The Japanese executive on the left and the one on the right, Toshiyuki Shiga and Itaru Koeda, respectively, are the ones who advised Carlos Ghosn that he could be compensated for lost pay. The former executive who paid the penalty in Japan's judicial system, however, was American Greg Kelly (not pictured). Photo: Nissan

This is the conclusion of a three-part series on key Greg Kelly trial documents, heretofore not publicly available that support Kelly’s and perhaps Carlos Ghosn’s innocence. Read part 1 and part 2.

When former Nissan executive Toshiyuki Shiga testified during the Greg Kelly trial in Tokyo in January 2021, he made headlines by expressing “regret” for his role in the Carlos Ghosn payment scandal.

Ghosn, the fugitive executive who once headed Nissan Motor Company, has been accused of concealing eight years of income from Japanese financial regulators with the aid of Kelly.

Kelly, the former number three at the automaker, would stand trial in what many feel was a proxy trial for Ghosn. After a judge eventually handed down what appeared to be a half-hearted, face-saving guilty verdict, the 65-year-old American was permitted to leave Japan with the support of the US State Department, the White House and a bipartisan coalition of US senators.

Meanwhile, Shiga, Nissan’s chief operating officer for nearly a decade before and after the 2008 and 2009 financial crisis, was the person who should have been charged, if anyone was to be charged, for aiding and abetting Ghosn.

Most court-watchers missed the significance of Shiga’s admission – that he, not Kelly, was the architect of the plan to pay Ghosn without disclosing Ghosn’s full income to Japanese regulators.

We hesitate to say he confessed to violating the Financial Instruments and Exchange Act, the law that Ghosn and Kelly were accused of violating. But it’s difficult to conclude that’s not what Shiga did if the charges against Kelly and Ghosn are taken at face value.

Moreover, Shiga’s name is on three documents, heretofore not reported, that are key to getting to the truth.

On January 11, 2021, as reported by the Associated Press, Shiga lamented in Tokyo District Court: “Why couldn’t I say, ‘No’? I deeply regret that to this day.”

Reported in court records but not by news media

On March 28, 2011, Shiga and Itaru Koeda, Nissan’s former co-chairman and an informal advisor to Ghosn, sent an advisory to Ghosn that under certain conditions the then-CEO could reclaim lost income in the form of “contribution rewards” and wouldn’t have to disclose it to the authorities.

The advisory, which had both Shiga’s and Koeda’s names in the heading, seemed at odds with the new Financial Services Agency guidelines introduced one year earlier, which required any income exceeding 100 million yen (roughly $1 million in total compensation, including bonuses and stock options) to be disclosed.

Ghosn has said that he took a nearly 50% pay cut following the enactment of the new guidelines because he was looking for ways to address concerns about public perception in Japan of his being highly paid during a difficult economic period. Taking a pay cut was also intended to smooth his dealings with the French government, which believed he was excessively paid. It was this “lost income” that Ghosn sought to recoup somehow.

According to Shiga’s and Koeda’s advisory – it still is not publicly available – Ghosn could receive annual “contribution rewards” for income lost without disclosing those rewards. The rewards would be paid upon and after his retirement, if Nissan’s board employed him as an advisor and only if the board employed him. The board would have to approve a contract.

Shiga and Koeda further directed Toshiaki Ohnuma, who headed the secretariat, to draw up payment terms based on their memo. They made it clear that Ohnuma would be responsible for calculating the annual remuneration.

Based on the plan, the secretariat office will calculate the amount and notify the individual [Ghosn] and remuneration does not need to be disclosed.

Quoted in the closing brief by Kelly’s lawyer and in the court record

Based on their memo, Ohnuma drew up a payment agreement in April 2011. Ohnuma testified that Ghosn had requested that the agreement be consistent with the conditions stipulated by Shiga and Koeda – one of the biggest conditions being that the rewards be authorized annually by the representative directors (plural).

The conditions will be confirmed in writing and signed by the representative directors every year [and] there is no legal problem.

