This is part 3 of a series. Read part 1 here and part 2 here.
Ravinder Passi may be the person Nissan least wants to take advice from but probably should.
Passi is the automaker’s former global legal counsel. He uncovered what he called serious misconduct by other executives in the course of a nearly year-long internal investigation into Carlos Ghosn’s compensation issue, blew the whistle on them – and lost his job.
He believes Nissan needs to get back to its main business of making “good quality cars that people want.”
“Fighting court cases – which Nissan is now doing in the US, France, the Netherlands, Japan and Lebanon – takes time, energy, effort and money,” he said. “They are incredibly distracting for management.”
He added, “Whoever thought it was a good idea to oust Ghosn the way he was ousted was incredibly reckless. Nissan needs to authorize a ‘real’ independent investigation, much like the one at Toshiba.”
It’s worth noting that Passi is pursuing a lawsuit that he filed against Nissan in the UK, attacking the way he was pushed out of management after a 16-year career.
In what Passi characterized as harassment, Nissan president Makoto Uchida authorized a raid on the Passi home in a residential area of Yokohama, with Mrs Passi and the children present, shortly before the family’s planned departure from Japan.
The sense among people we’ve talked to for this report is that Nissan will not back down in any of the lawsuits and, in the words of one individual close to Ghosn, will continue “treating anything involving Carlos Ghosn as the crime of the century.”
Following is a review of Nissan’s ongoing litigations outside Japan:
More Beirut
The Beirut case is problematic for Nissan because criminal action on its part is alleged and there is little dispute about the facts.
Nissan sent a team of as many as four employees into Lebanon, one a corporate lawyer from Japan. Latham & Watkins sent a lawyer from the firm’s Dubai office. That team conducted what Ghosn believes was a police action authorized by the Tokyo prosecutors’ office, and thus by Japan’s Ministry of Justice, but not by Lebanese authorities.
They took Ghosn’s computer and personal papers – and, in the case of Fadi Gebran, Ghosn’s late lawyer and friend, a hard drive Ghosn’s lawyers say is protected by attorney-client privilege.
Ghosn’s lawyers filed a criminal complaint shortly after his November 2018 arrest. The case didn’t gain traction – in part, according to our sources, because Ghosn was not reachable for exchanges of information. He’d been in solitary confinement for more than three and a half months.
But new evidence has surfaced including names of individuals said to have been involved in planning the raid. We have learned at least two.
The eventual outcome: TBD.
In France, there are two cases involving Ghosn, both of them civil proceedings and – and both costly if he loses.
The first case involves French tax authorities retroactively interpreting residency rules and seizing a reported 13 million euros ($15.2 million) in assets pending the conclusion of an investigation. Included among those assets is a Paris apartment reportedly owned by Ghosn’s wife, Carole, part ownership in another property and an unspecified number of Renault shares.
The second case: Renault’s canceling of a reported 30 million euros ($36 million) in severance pay.
In both cases, Ghosn is trying to reclaim money he claims is owed to him. Although possible criminality has been insinuated in the tax case, there may not be grounds for a criminal charge in the case that involves a dispute over Ghosn’s tax domicile.
The tax case
In 2012, Ghosn made the Netherlands his tax domicile. France is now challenging that for the 2016-18 tax period.
Last December a judge agreed to allow tax authorities to seize a reported 13 million euros ($15.2 million) in assets, more than half the total coming from his wife.
A source close to Ghosn said the facts are on Ghosn’s side, but because the case is political the outcome is uncertain. French tax authorities “have both the means and the authority,” the source explained. “There is also the French cultural aversion to people who make money.”
Nevertheless, a potential problem for the French government is that Ghosn’s residence status is governed in part by international treaties, particularly treaties within the European Economic Area of which the Netherlands and France are both signatories along with 28 other countries.
It is not clear if making a special case out of one high-profile individual could have ramifications for other French nationals living and working abroad, but the subject came up in our conversations.
The outcome: TBD. But resolution of the case will take time, perhaps years, because the French government is involved and the French government, since French President Emmanuel Macron came on the national scene as Minister of Economy and Trade in 2014, has had a strained relationship with Ghosn over his compensation.
