Based on information from additional interviews and newly obtained documents, Roger Schreffler has expanded his latest series (begun in September) on Nissan and the Carlos Ghosn case. This is the concluding part 12. Read part 1 here, part 2 here, part 3 here, part 4 here, part 5 here, part 6 here, part 7 here, part 8 here, part 9 here, part 10 here and part 11 here.
Carlos Ghosn has long argued that he is guilty of none of the crimes charged, including concealing undisclosed income, and that the reason a small nationalist faction in Nissan’s management turned against him was to block the French government from swallowing up the Japanese automaker.
The French government was the controlling shareholder in Renault, whose Nissan shareholdings had since 2001 given the French automaker control over the automotive “Alliance.” Paris wanted that level of control to be made “irreversible.” Although others have characterized the proposed outcome more neutrally as a “merger,” the anti-Ghosn faction saw what the French had in mind as a “takeover.”
Ghosn had forebodings that things might not end happily. However, what he did not take fully into account at the time is that one of his top administrative executives at Nissan, Hari Nada, the head of the CEO’s office, had a particularly intense personal motive for bringing him down.
Nada, according to our sources, would have lost his power base and influence, if not his job – because Ghosn had already committed to a Renault executive, Mouna Sepehri, to head the office of the CEO of the Alliance.
Two key documents that surfaced during the Tokyo trial of Greg Kelly, a Ghosn ally on Nissan’s board, not only support Ghosn’s assertion about Nissan’s opposition to the French plans, but also explain the desperation that led to such extreme measures – including Nada’s role – to remove its former boss.
The first document, a May 2018 plan entitled “scenario chart” authorized by Nada, Ghosn’s main accuser, set out circumstances in which Ghosn and board allies might be removed from management. Among the scenarios was a detailed plan for turning to the judiciary while laying the groundwork for criminalizing the case.
As head of Nissan’s CEO’s office, Nada effectively ran the company’s legal and compliance departments. He continued to run those departments even after entering into a plea agreement with the Tokyo prosecutors’ office five months later, in October 2018, in the process of confessing to a so-far unspecified financial crime.
We have reported earlier that a criminal lawyer involved in the “Kali-10” investigation had expected Nada to be indicted for aggravated breach of trust. Aggravated breach of trust, according to Article 247 under the Japanese penal code, carries with it a penalty of up to five years in prison.
Three weeks after the lawyer, Takeshi Ohki, issued an advisory that included the prediction, Nada entered into his plea agreement with the Tokyo prosecutors’ office to avoid criminal prosecution.
Let’s be clear: By entering into a plea agreement to avoid prosecution, Nada admitted to committing a crime. He is a criminal, by definition, yet he still remains in Nissan management as a senior vice-president.
The second document is a November 18, 2018, email from Nada to Hiroto Saikawa, Nissan’s CEO at the time, in which he discussed changing the structure of the Nissan and Renault alliance after Ghosn’s arrest – which had been planned for and was indeed carried out on the following day, November 19.
We will begin with the second document – which was revealed in the courtroom but is still not available for the general public to see – because the meaning is indisputable and leaves hardly a scintilla of doubt about the motive for the coup as of the day before Ghosn’s and Kelly’s arrests.
“Nissan’s position should be,” Nada wrote, that “Mr XXX’s wrongdoing and removal” at Nissan “represents a fundamental change in the alliance and a new governance for the alliance must be found.”
Mr XXX, of course, is Ghosn. Nada, the architect of the plan to oust Ghosn, sent the memo to Saikawa the day before the November 19 sting in Japan. Nada then coordinated raids on Ghosn’s residences in Amsterdam, Beirut and Rio de Janeiro to secure personal records, all without warrants and all carried out on the 19th.
The real motive of Nada, Saikawa and other members of the coup, including current board members Masakazu Toyoda and Motoo Nagai, who chair the board nomination and audit committees, was laid bare in the memo: to change the governance structure of the Alliance.
