Former Renault-Nissan boss Carlos Ghosn gestures as he addresses a large crowd of journalists on his reasons for dodging trial in Japan, where he is accused of financial misconduct, at the Lebanese Press Syndicate in Beirut on January 8, 2020. The fugitive auto tycoon vowed to clear his name as he made his first public appearance since skipping bail in Japan. Photo: AFP

Roger Schreffler is expanding his series on the post-Carlos Ghosn Nissan board of directors based on information from more interviews and newly obtained documents, of which four installments were published in September. This is part 7 which continues from part 6. Read part 1 herepart 2 herepart 3 here, part 4 here, part 5 here and part 6 here.

In her capacity as global compliance chief at Nissan, Christina Murray had been picked to head a nearly yearlong investigation into the financial dealings of Carlos Ghosn. She never presented her report to the audit committee and board as she had planned in early September 2019. Just as she and her team were completing the report, she was relieved of her duties without any advance notice or believable explanation.

We have learned that someone leaked a 172-page document to select media outlets. We haven’t seen it, but have been advised that it couldn’t be the final version because the final version hadn’t been completed. Murray’s team was still reviewing and amending the document when she was relieved of her duties.

Throughout the summer of 2019, according to our source, in various iterations of the report lawyer Michael Yoshii of Latham & Watkins, who was working in a support role with Murray’s team, would remove findings related to Hari Nada, head of the CEO’s office, whereupon team members would put them back in.

Among the most significant: Nada’s deep involvement with the purchase of properties for use by Ghosn, his advisory role in Ghosn’s post-retirement compensation and his role in CEO Reserve fund payments.

We requested that Nissan make audit committee chairman Motoo Nagai available to be interviewed. Our request was refused. We contacted board and audit committee members Jenifer Rogers, Yasushi Kimura, Masakazu Toyoda and Thierry Bolloré separately. Bolloré has since left Nissan and Renault, where he was CEO, to become CEO of Jaguar Land Rover. 

There was no response from any of them, although a company spokesman got back to us with the following comment: “They cannot comment on individual questions since this case is still the subject of ongoing litigation. The company contends that the facts surrounding the misconduct will be shown during the court proceedings and the law will take its course.”

Nissan security staff removed Murray’s report from her office on August 30, 2019. On September 13 Kathryn Carlile, who had taken over the investigation from Murray, ordered Murray’s fellow task force member Ravinder Passi to turn over his copy and “all work” related to the investigation.

The cover-up begins

Up until the start of the September 9, 2019, board meeting, where Murray had committed to delivering her report, Nissan’s new board members, who had been elected several months earlier at the June 25 general shareholders meeting, had done nothing wrong. That would change with the first item on the agenda.

Latham & Watkins lawyer Michael Yoshii, who was tasked with providing support for Murray but in fact reported to Nada, delivered a six-page summary of the findings of Murray’s nearly year-long undertaking.

Since the report wasn’t completed (it was still being reviewed) and since Murray had been relieved of her duties (and wasn’t available to provide context and answer questions), all we can go by is what was omitted in the six-page summary, namely:

  • Any reference to the “conflict of interest” issues raised by Passi in his July 23 and September 9 memos;
  • The findings by Anderson, Mori & Tomotsune on executive compensation abuses by eight Nissan executives; and
  • Any reference to the report by Murray’s Committee on Employment Action and Remediation – called CEAR.

A glaring omission by Yoshii in his 30-slide presentation was his failure to include Nada among Nissan executives who had received unauthorized bonuses. He presented Latham’s own list of nine former board members (including Ghosn and American Greg Kelly who is on trial in Tokyo for conspiring with Ghosn to conceal retirement income)), but did not include an Anderson, Mori & Tomotsune list of eight executives mostly just below board level, including Nada, one of the coup plotters, who also had allegedly received unauthorized bonuses.

Lawyer Michael Yoshii. Photo: Latham & Watkins

Thus, Nada’s breach was not reported to the board. In the end, Yoshii and the audit committee focused entirely on Ghosn and Kelly although, in fact, by that time the scope of the investigation had expanded.

Until Nissan conducts an independent inquiry into the Ghosn affair, much like the one Toshiba launched in 2020 to address its governance scandal, we can only make educated guesses about the relationship between Yoshii and the Latham firm, on the one hand, with Nada, Imazu, Nagai and other members of the coup. But clearly, they have been working symbiotically together.