Quoted in the closing brief by Kelly’s lawyer and in the court record

Ghosn signed the Ohnuma agreement in mid-April. Ohnuma backdated it to March 24, which we were told was the day Shiga and Koeda met Ghosn and informed him of their conclusions. They had earlier, on March 16, presented him with several options. They all agreed on the “advisor” option on Thursday, March 24, 2011, and then Shiga and Koeda delivered their formal advisory – in writing – on the following Monday, March 28.

Ghosn, in an interview, said that Shiga and Koeda had consulted with counsel. We’re not certain but were told that most likely would have been Masaaki Ushigome, Nissan’s global general counsel at the time.

The backdated April agreement, again based on Shiga’s and Koeda’s advisory, would become the key piece of incriminating evidence against both Ghosn and Kelly at Kelly’s trial.

The first big problem: Kelly had nothing to do with its drafting and didn’t even know about its existence until the evidentiary discovery phase of his trial in the summer of 2019.

Again, all of this can be found in the court record.

Also in the court record but not mentioned in any of the news dispatches about the trial or, to the best of our knowledge, in any of the analyses by legal experts: Shiga at the time was one of two representative directors – or daihyo torishimayaku in Japanese – on Nissan’s board. Ghosn was the other.

Kelly wasn’t one, nor was future CEO Hiroto Saikawa. In fact, Kelly wasn’t even a board member until July 2012. Koeda, who had retired from the board in 2008, had served as daihyo torishimayaku earlier in the decade.

Although technically any director can propose compensation for another director at a board meeting, including even for himself or herself, Nissan’s board had delegated this task to the daihyo torishimayaku, who have special statutory status under the Companies Act. So for all practical purposes, only Shiga would have made a compensation proposal to Ghosn since Ghosn, as a matter of course, wouldn’t recommend compensation for himself – at least not formally.

We can quibble about whether this structure was inherently flawed – empowering two executives to decide compensation for all members of the board including themselves – but it was working from the standpoint of the automaker’s generating solid profits. Contrast that to the situation post-Ghosn.

Three and a half years after his ouster and following two years of massive business losses, Nissan reported tepid earnings earlier this month as reflected in its 2.9% operating profit margin. Compare that with an average of 6% during Ghosn’s final decade excluding the two years of the financial crisis.

Ghosn began discussing possible upcoming changes in executive compensation disclosure regulations with Shiga and Koeda as early as summer 2009. Koeda in April that year had relinquished his honorary chairman and advisor positions.

In an Asia Times interview, Ghosn said he doesn’t have a clear recollection of when those talks began, but it was “certainly in 2009 because we knew the government was considering changes in its disclosure requirements and those changes would affect Nissan.”

In fact, the Cabinet Office issued a special study group’s findings in June 2009. So it is likely to have been shortly after that.

Then in September 2009, Shiga began communicating directly with Ohnuma to discuss possible changes in the law. A September 2009 communication is the first record of Shiga’s reaching out to Ohnuma, one of Ghosn’s and Kelly’s main accusers.

That was nearly half a year before Kelly (himself a lawyer) and Scott Becker, Nissan North America’s general counsel, advised Ghosn that if he took a cut in pay he could not reclaim it at a later date. The Kelly-Becker advisory did not take into account what Shiga was advising because those two were not aware of Shiga’s involvement.

Former Nissan Representative Director Toshiyuki Shiga. Photo: Nissan USA

We reported about the Kelly-Becker advisory in part one of this report. That advisory followed an early February 2010 communication from Global General Counsel Ushigome, who informed Shiga and Kelly in an email about possible changes in the law.

Shiga, again, was already on top of the issue, as was Ghosn. Indeed, Shiga and Ghosn had assigned the newly appointed senior vice president for external and government affairs, Hitoshi Kawaguchi, to lobby against the new measures.

