three weeks, in solitary confinement, before the Tokyo District Public Prosecutor’s Office handed down its first of four indictments.

Ghosn would be held in custody for the better part of the next three months in what effectively is a maximum-security prison (despite its innocuous-sounding name, the Tokyo Detention House holds and has executed some of Japan’s most dangerous criminals) before being granted bail, which was set at ¥1 billion ($9.2 million), one of the highest levels ever in Japan.

The prosecutors clearly wanted to break Ghosn. They haven’t succeeded yet.

Best as I can tell, Ghosn is holding up physically. I can’t say how he’s dealing with the emotional strain of being separated from his wife (the prosecutors won’t let him see her), having had his reputation as an industry legend destroyed by a stream of media leaks (to both foreign and Japanese media) and not being permitted to mount a fair defense because prosecutors allegedly are withholding evidence.

Ghosn’s lawyers argue that the Tokyo District Prosecutor’s Office, working with Nissan’s mostly Japanese management, willfully and knowingly denied Ghosn his constitutionally guaranteed right to due process, for the purpose of removing him from management.

At the time of his arrest, Ghosn was chairman of Nissan, chairman and CEO of Renault and chairman of Mitsubishi Motors. By the fourth week of January, he was out at all three companies.

While one needs to be careful about reporting conspiracy theories, Ghosn’s lawyers in their Oct. 17 petition to dismiss the case, outlined a series of events that, if true, have broader implications for foreign corporations wishing to do business in Japan.

In January 2018, according to the court documents, the French government informed METI, Japan’s Ministry of Economy, Trade and Industry, that it intended to integrate the management of Renault and Nissan. This wasn’t Ghosn’s initiative.

Then in February, Renault reappointed Ghosn as CEO, a position he was to have held until 2022. Thus Ghosn, whether he supported the plan or not (it is not clear) would have been tasked with implementing it.

In March, several individuals in Nissan’s mostly Japanese management established a secret investigatory team to try to find dirt on Ghosn and, at some point, reached out to the prosecutor’s office –which, working with Nissan, set up the Nov. 19 sting operation, when Ghosn was arrested.

If this timeline is true, then the claim made by Ghosn’s lawyers that there was a concerted effort by Nissan’s mostly Japanese management to preemptively strike (my word) and remove Ghosn from management, before the inevitable shakeup over lackluster business performance, needs to be known.

Another disturbing charge by Ghosn’s lawyers is that he “has been discriminated against based on race, nationality and social status.”

Not a single Japanese member of Nissan’s management team has been arrested, although Nissan’s former CEO and Ghosn’s handpicked successor Hiroto Saikawa was himself forced to resign in September over unreported future compensation.

Saikawa, who was the bearer of the news of Ghosn’s and Kelly’s arrests at a hastily organized news conference last year on Nov. 19, was on the executive committee and board at Nissan when many of the alleged financial reporting crimes were committed. We will have to wait until Ghosn’s trial, currently expected to get underway this spring, to find out what Saikawa authorized.

In the meantime, Saikawa was allowed to apologize, pay back any unreported compensation, and get on with his life after Nissan. Ghosn effectively is under house arrest, free to move around Tokyo until his trial, at which time he faces a possible 15 years in prison.

And Nissan shareholders, who have lost billions of dollars, won’t learn the truth so long as he is muzzled in Japan.

From the very beginning, the case has violated Japan’s constitution, which states: “No person shall be arrested or detained without being at once informed of the charges against him or without the immediate privilege of counsel.”

 This didn’t happen, according to media reports.

The constitution also says: “In all criminal cases the accused … shall be permitted full opportunity to examine all witnesses, and he shall have the right of compulsory process for obtaining witnesses on his behalf at public expense. At all times the accused shall have the assistance of competent counsel who shall, if the accused is unable to secure the same by his own efforts, be assigned to his use by the State.”

Ghosn was interrogated daily for hours, without the “assistance” of counsel.

Meanwhile, there are problems with the charges, in particular with the main charge, which led to his arrest – that he underreported an estimated ¥5 billion ($44 million) in deferred executive compensation, a figure later raised to ¥8 billion ($70 million).

First, stock appreciation rights are not “income” per se. They might not be income at all if a company goes bankrupt or must seek protection from its creditors.

Second, the charge seems to presume that Ghosn and Greg Kelly, the American executive who allegedly “masterminded” the crime and also is awaiting trial, didn’t seek legal advice on this essentially technical matter.

And third, it assumes Nissan’s board of directors knew nothing about the deferred income plan. This seems unlikely. In fact, several media organizations, including Japan’s Nihon Keizai Shimbun and the Financial Times, have reported that they have seen a document in which Saikawa authorized a $40 million retirement bonus.

Nissan politely declined my request for an interview with senior management.

Beyond which

None of this makes sense in the first place because neither Ghosn nor Kelly reads, writes or speaks Japanese. Thus, how could they have engineered a financial crime of this magnitude over the course of a decade inside a Japanese corporation?

The only way it could have happened is if Nissan’s financial and auditing operation was asleep at the wheel the entire period – which, as one veteran corporate attorney advised, “would signify a systemic breakdown falling somewhere between gross negligence and willful recklessness.”

I learned that there are about eight layers of compliance, thus dozens of people including in-house auditors, who would have reviewed the internal financial accounts and reports, in Japanese, before submitting them to financial regulatory authorities.

Thus the “crime” wouldn’t have happened the way the prosecutors office said.

Ghosn, of course, professes his innocence of all charges.

At present we cannot know the truth about the sting operation to remove Ghosn from management, dragging him from his plane when he came to Tokyo to attend a board meeting and – this is my understanding from sources close to him – to deal with management “problems” inside Nissan, whose business had already begun to tank. We will not know the full story until he is able to speak freely.

And he is not free to speak. When he tried to meet the foreign press last April, he was re-arrested, effectively silencing him, as the prosecutor’s office rolled out a new charge. The four separate indictments in Japan now included breach of trust, understating his income, transferring personal financial losses to Nissan and – the new one – misappropriating money for personal use from a company business partner in Oman.

He spent another three weeks in solitary confinement.

The public needs to know what he has to say.

Over the past 12 months, the three alliance partners – Renault, Nissan and Mitsubishi – have lost a combined $18 billion in market capitalization. Profits and share prices have tumbled, while Nissan has announced plans to eliminate 12,500 jobs.

Not surprisingly, investors remain skittish as top management is shrouded in uncertainty. More to the point, industry analysts are concerned about whether the new management teams – all three companies have new CEOs – can truly work together as if the past year never happened.

Roger Schreffler is a business journalist who has covered the Japanese auto industry since the 1970s. He has followed all of the major automotive joint ventures dating back more than 30 years including the Renault-Nissan Alliance. Prior to beginning his career in journalism, he had done graduate studies in Japanese history and politics. He is  an automotive correspondent for Wards, where an earlier version of the article appeared. The current version adds new reporting.

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