Carlos Ghosn told us that he believes Latham has something to hide, pointing out that the Tennessee investors’ case was settled in September within days after his and Kelly’s legal teams “asked for broad discovery of documents including documents from Latham & Watkins.” According to Ghosn, Nissan agreed to pay about US$35 million to settle the case, which he said is several times more than cases of this nature tend to be worth, and to pay for all individual defendants, including Ghosn and Kelly, that had been identified in the suit. Nissan had pleaded guilty to the charges in Japan. Ghosn and Kelly never did.

Even Nissan’s in-house lawyers raised red flags about Latham’s advocacy for Hari Nada. People on the Ghosn-Kelly side of the case say Yoshii needs to address questions about his own involvement with the planning and execution of the Ghosn and Kelly sting operation and about his having known, yet failed to apprise Murray’s team, that Nada had broken the law.

In the end, according to our source, “Murray’s team (comprising more than 30 members, mostly members of Nissan’s compliance and legal departments) no longer saw Ghosn’s and Kelly’s activities in black and white terms. The facts had changed and the task force’s view was much more nuanced. Ghosn and Kelly couldn’t have done some of the things they were accused of doing without a whole network of senior and middle management support.”

Despite Yoshii’s omitting any reference to the CEAR report in his presentation, board members Andrew House and Keiko Ihara raised questions about the 59 Nissan officials who allegedly would have had to “enable” Ghosn. Yoshii downplayed the significance.

As for the audit committee, we don’t know whether all audit committee members were informed of new lines of inquiry and exculpatory information.

We do know that Passi had told Nagai, the audit committee’s chairman, about Nada’s conflict of interest three times between July 24 (the day after he prepared his initial report) and August 30 – while Murray in mid-August had warned Nagai about “going too far” to protect Nada. Toyoda, Rogers and Kimura received Passi’s memo at the board meeting. Only Bolloré among the five members of the audit committee wasn’t informed. The other four didn’t speak up.

At least two members of the audit committee, Nagai and Toyoda, had been briefed earlier in the year about the four Saikawa and Saikawa-Kelly proposals to retain Ghosn as a consultant after his retirement, and thus they must have known that he would not have received compensation for past work as the Tokyo prosecutors’ office has alleged. They knew that there were problems – to the point of their possibly being fabrications – with the initial charges that Ghosn and Kelly had conspired to conceal 9.3 billion yen ($82 million) in Ghosn’s back income. It is not clear whether the other three members, Rogers, Kimura and Bolloré, knew about the proposals.

Board lacking

Despite the efforts of Nada, Nagai and Latham lawyers that had the effect of keeping non-plotter board members in the dark, they ended up getting enough information. But they didn’t act upon it, and the board approved Yoshii’s summary report without amendment – and thus without the new and potentially exculpatory information that Murray and her team had uncovered. Rogers, the only lawyer on the board, raised no objections.

By ignoring new lines of inquiry and withholding potentially exculpatory information about Kelly and Ghosn the board, acting on the audit committee’s recommendation, effectively convicted both Ghosn and Kelly in the public domain.

“They knew that not a single Japanese executive received any consequences,” Ghosn told Asia Times and Ward Automotive in a recent interview. “They have dirt on their hands because they sat there when they could have spoken. They let an injustice take place and didn’t do their job to protect the interests of the shareholders, the company and the brand.”

Next on the agenda: Saikawa

The board next took up Hiroto Saikawa and whether his 47 million yen ($411,000) unauthorized bonus was grounds to remove him from the CEO’s position. Rogers, who had remained silent during the broader executive misconduct discussion – not raising concerns about Passi’s legal department memo regarding Nada – led the discussion to force Saikawa to resign.

Nissan board member Jenifer Rogers. Photo: ACCJ

She was joined by Keiko Ihara.

Nissan board member Keiko Ihara. Photo: fia.com

Kimura sat there like a sage, processing it all, according to our source.

Nissan board member Yasushi Kimura. Photo: Nissan

Our source felt it was a surreal, staged proceeding in which there had been pre-arrangement of who was assigned to speak and who wasn’t – that they had decided in advance the focus would be on getting rid of Saikawa, throwing him under the bus, and going no farther with respect to alleged wrongdoing by others in the organization: Throw Saikawa under the bus, then move on. The source’s impression is that Toyoda and Nagai, in particular, were pulling the strings.

NIssan board member Masakazu Toyoda was instrumental in Carlos Ghosn’s fall. Photo: Twitter

After nearly an hour of recriminations and what our source characterized as incoherent defenses by Saikawa, the embattled CEO, who had offered the most damning indictment of Ghosn and Kelly 10 months earlier on the evening of their Nov. 19, 2018 arrests, reluctantly agreed to step down as CEO effective September 16, 2019. But he tried to blame Kelly for backdating the execution dates of his stocks when, in fact, the one who had done the backdating was Ohnuma – a Ghosn and Kelly accuser who had entered into a plea agreement for breaking the law himself.