The severance case with Renault
Carlos Ghosn formally retired from Renault on January 23, 2019, under duress and while he was still imprisoned in the Tokyo Detention Center. The next day, Renault’s board met and named Thierry Bolloré to be his replacement as CEO.
Sources close to Ghosn said that Renault reached out to Ghosn’s legal team a week before the board’s Jan. 24 meeting, urging him to “retire,” rather than be removed, so that he could collect his severance pay, mostly stocks being held for him by the French automaker.
According to the terms of his contract, he couldn’t cash his stock holdings until five years after leaving the company.
Reluctantly, Ghosn agreed to retire, in part so he wouldn’t forfeit his severance pay, and signed an agreement prepared by Renault marked “retirement agreement.”
Then in short order after the January 24 board meeting, with Ghosn still in solitary confinement in Japan, Renault reneged on the agreement.
Our source told us that Renault’s management didn’t harbor animus toward Ghosn the way Nissan’s management did in Japan, but that they saw this as an “opportunity” since some felt Ghosn would never leave Japan.
The sense among our sources is that this case is likely to drag on for years, in part because it is unclear if Ghosn will be indicted in France and there is no time limit on when a criminal complaint must be filed. Thus he finds himself in a form of Catch-22, coupled with the fact that our sources believe the French government was behind the decision by Renault not to pay him his severance allowance. The French government, after all, owns a nearly 20% stake in the automaker.
As for the amount in question, it is unclear because the stock value is variable by definition and Renault’s stock has lost 50% in value since Ghosn’s arrest.
At the time of his arrest and dating back to 2015, Ghosn was making around 1.2 million euros ($1.4 million) in annual fixed income. The share held by stock would have totaled roughly 5 million euros ($6 million), according to our source.
Note that in Japan we were told that Nissan is withholding payment of an estimated 7.5 billion yen ($68 million) in retirement compensation. We could not confirm the number independently.
French tax case outcome: TBD, but the case is expected to take five years, or longer, to resolve. As in Japan, Ghosn’s legal team is struggling to gain access to documents. But since no criminal charges have been brought (and none may be brought, ever), they are facing difficulties to prove their case. Eventually, they expect to.
French judicial inquiry
French prosecutors, nearly three years behind their counterparts in Japan, are conducting a judicial inquiry into possible criminal misconduct by Ghosn.
In late May and early June, a team of six prosecutors and judges traveled to Beirut to interview Ghosn for four and a half days. We are not privy to what they discussed. But media reports indicated that subjects ranged from his alleged spending on lavish parties, including but not limited to his use of the Versailles Palace for his wedding reception in 2016, to dealings between Renault and its distributor in Oman, Suhail Bahawan Automobiles LCC
A member of Ghosn’s legal team reportedly said that Ghosn “was pleased” that he had finally been given a chance to tell his side of the story and to challenge some of the accusations coming out of Japan from Nissan and the Tokyo prosecutors’ office.
It is still not clear whether criminal charges will be brought in France – and, if so, for what – and how that might work since Ghosn can’t leave Lebanon.
But what is considered to be the most serious charge in Japan (thus probably by French prosecutors, as well, since they appear to be taking their cue from Nissan and the Tokyo prosecutors’ office) is an allegation that Ghosn used his authority as CEO to launder money through Suhail Bahwan Automobiles LLC in Oman – which, in turn, if the allegation is true, redirected part of those payments back to Ghosn or members of Ghosn’s family.
It is not clear how that could have happened because, according to Ghosn, disbursements to overseas sales companies require a series of authorizations before the CEO can sign off.
Ghosn said, when we pressed him on this point, that there is a record of authorizations both at Renault and Renault-Nissan BV, the Dutch joint venture at the center of many of the allegations reported in the media.
We reached out to Renault to explain its internal controls and if they are similar to the controls at Nissan in Japan, where similar money-laundering allegations were made involving Suhail Bahawan Automobiles. We were given a polite no comment.
