Carlos Ghosn in Wonderland
Carlos Ghosn in Wonderland
Carlos Ghosn finally received 10 minutes in a Japanese courtroom Tuesday, and the prosecution case against him looks no better now than it did when the former Nissan CEO was arrested way back on Nov. 19. One of the strangest cases in the history of international business gets curiouser and curiouser.
Readers may recognize the “Alice in Wonderland” reference above, and there certainly is a “sentence first, verdict afterwards” quality to the Ghosn proceeding. The man who was a folk hero in Japan for saving Nissan has so far been formally charged only with misreporting income to Japanese regulators. But while he’s been detained for seven weeks, prosecutors keep piling on other allegations to investigate so they can detain him further under Japanese law.
As the world is learning, the practice of Japanese prosecutors isn’t to indict someone and then go to trial to test the evidence against the defense. In Tokyo prosecutors hold and interrogate a defendant without a lawyer present until he confesses. The trial is essentially pro forma, with guilt preordained.
The problem for prosecutors is that Mr. Ghosn refuses to confess because he insists he did nothing wrong. His Japanese lawyer used a rare procedural move Monday so Mr. Ghosn could appear before a judge and read a statement declaring his innocence in public for the first time. His defense is more persuasive than the prosecution’s public evidence.
“Contrary to the accusations made by the prosecutors, I never received any compensation from Nissan that was not disclosed, nor did I ever enter into any binding contract with Nissan to be paid a fixed amount that was not disclosed,” Mr. Ghosn told the court.
The “compensation” was a notional account maintained by Mr. Ghosn of what he might have earned had Nissan paid him by international auto-executive standards. Everyone knew he was underpaid by those standards, and both Ford and GM had attempted to hire Mr. Ghosn away from Nissan.
But he says he never had a “binding contract” with Nissan for any amount that wasn’t disclosed. Draft proposals for post-retirement compensation were inspected by Nissan lawyers, “internal and external,” and also weren’t contractual, he says. We look forward to hearing prosecutors explain why it’s a crime for Mr. Ghosn not to disclose a non-contract for non-compensation.
Mr. Ghosn also offered plausible defenses for two other allegations. Nissan covered the then CEO for some collateral he used for foreign-exchange contracts to ride out changes in the yen-dollar rate. He was paid in yen but had dollar costs outside Japan. The forex contracts were later transferred back to Mr. Ghosn, and Nissan had no losses.
Prosecutors also say Mr. Ghosn may have had Nissan make payments to a longtime Nissan partner, the Khaled Juffali Co., in return for business Juffali did for Mr. Ghosn. But Juffali and Mr. Ghosn both say the payments to Juffali were appropriate for “critical services that substantially benefited Nissan.”
The judge is expected to rule on Mr. Ghosn’s bail request by the end of this week, but then prosecutors could come up with new allegations to hold him in prison for longer. Prosecutors say Mr. Ghosn is a flight risk and could destroy evidence, but if prosecutors don’t have enough evidence by now what is there to destroy?
The long detention is putting more pressure on Renault to remove Mr. Ghosn as chairman. Renault has an alliance with Nissan and
Mitsubishi Motors
that increasingly rankles the Japanese, and a fair surmise is that the Ghosn inquisition is part of a Japanese effort to break up this alliance that Mr. Ghosn had put together. The French aren’t going out of their way to raise a stink about the way Japan is treating Mr. Ghosn, which suggests they may care more about the alliance than about what Mr. Ghosn did to save the French auto industry.
All of this looks to us like a dispute that should have been handled in a boardroom, not a courtroom. Meanwhile, Mr. Ghosn sits in prison, where he can contemplate a case of what looks like the Red Queen’s justice.
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