Within days of Carlos Ghosn’s arrest for understating his compensation in Nissan’s regulatory filings came the predictable questions about what this meant about Japanese corporate governance. My answer would be not very much, except that perhaps those who look to Japan as a model of “stakeholder capitalism” might need to think more about the role of government as a stakeholder. In any case, Nissan’s complex alliance and shareholding relationships with Mitsubishi Motors and Renault (and thereby extension, the French government) mean it is an unlikely source of useful lessons on how other corporations should be run.
No, the real significance of his arrest will likely prove to be in subjecting Japan’s criminal justice system to intense global scrutiny. You can’t use a reporting violation as a pretext for detaining a famous Brazilian-Lebanese-French business leader associated with multiple global automotive brands in an unheated cell for weeks with limited access to lawyers and almost no contact with family members before formally charging him with a crime without generating some negative press. In a Nov. 22 article on news analysis site Agora, former economy ministry bureaucrat and university professor Kazuo Yawata wondered whether Ghosn’s arrest and removal might be a sign of the “suicide of Japan’s judicial system.”
What follows are some key points on how that system works.
1) It’s not the police
Some in the media have wrongly reported Ghosn being in “police custody,” but he was arrested by prosecutors. Japanese prosecutors are exceptionally powerful, having the power to arrest, investigate and prosecute suspects. Prosecutorial arrests are rare, however, and those by the special investigations team at the Tokyo Public Prosecutor’s Office exceptional, usually involving high-profile political or corporate cases. The fact that Ghosn was arrested by this office for a minor regulatory offense means it is probably not actually about a minor regulatory offense.
High profile prosecutorial arrests generate significant press and are often accompanied by a leak-based media strategy. The press was waiting for Ghosn’s jets together with the prosecutors. Within a day of his arrest, Japanese tabloid magazines had stories out full of salacious details from anonymous sources about his extravagant, allegedly Nissan-funded lifestyle. Such details were irrelevant to the grounds for his arrest, but the goal is to paint the suspect as a “bad person.” Narrative control is a recurring theme of the process.
2) Bekken taiho — arresting you to arrest you again
Unless it is for a crime in process, Japan’s Constitution prohibits arrest except by judicial warrant “which specifies the offense with which the person is charged.” Law enforcement may find this bothersome, since in Japan the most important piece of evidence in many criminal cases is a confession of either the suspect or a co-conspirator, which are hard to procure if you don’t have the target in custody.
In Japan most high-profile murder cases start with an arrest not for murder, but for “wrongful disposal of a dead body.” The police have enough evidence — a dead body and something connecting it to the suspect — to make an arrest on that charge. The suspect can then be interrogated until they confess to the murder. Based on the confession, they can then be re-arrested and prosecuted for the murder. Bekken taiho — arresting a suspect for one crime in order to investigate others — is a questionable but common practice.
The grounds for arresting Ghosn and his conveniently foreign fellow board member Greg Kelly may likely seem ridiculous. How could the pair file an untrue statement of compensation (in Japanese!) in spite of all the financial controls, audit trails and other mechanisms public companies have in place to ensure accuracy in their public reporting, without the acquiescence and cooperation of Nissan management? Granted, both men were representative directors meaning they had both the power to do so and symbolic responsibility for potentially all acts of the company in theory. In practice, however, it is an absurd proposition.
But that is not the point: If prosecutors had reasonable grounds (such as whistleblower reports) that the filing was untrue, it would be sufficient grounds for arrest and the opportunity to investigate other, hopefully more serious crimes (though subsequent reports suggest the executives obtained expert advice about the filings). Press reports that prosecutors are also considering charging Nissan — the corporation — suggest they have concluded it is impossible to ignore institutional involvement in whatever malfeasance has gone on, though to me it also seemed like an announcement that additional human perpetrators would be unnecessary.
3) ‘Hostage-based’ criminal justice
When referring to their nation’s pre-trial criminal process Japanese defense lawyers (and even some former judges) commonly use the term hitojichi shihō, or “hostage-based justice system.” The “hostage” is the suspect, the “ransom” is their confession.
Within 48 hours of a prosecutorial arrest, the prosecutors must either release the suspect, initiate a prosecution or seek a detention warrant. Note that Ghosn was not immediately prosecuted for the charge on which he was arrested, meaning that by the time this deadline arrived prosecutors: lacked evidence (a confession, for example) necessary to ensure a conviction; and/or wanted to investigate the suspects regarding whatever other crimes might have occurred. Either way, they could be assured a judge would both authorize the detention of Ghosn and Kelly for 10 days and extend the detention period again if necessary (such an extension being duly granted on Nov. 30), a request the Tokyo District Court approved Friday.