Focusing on the Japanese indictment as a window to possibly shed light on the French inquiry, the Tokyo prosecutors office in February and April 2019 charged Ghosn with having enlisted two Middle Eastern billionaires, Suhail Bahwan of Oman and Khaled Juffali of Saudi Arabia, to help him launder Nissan money for his personal gain through the use of Nissan’s “CEO reserve” fund.
In the case of Juffali, the alleged total came to $14.7 million; Bahwan, $5 million.
The prosecutors have alleged that Ghosn turned to Juffali to cover personal losses due to currency rate fluctuations during the 2008 financial crisis. The value of the dollar fell from 106 yen in September – when Lehman Brothers Holdings Inc declared bankruptcy and triggered a global recession – to 91 yen in December, then gradually slid to a historic low of 76.6 yen by October 2011 before slowly recovering.
This led to cash flow problems not only for Ghosn and other foreign executives, whose salaries were pegged to the dollar or euro, but for Nissan as a company. Because of the weak dollar/strong yen, most cars exported from Japan were exported at a loss.
Ghosn in a book to be published this month, Broken Alliances: Inside the Rise and Fall of a Global Automotive Empire, coauthored by French journalist Philippe Riès, acknowledges in a lengthy passage that he got temporary help with cash flow problems from his Middle Eastern friends/business associates.
But Ghosn denies the money-laundering accusation and denies any abuse of the CEO reserve fund, saying fund outflows were appropriately authorized.
As one former Nissan executive commented in defense of Juffali’s fees: “He is incredibly well connected. Also, in addition to helping Nissan navigate through a tricky problem with an underperforming sales company [Al Hamrani United Company], he was asked to help make provisions for building an assembly plant in Saudi Arabia.”
Nissan eventually decided not to build the plant.
“But because of his connections, including with the government, he can command high fees,” the executive said. “Why would a person like Juffali get involved with a money-laundering scheme?”
Juffali said in a company statement that payments made were for the purpose of “supporting and promoting Nissan’s business strategy in Saudi Arabia including reimbursement of business expenses.”
In the case of Bahwan, the prosecutors accused Ghosn of pocketing $5 million between July 2017 and July 2018.
Hiroshi Kawatsu, Ghosn’s main lawyer in Japan before his December 2019 escape, presented a powerful rebuttal to both the Juffali and Bahwan charges in an October 2019 brief filed in Tokyo District Court.
Kawatsu revealed that each of the reported four remittances to Khaled Juffali Company Ltd, again totaling $14.7 million for services and expenses, underwent “appropriate” approval procedures.
In the case of the first payment of $3 million, the proposal was approved at a meeting of Nissan’s executive committee on May 21, 2009, according to Kawatsu, who reported that 10 days later, on June 1, Gilles Normand, Emmanuel Delay, Colin Dodge and Greg Kelly, all corporate officers, signed off on the proposal to use the CEO fund before it went to Ghosn for his signature.
At the time, Normand was vice president in charge of Africa, the Middle East and India. He is currently a senior executive at Renault.
Payments between 2010 and 2012 were all executed in the same manner, reported Kawatsu, with Normand and/or Dodge involved with the approvals along with newly appointed CFO Joseph Peter. He added that there is a record of signatures.
Ghosn’s Japanese legal team reported that similar procedures were followed in payments to Suhail Bahwan Automobiles, a national authorized dealership for Nissan and Infiniti cars in Oman – with one big difference: Hiroto Saikawa assumed the CEO’s job in April 2017. Thus the July 2017 and July 2018 payments would have been authorized by Saikawa, not Ghosn.
Moreover, the prosecutors’ office appears to have made a mistake in reporting the totals for the period, according to Kawatsu’s brief. The timeline when CEO Reserve fund disbursements were made indicates that the total should have been $7.5 million, not $5 million or $10 million as reported.
Ghosn signed off on payments of $3 million in January 2017, then $2.5 million in March. Saikawa was CEO when the July 2017 and July 2018 payments of $2.5 million and $5 million were authorized for a total of $7.5 million between July 2017 and July 2018.
Additionally, as a practical matter, Ghosn couldn’t have wired millions of dollars to Bawhan and Juffali without someone in the company physically handling the payments for him, according to the former executive.