Nissan also, as we reported in part one, had a particular problem in complying with the regulations because, for one thing, its management was distinctly international. In addition to Japanese, it employed unusual numbers of foreigners – many of whom wanted their compensation to be pegged to the dollar or the euro, meaning it would fluctuate over the course of a year.

In a matter of days after Ushigome’s advisory, the Financial Services Agency did secure those changes in the law. To be precise, quoting Nobuo Gohara, a former prosecutor and strong advocate of Ghosn’s innocence, it was done through a Cabinet Office “ordinance” that mandated the changes.

Thenceforth, anything over 100 million yen in total compensation – roughly $1 million at the time – would have to be disclosed.

Kelly, much of whose work for Nissan involved the North American operations where Becker was employed, promptly turned to Becker for a legal opinion. By the fourth week of the month (around February 22, 2010, according to our sources), Kelly informed Ghosn of their conclusions. (One reason Kelly didn’t seek the advice of Ushigome, Nissan’s global general counsel, is that Ushigome isn’t a lawyer. Ushigome currently has a different job, working as the compliance officer for a Nissan subsidiary.)

The right hand and the left hand

Kelly and Becker were not aware of Ghosn’s meetings with Shiga and Koeda, according to the court record. In fact, Ghosn would continue meeting with Shiga and Koeda after the new disclosure rules came into effect, thus from March 2010, to March 2011 and possibly beyond.

This is significant because it clearly shows that Ghosn was seeking advice on two tracks, which has created confusion. But it also shows that the main legal track, the one involving Shiga, the representative director, was the source of the crime, to the extent there was a crime – and that track had nothing to do with Kelly.

Ghosn told us that he doesn’t have in his records the dates of his Shiga and Koeda meetings, whether before the FSA’s February 2010 announcement or after. His records were taken in a Nissan raid on the day of his arrest. But he informed us that there were multiple meetings, both with Shiga and Koeda together and with Shiga and Koeda separately.

And Shiga and Koeda, as we’ve reported, took a different view than Kelly and Becker, arguing that Ghosn could receive compensation for past work – which they characterized as “contribution rewards” – and, under certain conditions, without disclosing that compensation.

Despite the double-tracked confusion, which clearly was self-inflicted by Ghosn,  it would have been natural and appropriate for him to seek advice from Nissan representative director – daihyo torishimariyaku – Shiga, a Japanese accustomed to reading, writing and speaking the language, and from former daihyo torishimariyaku Koeda, another Japanese, who had held the position for five years before retiring from the board in June 2008.

We reached out to Shiga asking him to explain his “deep regret” admission and why he didn’t defend Kelly during his trial testimony, since it is now even clearer that to the extent a crime was committed it involved Shiga and not Kelly.

Shiga currently serves as chairman of INCJ Ltd, a public-private corporation focusing on supporting startup ventures to promote Japanese innovation. The corporate communication office there relayed his reply: “The case has already been sentenced and I testified as a witness in the trial. Therefore, I do not intend to comment to the media on this matter.”

Again, the first clear record of what Shiga and Koeda had communicated to Ghosn was a memo, in both Shiga’s and Koeda’s names, dated March 28, 2011. In the memo, the two stipulated that Ghosn could receive past “contribution rewards” (their words) without disclosing them by working as an advisor for up to two years. They specifically characterized the arrangement as “legal.”

They also said that the contribution rewards would be the “difference” between the original amount of Ghosn’s compensation from fiscal 2009 and the amount that was actually paid – which would be the amount that the prosecution eventually charged Ghosn and Kelly with concealing.

On the receiving end of their proposal, in addition to Ghosn, was Ohnuma. Not on the receiving end was either Kelly or Saikawa. Saikawa by that time had been chosen to become a representative director. His appointment would be ratified at the June 2011 shareholders’ meeting.

Former Nissan Representative Director Itaru Koeda. Photo:

The document laid out the legal predicate for Ohnuma’s drafting of the April 2011 payment agreement he signed with Ghosn. The prosecution in both the Ghosn and Kelly cases eventually saw the payment agreement as incriminating. But by not linking it to the March 16 and March 28 Shiga-Koeda memos, prosecutors distorted the truth if not worse.