In the end, Mr XXX’s (Ghosn’s) removal and the arrest, imprisonment and criminal prosecution of Kelly – who, our sources report, had been expected to play a key role in the future restructuring of the Alliance – amounted to nothing less than a corporate putsch engineered by Nissan’s old guard to take back control of the automaker from Renault.
Planning for the coup
As Ghosn and French journalist Philippe Riès reported in their book, Le Temps de la Verite: Carlos Ghosn Parle (in English, Broken Alliances: Inside the Rise and Fall of a Global Automotive Empire), informal planning began in February 2018.
We now have evidence that the starting point of the coup was, indeed, February 13, 2018, when Nada sent an email to Saikawa alerting him, based on French media reports, that the French government had given Ghosn instructions to strengthen Renault’s position in the Alliance and had made that a condition for Ghosn’s reappointment as chairman and CEO of Renault in June 2018.
Two days later on February 15, Renault’s board announced plans to renew Ghosn’s four-year contract at the French automaker’s June 15 shareholders meeting, “recommending” that Ghosn’s mandate include taking “definitive action” to make the Alliance “irreversible.”
By irreversible, as Ghosn understood it, the Renault board meant that the Alliance companies – Renault, Nissan and Mitsubishi – would be brought into a holding company and their operations effectively merged. Of course, whatever the structure, the French government intended for Renault to be in control.
Nada responded to the Renault announcement by sending an urgent email to Kathryn Carlile, his closest assistant, outside lawyers at the firm Latham & Watkins LLP and Ravinder Passi, Nissan’s in-house global general counsel.
“Through internal discussions between CFO, CEO and me,” he reported in an email revealed in Kelly’s trial, “I have concluded that a train has been set in motion at Renault to completely integrate Nissan regardless of what Mr Ghosn thinks … I would like to discuss the implications and what tactics can be taken as soon as possible.”
CFO would have been Joseph Peter, who retired in May, six months before the coup. CEO was Saikawa, whom Ghosn had handpicked as his replacement. (Ghosn had kicked himself upstairs as chairman of Nissan in 2017.)
Nissan’s old guard, initially Hitoshi Kawaguchi and Hidetoshi Imazu, the head of government affairs and a former head of manufacturing respectively, took the view – correctly – that the French government intended to take control of Nissan and that, despite Ghosn’s assurances to the contrary, Ghosn couldn’t stop them.
Executives reportedly began meeting informally over lunch to plan their strategy.
Up to that point, there was nothing in the record to suggest that Ghosn had broken any laws.
Making Alliance ‘irreversible’
In his closing argument in Kelly’s trial, Yoichi Kitamura, Kelly’s main lawyer, declared that opposition to making the Alliance irreversible triggered an internal investigation by Nada, Kawaguchi and Imazu, “for the purpose of ousting Ghosn and Kelly” from Nissan.
Imazu held the title of statutory auditor, although like most statutory auditors in Japan he had little or no professional auditing experience.
Nada, Kawaguchi and Imazu began their investigation in March 2018, according to Kitamura, on the pretext of a relatively minor complaint that Ghosn had abused his travel perks.
The travel perks issue turned out to be much ado about little or nothing. Nissan’s in-house travel agency, Nissan Creative Services Co, Ltd, doesn’t operate like an ordinary travel agency. It is a high-priced subsidiary set up mostly to serve Nissan, the company.
Ghosn used Nissan’s in-house agency because of his extensive travel requirements for managing a global business with operations on six continents. Most other employees didn’t use it but some other executives, we were told, did use it for company-related travel – only rarely for personal travel.
In this particular instance, we were told, Ghosn’s children were involved with the disputed travel expenditures, at least some of which were for their travel to Japan to visit their father. They were billed at above-market prices, apparently having been unaware of the subsidiary’s pricing practices.
They complained to their father, who in turn raised the issue with an executive at the subsidiary – who reimbursed the full amount, not just the disputed overcharge.
The subsidiary’s decision to reimburse Ghosn triggered a complaint by the subsidiary’s president to Imazu, with whom the subsidiary president had a personal connection.