“It’s just not possible,” he said. “Someone would have had to sign off and push the button. Ghosn wouldn’t have done it himself.”
Ghosn has always maintained his innocence of the two “breach of duty” charges, and his lawyers have assured that the facts, once revealed, would exonerate him.
“There is no basis in fact that money was transferred, directly or indirectly, from Suhail Bahwan Automobiles, to Mr Ghosn or his family,” said Kawatsu; nor, based on Kawatsu’s brief, was money transferred directly or indirectly from Khaled Juffali to Ghosn or his family.
Suhail Bahwan Automobiles LLC, remains the national authorized dealership for Nissan, Infiniti and Renault cars in Oman. It is one of half a dozen Nissan sales companies in the region. Al Dahana FZCO, whose principal owner is Khaled Juffali, is still joint owner of Nissan Gulf FZCO, Nissan’s official distributor in Saudi Arabia, Bahrain and Kuwait.
Postscript: Two and a half years after Tokyo prosecutors obtained “breach of duty” indictments for Ghosn’s alleged criminal dealings with Juffali and Bahwan, essentially accusing Juffali and Bahwan of helping Ghosn launder money for his personal benefit, Nissan has yet to sever business ties with either individual.
Outcome of French criminal investigation: TBD, but since the investigation appears to be motivated in part by political considerations, speculation is that a change in government could bring a close to the case.
“There is no reason why a new government, either in France or Japan, would want to stay involved with this case,” said a source close to the situation. Again, TBD.
In the Netherlands Ghosn lost a lower court ruling in May in his wrongful dismissal case. He told Asia Times later that same month that he planned to appeal the ruling. The court ordered him to repay 5 million euros ($5.9 million) for income paid by Amsterdam-based Nissan-Mitsubishi BV, another joint venture, between April 2018 and November 2018, when he was removed from management.
Ghosn had been seeking 15 million euros ($17.7 million) in compensation and damages. The court, in rejecting the claim, ruled that he did not have a valid employment contract with the company at the time, a major difference with his case against Renault.
Worth noting: Hari Nada, the legally trained Nissan executive who engineered the sting operation to remove Ghosn from management, helped lawyer Kathryn Carlile (considered a Nada loyalist) present Nissan’s case.
All eyes on Tennessee
The Franklin County Employees’ Retirement Association filed a class-action lawsuit on December 10, 2018, in federal court in Nashville. That was three weeks after Ghosn’s arrest and less than 24 hours after the Tokyo prosecutors’ office obtained the first of four indictments.
The suit named Nissan and six former board officers as defendants, including Ghosn; Greg Kelly, Ghosn’s ally on Nissan’s board who has been accused of helping Ghosn conceal retirement income; Hiroto Saikawa, Nissan’s CEO after Ghosn; and three others including Nissan’s former chief financial officer, Joseph Peter.
The association, which is based in Michigan and represents Nissan investors, filed the lawsuit on the basis of early media reports that were decidedly one-sided since Nissan and the Tokyo prosecutors’ office were doing most of the leaking to the press.
At the time, Ghosn and Kelly were being held in solitary confinement at the Tokyo Detention House, incommunicado with their American attorneys. In fact, hardly anyone knew of the existence of the June 2015 retirement proposal, signed by Kelly and Saikawa but not by Ghosn, beyond the Tokyo prosecutors, Nissan and, most likely, Latham & Watkins’ Tokyo office, which was in regular contact with Nada.
Sources who have seen the document – we’ve spoken with five including Ghosn – claim it is extremely exculpatory.
Nissan did not reveal the document in any of its filings in the Tennessee case. Nor had the company revealed it two years earlier, to the US Securities and Exchange Commission, which conducted a 10-month inquiry into Ghosn’s compensation issue.
In terms of financial risk to Nissan and the individual defendants, the lawsuit is not considered significant. Potential settlement is, at most, $145 million, the amount of undisclosed retirement compensation and bonuses identified in the SEC’s 2019 report. And most of that would be covered by insurance, one source says.