Moreover, the agreement was never consummated. Consummation, as we’ve reported, would have required the signatures of both representative directors: Shiga and Ghosn – the latter, who had signed in his capacity as the employee concerned, needing to sign separately in his representative director capacity. Those signatures were never affixed.

And the representative directors (initially Ghosn and Shiga, then later Ghosn, Kelly and Saikawa) would have needed to sign annually under the terms of the agreement. Otherwise, income lost for a particular payment year would have been lost permanently, as we previously reported.

Ghosn, although tracking lost income through the secretariat (he has never denied it), didn’t enter into a payment agreement with the head of the secretariat, Toshiaki Ohnuma, until after Shiga and Koeda advised him that there was a legal way to reclaim the money and, more importantly, until after Shiga and Koeda instructed Ohnuma to draw up a payment agreement, the one backdated to March 24, 2011.

And Kelly knew nothing about the Shiga-Koeda advisory and payment agreement those two directed Ohnuma to prepare.

The prosecutors’ claim that Ghosn and Kelly concealed 9.3 billion yen ($94 million) of unpaid income over an eight-year period, all income that Ghosn had forfeited, is specious. They’ve known all along that Kelly for sure, and possibly/probably Ghosn as well, had taken no part in a payment scam that would bypass the board. Here’s Shiga from the court record: “Before making a contract” to retain Ghosn as an advisor, “it needed the approval of the board.”

The truth (inconvenient for the prosecution and for Nissan) is that none of the men who held the exalted title of daihyo torishimayaku ever, in that capacity, authorized additional salary for Ghosn. The proposed additional salary was never paid.

Kelly wouldn’t join the board, as a representative director, until June 26, 2012, 15 months after Shiga’s and Koeda’s advisory and Ohnuma’s April 2011 payment agreement. Saikawa, who had joined the board in 2005, wouldn’t become a representative director until June 29, 2011.

Only Kelly was charged criminally for assisting Ghosn.

During his testimony at the trial, Shiga made it sound as if he had been forced to break the law and conceal Ghosn’s income. “Why couldn’t I say, ‘No’?” But that begs the question. He was number two in the organization, both nominally and statutorily, and his name, along with Ghosn’s, was listed on the official public register.

Ghosn finally speaks

We reached out to Ghosn to shed light on these transactions since they’ve been presented as serious crimes. Moreover, we’ve concluded that there’s been a tendency to look at these issues through the lens of not the Japanese language but English, which became the language of the executive class at Nissan after Ghosn’s arrival in 1999.

Ohnuma, whose title in English was vice-president, was in fact a bucho, a departmental manager – indeed, the manager of a small department. So the idea that he would make policy for the company on matters like executive compensation is somewhat implausible.

Ghosn in our discussion dispensed with that issue in short order:

Ohnuma was like a secretary. His title was bucho – although we made him a vice-president; but that was only decorative. He had no power and no representation. He was kind of an office manager for all of the officers. His duties included filling out documents, reporting taxes and serving as a go-between between the different departments.

To say that I sat down with this bucho and that we plotted to take millions of yen from the company is ridiculous. Apart from the fact that Ohnuma couldn’t make policy and had no direct access to the board, no directors were involved. Secondly, I couldn’t pay myself.

Moreover, the figures on the charts Ohnuma kept were estimates. They weren’t fixed amounts. They were estimates between Ohnuma and me.

Remember, Ohnuma was under the protection of the prosecutor. So, it’s very understandable that he would say whatever the prosecutor wanted him to say so that he could be protected from prosecution himself.

Note that Ghosn, in a book written by Nobuo Gohara, a former public prosecutor, entitled Shinsō Carlos Ghosn to no Taiwa (or In-Depth Conversation with Carlos Ghosn), says that Saikawa and Kelly, “knew nothing about” the March 2011 memos.