A source familiar with the complaint who asked not to be named said there clearly was a misunderstanding and that Imazu overreacted. More bluntly our source asked: “Why didn’t he just take the elevator up one floor at Nissan’s headquarters building [from the 20th to the 21st floor] and ask Ghosn personally?”
Instead, Imazu took the complaint to the Tokyo prosecutors, who told him, according to courtroom testimony, that the charges “probably didn’t rise to the level of criminality,” but that he should “keep digging.” This was one of the first accusations of impropriety, made in June 2018.
If nothing else, the Kelly trial has provided a window into what really happened in the Ghosn coup. Although the prosecution has neither abandoned the case nor given any hint that it’s contemplating doing so, in other quarters there is much less dispute than before about the event’s characterization as a coup and about the identities of the key coup plotters.
Three witnesses including Imazu, Kawaguchi and Nada admitted in court there had been “conspiracy” against Ghosn. And when key evidence eventually makes its way into the public domain, we expect there will be a new round of investor lawsuits against Nissan. The evidence is that damning.
Back to the tick-tock
Speaking of damning evidence, informal planning for the coup became formal planning in April 2018 when Nada, who was running both legal and compliance departments out of the Nissan CEO’s office, assembled his team of lawyers to lay out contingencies for possible removal.
Those lawyers, as we related at the outset of this installment, included both Nissan in-house lawyers and Latham lawyers working at Nada’s direction.
Among the contingencies was a plan to remove Ghosn by turning to the Tokyo prosecutors’ office. Although Nada’s team didn’t mention the prosecutors’ office by name in its “scenarios,” the group discussed “actual conviction” and “pending conviction” situations whereby Ghosn would be removed “immediately.”
Generally in Japan, such records may not be disclosed during a trial. Afterward is another matter. Illustrating the level of detail in the various plans, a document that was leaked to a Japanese TV network in January 2021 shows one scenario, which can be seen (from 0:39 to 0:59) on a recording.
Nada completed his scenarios exercise in late May.
Kelly connection and purge
Nada’s team also developed scenarios for removing Ghosn allies from management. Although Kelly, José Muñoz, Arun Bajaj and Mouna Sepehri were not mentioned by name, the manner in which they were forced to leave in quick succession after Ghosn’s arrest provides an insight into the purge that followed.
And why is this important? They were to be the administrative leadership team in the restructured Alliance.
Kelly was arrested and falsely accused and charged. Bajaj, who headed human resources, experienced a police raid on his residence in front of his children shortly after the November 19 arrests, much like the raid on whistleblower Ravinder Passi’s home in May 2020, except that in Bajaj’s case he was taken away in handcuffs.
Three Nissan careers – Kelly’s spanning 30 years and Bajaj’s and Passi’s 16 years each – were over.
Sepehri, a Ghosn ally on Renault’s board, was forced to step down from her board oversight role in corporate governance and legal affairs because, we were told, of a January 2019 Kathryn Carlile media leak regarding Sepehri receiving €500,000 in unreported bonuses paid from Renault Nissan BV.
Her bonuses didn’t need to be reported, and the order to leak the information, we were told, came directly from Nada’s office. Her 23-year career at Renault was effectively ended.
As we’ve done previously when his name came up in our inquiries, we’ve requested an interview with Nada. He has not replied.
RNBV, a Renault and Nissan joint venture, is at the center of a number of the allegations claiming financial misdeeds by Ghosn. It’s not widely known that RNBV was effectively run by Nada.
In one questionable dealing, he used the operation to hire and pay a French cybersecurity specialist, Wavestone, to hack Nissan’s computer systems and Ghosn’s personal email account.
The hack reportedly took place between March and August 2018. According to our sources, it was traced back to a conference room on the 21st floor at Nissan headquarters – and to Nada. This would have been during the lead-up to Ghosn’s removal and clearly during the Kali-10 investigation.
Meanwhile, Muñoz, who’d been seen as a possible successor to Saikawa – and eventually to Ghosn, assuming Ghosn’s retirement came in the normal course – left Nissan after receiving friendly warnings not to return to Japan.