Rogers argued that Nissan had to remove Saikawa in order to restore shareholder confidence in light of the sharp decline in the automaker’s share price. At that point, Nissan’s share price had fallen by 19%. It is now down by close to 40%.

Nissan’s scheduled 6pm news conference, which started late, was hosted by four of the seven outside directors: Kimura, Toyoda, Ihara and Nagai, the latter three in their capacities as chairs of the newly formed and re-formed statutory committees: board nomination, compensation and audit.

Motoo Nagai, a retired banker and Nissan board member. Photo: Nissan

Essentially, without having interviewed Ghosn or Kelly, they blamed Kelly, not Ohnuma, for Saikawa’s bonus windfall – and didn’t disclose Nada’s.

Ghosn discussed the Saikawa matter in our above-referenced interview. “Ironically,” he said, aside from himself and Kelly, “the only person who paid a small price was Saikawa, who lost his job as CEO.”

And even that, Ghosn noted, happened only after Kelly revealed that Saikawa had done something wrong. “It was Greg Kelly who drew attention to Saikawa, not anyone on Nissan’s board even though they knew the facts.”

Again, at least half of Nissan directors would have known, even taking into consideration that six new members had joined the board in June 2019, about the Committee on Employment Action and Remediation report on “enablers”; the Anderson, Mori & Tomotsune findings into the backdating of shareholder appreciation rights bonuses; and that Nada and Ohnuma, two of Ghosn and Kelly’s main accusers, had entered into plea agreements with the Tokyo prosecutors office, and thus had disqualifying conflicts of interest.

The officials who conducted the post-board meeting press conference also mentioned nothing about the 2011, 2013 and 2015 compensation proposals – the latter two signed by Kelly and Saikawa (none of them by Ghosn) – which many in the compliance, audit and legal departments had reviewed.

They didn’t mention that Nada, with Yoshii’s assistance, had drawn up the 2015 proposal or that in 2014 Nada had attended a meeting with Ghosn’s Lebanese lawyer in which they unequivocally agreed that Ghosn couldn’t be compensated for “past work” in his retirement package. The discussion, rather, was about the value of a “non-compete” agreement in the future.

And they didn’t mention that on October 10, 2018, Yoshii had been advised by a criminal attorney on Nissan’s payroll, Takeshi Ohki, that Nada was likely to be indicted for aggravated breach of trust, a criminal charge under the Japanese penal code – or that instead of informing Murray’s team about the development (the task force was just being assembled) Yoshii took the memo to Hari Nada directly. He sent it to Nada’s private email address. (Ohki would be fired shortly after offering his advisory.)

Nada would negotiate his plea agreement three weeks later; thus he effectively began working for the Tokyo prosecutors’ office. Only after another nine months, on July 5, 2019, did Yoshii inform Murray’s team about the existence of the Ohki memo. Instead of making a public disclosure to the court, Yoshii mentioned it in an email thread that shows him proposing ways to avoid turning over evidence to Ghosn’s and Kelly’s lawyers in the pre-trial phase of their respective criminal cases.

Several weeks earlier in late May 2019, Yoshii had raised eyebrows when he seemingly supported the decision the previous year by Hari Nada and former Nissan executives Hidetoshi Imazu and Hitoshi Kawaguchi, all members of the coup, to turn over Nissan corporate records to the Tokyo prosecutors’ office without informing the board.

In the late summer or early autumn of 2018, before Nada concluded his plea agreement with the prosecutors, he or his personal lawyer, Akihide Kumada, had turned over his computer and with it Nissan’s legal files.

With Ghosn’s and Kelly’s criminal trials advancing to the pre-trial phase, a team of lawyers, both in-house and outside, was trying to ascertain the automaker’s level of legal exposure, essentially trying to do damage control over what constituted “privileged” or “protected” information. By turning over the automaker’s legal file kept in Nada’s computer, the company effectively forfeited its “privilege” over proprietary information about other matters that had nothing to do with the Ghosn and Kelly cases.

Yoshii, in an email to the team of eight lawyers from Nissan, Latham & Watkins and Cleary Gottlieb Steen & Hamilton LLP, urged them not to characterize Nada, Imazu and Kawaguchi as “unauthorized employees” as the team prepared a memo for the prosecutors’ office regarding evidence the three had turned over to the prosecution.