The final loose end

Former Nissan Representative Director Greg Kelly. Photo: Asahi

Fast forward to August 2018 – three months before the coup and at a time when Vice President Hari Nada and other members of the coup, with the aid of two Latham lawyers, Hiroki Kobayashi and Michael Yoshii, were trying to find something with which to charge Ghosn and Kelly.

Arun Bajaj, who headed human resources, made a preliminary presentation in August to introduce a stock program. Called DDSO for “Deeply Discounted Share Option,” the program had the support of Kelly, Saikawa and Ghosn.

In putting together the plan, Bajaj retained a compensation consultant from Towers, Watson & Co, Peter Gundy, who reported to the team that Ghosn’s employment market worth was more than Kelly and others had envisioned – between 12.2 billion yen and 13.3 billion over a 10-year period ($95 million-$104 million at today’s inflated dollar rate).

Gundy’s estimate substantially exceeded all others including the 2011, 2013 and 2015 proposals, not a one of which matches Nissan’s and the Tokyo prosecutors’ accusation.

We published a year ago the Ohnuma chart that came from Ohnuma’s disclosure to the US Securities and Exchange Commission, which published its findings in September 2019 and which identified Ohnuma as Nissan Employee 1. 

The watchdog agency did not mention in its findings that Ohnuma had received immunity from prosecution for unspecified financial crimes he had committed and did not mention that, as we now know, Shiga and Koeda – not Kelly – had advised Ghosn on ways to avoid full disclosure of his income.

Verdict on the verdict

In his rambling five-hour, 130-page sentencing statement, Kenji Shimotsu, the chief judge in Kelly’s trial, made only one brief mention of the key documents, which clearly show the intent of Kelly and others, including Ghosn, to find a legal solution to Ghosn’s compensation dispute.

Those documents, as we previously reported, include the 2010 Becker-Kelly advisory to Ghosn, the 2011 Saikawa, Kelly and Becker post-retirement proposals, the 2013 and 2015 Saikawa and Kelly proposals and the 2018 Arun Bajaj, Peter Gundy and Kelly proposal.

Although he briefly mentioned the proposals, the judge ignored the fact that Kelly had for years sought to find ways for Nissan to retain Ghosn legally by offering him employment opportunities after he retired.

The judge in his statement also made no mention of the July 3, 2019, Hari Nada-Latham & Watkins law firm interview in which Nada had admitted that Kelly is innocent – that there had been “no legal obligation” to pay Ghosn. We’ve now learned that the interview was withheld, possibly illegally, from Ghosn’s and Kelly’s lawyers during evidentiary discovery.

The judge also didn’t mention that Shiga, the number two in the organization statutorily, together with Koeda, Nissan’s former co-chairman, had advised Ghosn that he could receive income that he’d previously foregone by taking a pay cut and he would not have to disclose such back income publicly. 

More significantly, they directed the secretariat (not Ghosn and definitely not Kelly) to keep an annual tally of what Nissan owed Ghosn in contribution rewards – and not disclose it.

Kelly’s lawyers are preparing an appeal. No date has yet been set. The first hearing in Nissan’s civil suit against Kelly took place on May 12, in Yokohama.

We’re not sure if the curtain will ever be pulled back fully. But we would hope that it eventually will be, considering the fact that the trial involved the biggest corporate scandal in Japanese history, with market cap losses alone approaching $20 billion.

Stephen Givens, a prominent American lawyer in Japan, weighed in and characterized the Kelly verdict as “not guilty” in substance and a rebuke to the prosecution.

Givens described the level of jurisprudence exhibited in that case as “third world,” explaining that “the prosecution’s criminalization of what should have been left to the civil side of the legal system – corporate, commercial and administrative law – deservedly earned the derogatory tag ‘Japanistan.’”

Veteran automotive correspondent Roger Schreffler is a former president of the Foreign Correspondents’ Club of Japan. Follow him on Twitter: @RogerSchreffler