He had reason to fear he would be next on Nissan’s and the Tokyo prosecutors’ office’s hit list – another foreigner to be arrested.
Muñoz considered the threat so real that he forfeited $12.8 million in severance pay rather than return to Japan to collect it. Nada loyalist Kathryn Carlile had requested that he return. Muñoz’s 15-year career at Nissan was over just like that.
On June 1, 2018, Japan introduced a plea-bargain system in which prosecutors for the first time were given the right to choose not to indict individuals who might have committed crimes, in exchange for their testimony.
Then on June 15, 2018, Renault renewed Ghosn’s contract, including a mandate to merge Nissan’s operations with Renault’s and those of the third Alliance partner, Mitsubishi Motors.
The coup plotters had concluded during their scenario exercises that the only way to keep that from happening was to use the criminal justice system to oust Ghosn.
The day after the Renault announcement, June 16, Hidetoshi Imazu, a statutory auditor, took his concerns about Ghosn’s alleged misconduct to the Tokyo prosecutor’s office – instead of to the board as required by law.
Nada’s personal agenda
In what has to be in the running to be adjudged the mother of all palace intrigues, while the motive of other coup planners was clear – to get rid of Ghosn – Nada had a different agenda.
He needed to eliminate not only Ghosn but also Ghosn’s future administrative management team – Kelly, Sepehri and Bajaj – in order to maintain his influence within the organization and possibly his job.
Administrative management, as opposed to line management, includes such support functions as human resources, labor relations, legal, compliance and auditing along with corporate communications and, at Nissan, the secretariat’s office.
Sepehri and Bajaj, in particular, were expected to assume key positions in the new Alliance holding company when it would be established in 2020 and Nada, despite having been one of Ghosn’s closest advisors after taking over the CEO’s office at Nissan in 2014 as Kelly’s successor, was going to be the odd man out.
In fact, Ghosn had already revealed his preferences nearly a year before the Renault board resolution to make the Alliance “irreversible.” And his choices, according to multiple insider sources, were Sepehri and Bajaj.
Having given up the CEO’s position at Nissan in April 2017, Ghosn had to create a new administrative structure to allow him to manage the expanded Renault, Nissan and Mitsubishi alliance. The Renault board resolution accelerated the process by highlighting the need for a new holding company to replace RNBV, which didn’t include Mitsubishi.
According to sources who know him, Nada saw the likely promotions of Sepehri and Bajaj as a demotion and threat. And even though he probably wouldn’t have been fired, at least initially, he no longer would have had direct access to Ghosn and other senior executives.
We were told that Sepehri would have wanted to assemble her own team in the new Alliance CEO’s office and that Nada would not have been part of it as he had upset several key Renault executives who complained about his aggressive and at times erratic management style.
And Bajaj, as the intended future head of HR for the Alliance (at the time, he headed HR at Nissan and Renault but not at Mitsubishi), would have effectively become a gatekeeper for Nada’s future advancement.
Kelly, despite being a longtime support for Nada, was also seen as a gatekeeper for he was also known to have thought highly of both Bajaj and Sepehri.
Nada had amassed enormous power as head of the CEO’s office, initially as corporate vice-president, then senior VP from 2015. By 2018, he had under his control such administrative functions as legal, compliance, internal auditing, corporate communication and security. His reach also extended to RNBV and Zi-A Capital where, we’ve been told, he was effectively running both companies.
He mentioned casually to acquaintances that he was “the secret CEO,” not so implausible in light of events over the past three years. Saikawa was CEO at the time.It was against this backdrop that Nada, at the time 53, took steps to remove his rivals.
Feeling threatened, according to our sources, he began with his scenario plan exercise in May 2018 – included were the contingencies for targeting Ghosn allies – and concluded with the “putsch,” to quote one observer, between November 2018 and January 2019.
A veteran correspondent for Ward’s Automotive, Roger Schreffler is also a former president of the Foreign Correspondents’ Club of Japan.