According to one of the recipients of the Yoshii memo, the lawyer’s argument that the actions of the three coup plotters should be characterized as if they had been authorized by Nissan was “shocking and factually incorrect in that even Imazu, the statutory auditor, was required by law to report any concerns he had about executive misconduct to the board first” – not run to the prosecutors without informing the board or getting its approval.

Our source concluded that, on behalf of Nada and other high-level Nissan people whose own conduct had been legally questionable, “Yoshii’s involvement was to make sure that Christina Murray’s investigation stayed on track and that she would confine her activities to those set forth at the outset – to build an airtight case against Ghosn and Kelly, while steering investigators away from any other line of inquiry. It was hardly an independent investigation. We didn’t know at the time how much Yoshii and other Latham lawyers were working against us.”

Yoshii has failed to respond to two emailed requests for his comments on these issues, the latter one on October 31.

Nissan exacts its pound of flesh

Passi would be punished in short order for blowing the whistle and handing out the legal department’s memo, which he sent to all outside directors except Bolloré. The memo wasn’t Passi’s alone. It had been reviewed by key members of his legal department and by external lawyers.

Passi’s fall from grace has been reported extensively (by Bloomberg News). What hasn’t been reported is the legal significance of the memo from the standpoint of corporate governance standards for listed companies.

Nissan board member Andrew House. Photo: Nissan

The people on the cc list – Kimura, Toyoda, Ihara, Rogers, House and Delmas – cannot say they weren’t informed by the automaker’s top lawyer.

Nisan board member Bernard Delmas. Photo: Nissan

On September 12, 2019, Passi was removed from his involvement in the investigation by way of a letter from Saikawa, one of his final acts as CEO. The cover-up was complete.

Murray was replaced as compliance department chief by Yasunori Manno. Passi was replaced by Kathryn Carlile for the Ghosn investigation, by Yuki Yamamoto for the general counsel responsibilities and by Kimio Kanai for compliance-related issues. Of the four, Manno, Yamamoto and Kanai are not lawyers. Thus the heads of Nissan’s legal and compliance departments are not lawyers. Murray and Passi are both lawyers.

The following day, September 13, Kathryn Carlile, reportedly a Nada loyalist, summoned Passi to her office where she instructed him to turn over “all work” related to his investigation into executive compensation.

On September 16, Saikawa stepped down from the CEO’s position. He was replaced as interim CEO by Yasuhiro Yamauchi, who was Nissan’s chief operating officer at the time.

Fast-forward to October 8 when Nissan’s board next met: Thierry Bolloré, who had been excluded from receiving Passi’s advisory one month earlier, delivered a scathing rebuke of the audit committee’s cover-up and submitted a list of more than 50 questions on subjects ranging from Nada’s, Ohnuma’s and the Latham’s & Watkins law firm’s conflicts of interest to Christina Murray’s sudden departure and Kathryn Carlile’s replacing her to head the investigation. Bolloré, who identified Carlile as a “close Nada associate,” asked for answers by October 21.

On October 9, 2019, Nissan announced that Nada had been cleared of any wrongdoing in the automaker’s internal investigation (he had not, at least not by Murray’s team) and that he had been promoted to senior vice-president and senior adviser overseeing special projects; also that he would continue reporting to the CEO.

The announcement further stated that Kawaguchi – a member of the coup with Nada – would take over legal department duties from Nada, but that Nada would continue to “focus on important tasks such as forthcoming legal actions” in the Ghosn case.

Kawaguchi is not a lawyer, and Nada broke the law. His plea agreement was revealed in January in the Kelly trial.

On October 10, Renault’s board of directors removed Bolloré as CEO, apparently reacting to his tough critique of Nissan and the apparent cover-up. Bolloré was replaced by an interim CEO. Media reports indicated that Renault wanted to “turn a new page” in its relations with Nissan.

Postscript: In November 2019, Nissan’s compensation committee (Ihara, Delmas, Rogers and Nagai) approved a 250 million yen ($2.3 million) retirement bonus for Hitoshi Kawaguchi. The committee also scheduled a review of a proposed 1.4 billion yen severance package (nearly $13 million) for Hiroto Saikawa at its February 2021 meeting. We could not find out whether Saikawa received the full amount.

A former insider speculates that what he got would have been about $6 million.

Next: What to make of the main charges against Kelly and Ghosn.

A veteran correspondent for Ward’s Automotive, Roger Schreffler is also a former president of the Foreign Correspondents’ Club of Japan.