Court ruling condemns fugitive Ghosn as key culprit in wrongdoing

The Yomiuri Shimbun

14:57 JST, March 7, 2022

The charismatic leader of a giant corporation who jumped bail and fled overseas has in absentia been held criminally responsible in court. This case also raised serious questions about how corporate culture and the judicial system should function.

The Tokyo District Court has handed down a guilty ruling for Greg Kelly, a former representative director of Nissan Motor Co., who was charged with violating the Financial Instruments and Exchange Law by understating former Nissan Chairman Carlos Ghosn’s executive remuneration on the company’s securities reports.

The ruling concluded that Ghosn’s pay over the eight years through fiscal 2017 was actually about ¥17 billion, but he underreported it by about ¥9.1 billion. The court also described the wrongdoing as driven by Ghosn’s “self-interest,” because he tried to avoid criticism over his high pay.

Out of the eight years in question, the court ruled that Kelly conspired with Ghosn over the remuneration paid for one year. Securities reports, which disclose business performance, are an important source for investors to use in evaluating companies. Although Kelly was acquitted with regard to the remaining seven years, he still bears a heavy responsibility for putting Ghosn’s interests before Nissan’s.

Ghosn fled to Lebanon in December 2019 while on bail. If he claims not to be guilty, he should prove his innocence in court, but he has flouted the rule of law and will not even stand trial. Such selfish behavior should not be tolerated.

Ghosn was also indicted on suspicion of aggravated breach of trust under the Companies Law, as he is accused of misappropriating Nissan funds. The government should tenaciously continue to urge the countries concerned to extradite him to Japan.

The Nissan corporation was fined ¥200 million. In the ruling, the court condemned the company, saying that its watchdog system did not function because Nissan executives and others were so daunted under Ghosn’s long-term dictatorial system. In other words, the automaker’s corporate governance likely was seriously lacking at that time.

After the incident, Nissan drastically increased its number of outside directors and shifted to a system that clearly separates the execution of management’s decisions and its supervision. The company is also reviewing its personnel and remuneration systems. To restore public trust, it is important to heighten the transparency of Nissan’s management.

Other people, including a former head of the secretaries’ office at Nissan, were spared from indictment after agreeing to plea bargains with prosecutors.

The ruling rejected the credibility of the unsubstantiated parts of their testimony, citing the possibility that they might have made statements in line with prosecutors’ wishes in order to obtain favorable treatment.

There have been concerns that under the plea bargaining system, which was introduced in 2018, a person who is offered a plea bargain may make false statements to lay the blame on someone else and have their charges reduced.

Prosecutors need to strive to use plea bargains in a manner that will not result in erroneous charges, by thoroughly verifying corroborative evidence for testimony obtained through the plea bargaining system.

— The original Japanese article appeared in The Yomiuri Shimbun on March 7, 2022.