Nissan global headquarters, Yokohama, Japan. Photo by Wikimedia Commons user Thirteen-fri, licensed under CC BY-SA.
American executive Greg Kelly went on trial in Tokyo last week in the much-ballyhooed nonprosecution of Carlos Ghosn. If the news escaped you, don’t despair: You haven’t missed much.
Thanks to the deliberately deliberate machinery of Japan’s justice system, Kelly’s criminal trial is not expected to wrap up for about a year. That will be after more than 70 scheduled court days in front of a three-judge panel, which will decide his fate without a jury. Not that there is a ton of suspense in the proceedings, regardless of their length. More than 99% of all criminal cases that go to trial in Japan result in a conviction.
Despite its theatricality, the case against Kelly resembles nothing more than a locomotive rumbling down the tracks with nobody at the controls. Kelly was only a collateral target. The attempted corporate malfeasance prosecution was aimed squarely at Ghosn, the longtime CEO of Japan’s Nissan and its French alliance partner, Renault.
Ghosn and Kelly were both arrested in November 2018 after a summons to Tokyo on the pretext of an emergency board meeting. Ghosn was charged with failing to fully disclose his Nissan compensation as required by Japanese law (and later with other alleged misuses of corporate funds). Kelly, who was a top aide and member of Nissan’s board, was accused of assisting him. Both denied wrongdoing.
Under Japanese law, Ghosn could be held for 23 days after his arrest and subjected to prolonged daily interrogation without a lawyer present. He was ultimately arrested and subjected to this treatment four times. When he was finally released on bail (for a second time, after his fourth arrest), he was forbidden from seeing his family or even talking to his wife without his lawyers present to monitor their conversations. He was barred from using the internet or talking to Kelly, his co-defendant.
Ghosn escaped to his native Lebanon in the final days of December. He was smuggled out of Japan on a private jet while hiding in a musical instrument case. Lebanon has no extradition treaty with Japan, leaving Japanese authorities looking for other targets on which to vent their outrage. Kelly is the most convenient one, as he remains in the country under strict bail conditions. Two Americans accused of helping Ghosn flee are being held in the U.S., pending a State Department decision on Japan’s extradition request. Japanese authorities have also filed charges against Ghosn’s wife, although she is reportedly with him in Lebanon and thus out of their reach.
The entire affair has smacked of a boardroom coup almost since the beginning. This impression was not dispelled when a Nissan representative entered a guilty plea on behalf of the company last week, at the same hearing where Kelly pleaded not guilty. Kelly and Ghosn insist they complied with Japanese law, and operated under advice from attorneys in structuring and disclosing Ghosn’s compensation package. Ghosn was one of the auto industry’s most prominent global executives; under his leadership Nissan rose from being the junior partner in the alliance with Renault to become the dominant member of a three-company tie-up that later included Japan’s Mitsubishi. Ghosn has asserted that Japanese executives feared he would merge the companies and move the seat of corporate power to Europe.
In most developed countries, civil proceedings between the executive, the company and perhaps regulators would settle this sort of dispute. The intervention by Japan’s law enforcement seemed heavy-handed at best. Their later treatment of Ghosn was outright draconian. Both the legal and business communities in Japan have had their international reputations tarnished as a result.
But in Japan, there is a major cultural emphasis on saving face. Taking Nissan’s executive control out of Japan would have been a blow to national prestige. Criticizing the country’s law enforcement tactics, and ultimately fleeing a judicial system that he claimed would not give him a fair trial, was an all but intolerable insult. Japanese judges would throw the book at Ghosn if they could. Absent that, Kelly stands alone to take the fall. But Japan’s justice system will take its sweet time with him first.