When one averages that sum over the eight years the agency reviewed, it comes to $18 million a year, which would be around 0.004%-0.005% of operating profit at the time of Ghosn’s arrest. And if the total is limited to the undisclosed income of $94 million excluding bonuses, that comes to $12 million annually or 0.003%.
“In terms of materiality,” a source monitoring the case explained, “it is not going to prevent an investor from investing in Nissan. This level of underreporting is immaterial from an economic and financial standpoint.”
Of course, there is no assurance that the judge hearing the case will not increase the amount or deviate from standard practice in cases like this and target individual defendants. But as a rule, Nissan would have to pay the settlement, which, again, would probably be covered by insurance, raising questions about why it has not agreed to settle.
But if Nissan does not settle, we have been told, the automaker exposes itself to the possibility of the court’s revisiting a criminal inquiry dating back to the SEC investigation when – according to a whistleblower’s allegation – employees at Nissan North America Inc tampered with evidence by moving documents from Franklin, Tennessee, where they were stored, out of the country.
We don’t have a precise date – it was late November or early December 2018, according to the whistleblower, who agreed to speak to Asia Times – and we have not seen the email that allegedly directed Nissan North America headquarters staff to move the documents.
The source further told us that the SEC gave Nissan a “preannouncement” advisory that it planned to launch an investigation and within hours a directive came from the automaker’s Yokohama headquarters. The documents, more than 10 boxes, we were told, were out of Tennessee by the following day.
We asked the SEC to comment on the whistleblower report about the incident and wrote to all five individuals involved in the investigation on multiple occasions in August and September. We have not yet received a response. An SEC spokesman had replied to an earlier information request with a “no comment.”
And in the leadup to the Ghosn and Kelly sting operation in Japan and the apparently coordinated raids on Ghosn’s residences in Lebanon, France, the Netherlands and Brazil, all without warrants, we were told by the same source that a Nada subordinate, Christina Murray, had ordered a Nissan executive in Tennessee to remove Ghosn’s safe from his apartment in Rio de Janeiro but that the executive, Brian Delauter, had refused.
Neither Murray nor Delauter responded to our requests for comment.
We do not know if Murray found another way to secure the safe, but we do have one account of what happened from Broken Alliances – which is a translation of a 2020 French volume by Ghosn and Riès, Le Temps de la Verite (Time for the Truth). Rio de Janeiro is where Nissan’s Latin American headquarters is situated.
At 6 am in Rio de Janeiro on November 19, 2018 (6 pm in Tokyo), Carlos Ghosn’s personal assistant, Vania Rufino, who was employed by Nissan’s subsidiary in Brazil, received an email from Christina Murray telling her to go immediately to the Nissan office with her phone and laptop. In vain, Rufino tried to contact Carlos Ghosn, who had already been arrested at Haneda International Airport in Tokyo. She found out what had happened from Ghosn’s sister, Claudine, and went to the headquarters.
Locked in a room and prohibited from speaking to colleagues, Rufino was interrogated for three hours by Salvador Dahan, the regional head of risk, governance, compliance and internal audit. Without being implicated in the slightest, she received a letter advising that she had been suspended without pay for 30 days.
Dahan accompanied her to the apartment, also without a warrant, to take possession of the keys and documents found there. “They later asked me to go to Japan to be questioned by the prosecutors,” Ruffino recalled. “I refused and got fired.”
The risk to Nissan of not settling
It is not clear why Nissan hasn’t settled the case in Tennessee. It has admitted guilt to falsifying annual securities reports in Japan with respect to underreporting executive compensation, the same charge Ghosn and Kelly were accused of but of which they profess innocence.
Again, insurance will most likely cover any settlements handed down by the federal judge hearing the case. But more relevant may be the paper trail in Tokyo – which shows Nissan’s board, and particularly its audit committee, sitting on evidence of conflicts of interest, even criminality, by current and former members of management to bring down Ghosn and, by extension, could be blamed for setting the company on a course toward massive financial losses.
Evidence can be seen in linked documents linked at the bottom of this story: Ravinder Passi’s September 9, 2019, “conflict of interest” memo to Nissan’s outside directors; Nissan’s September 9, 2019, news release summarizing the findings of its nearly yearlong internal investigation into the executive compensation issue; and former Renault CEO Thierry Bolloré’s October 8, 2019, memo to Nissan’s board with questions that he felt needed to be answered to protect shareholders.
The story of what transpired is largely part of a court record in Japan. Four of the six members of the coup that brought Ghosn down testified in the Kelly trial. The same four executives, including a former CEO and statutory auditor, have been linked to the secret inquiry. Three of the six received unauthorized retirement bonuses, which is also one of the main charges against Ghosn. And two of the four pleaded guilty to other unspecified crimes under sealed plea agreements.
Add to that: Testimony in Kelly’s trial is over, with only closing arguments remaining before the court’s verdict. Kelly could receive up to 15 years in prison when not a single Japanese at Nissan was indicted and the chief architect of the coup is still an executive officer with direct access to the CEO. Nissan should worry, I’d say – speaking as a reporter who is following the Ghosn story on three continents – about the fact that Kelly is both a sympathetic character and a resident of Tennessee.
“It’s a different situation in the US with different discovery rules,” said a source familiar with the Tennessee case. “There is a substantial risk for Nissan that we might see documents which show that Ghosn and Kelly were set up.”
In fact, Nissan is being hit with an avalanche of requests for documents related to the case – as well as names of key people in management whom Ghosn’s lawyers want to depose. The automaker, we’ve been told, is resisting at every turn and resorting to legal technicalities – for example, Japanese court rules don’t permit the release of documents.
Outcome: Nissan can’t win. It’s a no-win situation.
Ghosn continues to hold out hope that he will eventually be removed from the Interpol “red notice” or “most wanted” list. He was placed on the list on January 2, 2020, three days after his escape from Japan.
As Ghosn’s lawyers continue to build their case against Nissan and as the Tokyo prosecutors’ office continues to refuse to turn over its extradition file to authorities in Lebanon, there is a belief in the Ghosn camp that Interpol may eventually be forced to remove his name from its red notice list.
The Tokyo prosecutors office, the argument goes, is not following correct process. “If Japan insists on not transferring the file,” our source claims, “they would be committing an abuse of process similar to what they did with Ghosn’s arbitrary detention. Maintaining someone in detention is in violaton of the UN Declaration of Human Rights. The fact that Japan refuses to transfer the extradition file to Lebanon means they are abusing process again.”
We could not make contact with Interpol.
Outcome: TBD.
Links to important case documents
(1)Passi Sept. 9, 2019 memo to Nissan’s board onferenceimg 20210903_17113610
https://drive.google.com/file/d/1eccH2R6OvI78Ts9Ky_qNE7XjZ2r5NQ_g/view?usp=sharing
(2)Nissan 9_9_2019 board meeting announcement on Ghosn investigation
https://drive.google.com/file/d/1sjbZeHxuODkUn2xa3IIxmt_kwa4GxQp1/view?usp=sharing
(3a)Saikawa Sept. 12, 2019 memo to Saikawa Screen Shot 2021-09-03 at 7.07.48 PM
https://drive.google.com/file/d/1Bj0h1rfOa_0wpME8Z-2PlBcEDZjCQeLl/view?usp=sharing
(3b)Saikawa Sept. 12, 2019 memo to Passi Screen Shot 2021-09-03 at 7.08.04 PM
https://drive.google.com/file/d/1q-a0hEbkJxuWnj55IAw26Mc_cou0zpmo/view?usp=sharing
(4)Bollore Oct. 8, 2019 memo to Nissan’s board
https://drive.google.com/file/d/1eXfe1OcoQYuvV8pLDxBjeMsdEtlgZs0Y/view?usp=sharing
(5) Nissan announces executive management changes Oct. 9, 2019
https://drive.google.com/file/d/1hqWMXQlgBElH-16EFgtboSDMoxwst9wp/view?usp=sharing
The fourth installment of this series will provide a detailed timeline.
Roger Schreffler is a veteran correspondent for Ward’s Automotive and a former president of the Foreign Correspondents’ Club of Japan.