The judiciary becomes involved very soon after an arrest in a way that may seem superficially similar to other countries but is actually quite different. In Japan, the first time a suspect sees a judge is not an arraignment hearing in open court where they are informed of the charges being brought against them so they can prepare a defense. Rather it is in a closed proceeding where the prosecutor argues that the suspect should be detained because they are still being investigated in order to determine whether to initiate a prosecution and, if so, on what charges. The standard grounds for seeking detention is that the suspect is a flight risk, might tamper with evidence or intimidate witnesses.
These may be legitimate concerns in the case of violent mobsters, less so for someone like Ghosn. Nonetheless, judges invariably accept these assertions at face value, presuming the suspect guilty before there has even been a trial. While Japan is known for its 99 percent conviction rate, the more shocking statistic is the rate at which detention warrants are granted, which is above 96 percent. Even that is regarded as an improvement from a decade ago when it was about as high as the conviction rate.
Although now detained, the suspect is not yet a defendant: They have not yet been prosecuted for anything, not even the crime for which they were arrested. Under the Code of Criminal Procedure, detention is essentially an investigative tool used to interrogate suspects and develop evidence. Suspects in detention have a constitutional right to counsel but not to have a lawyer present during questioning. In fact, the Code of Criminal Procedure empowers prosecutors to subordinate a suspect’s access to their lawyer to the needs of the prosecutor’s investigation.
Defense lawyers thus have to wait until the end of the day to find out what their clients may have already admitted to. And as the world is learning in the case of Ghosn, meetings with family members (if permitted at all) are highly restricted, must take place under the supervision of guards and cannot be in any language other than Japanese. This is more narrative control, to prevent suspects from getting information to the outside world that could muddy the story prosecutors are trying to build for trial, one memorialized in a confession prepared by prosecutors and hopefully signed by an exhausted and demoralized suspect. Then the prosecution can be brought.
4) Confessions and punishment without trial
It may seem incongruous that Japanese law enforcement is so focused on procuring mea culpas, given the nation’s Constitution specifically prohibits convictions based solely on confessions. In reality, with a confession in hand it is not hard to procure something that qualifies as corroborating evidence, and in any case the constitutional prohibition does not extend to convictions based solely on the confession of a co-defendant or testimony of a witness, both of which can also be produced in similarly coercive environments.
The pretrial detention system may seem shocking but is logical in its goal of minimizing uncertainty about the result of the trial by ensuring it is just a formality, at least as to the question of guilt. Most Japanese criminal trials are just about sentencing decisions. A defendant may, of course, challenge the validity of their confession at trial, but the burden of proof is on them — they must prove they are innocent in the face of it.
In fairness to law enforcement, most of the time they probably deal with people who are clearly culpable, and prosecutors just want the baddies to tell the truth about what transpired. Ideally “the truth” and the story the prosecutors want to tell at trial are the same thing. Unfortunately, one of the criticisms of this system in complex cases that are hard to prove without confessions — those involving corporate malfeasance and corruption, for example — is that prosecutors may commence the process with a preconceived story about what transpired and overzealously use the coercive environment of the interrogation room to force suspects to render interrogations that match the story. In an infamous 2003 case police and prosecutors in Kagoshima managed to force a dozen innocent people to confess to an elaborate vote-buying conspiracy that turned out at trial to have been completely specious.
Think about it: How long could you simply vanish, separated from family, pay bills, respond to e-mails or do your job, before it caused serious long-term damage to your life and career? In addition to encouraging confession, even a false one proffered just to escape the stress of constant interrogation and life in an uncomfortable cell in a facility controlled by your interrogators, the pre-charge detention system gives police and prosecutors in Japan incredible powers to punish someone severely without even putting them on trial. Ghosn’s career as an executive at Nissan and possibly anywhere else has been terminated based on allegations that may never be proven in court.
5) Have prosecutors taken sides?
Perhaps he will ultimately be convicted of every charge brought against him. Given the impact the arrest has had on whatever plans Ghosn may have had for Nissan (including a possible merger with Renault) Japan’s prosecutors will invariably be suspected of “taking sides” — the Nissan side — in what is essentially a cross-border corporate spat.
I like to think Japan’s elite prosecutors are above such things. Nonetheless, awareness of how this case will affect their reputations — not just in Japan but around the world — will doubtless create intense pressure to ensure Ghosn is found culpable, ideally at trial but at least in the court of public opinion. The tools they have to force such a result are frightening and seem easy to misuse.
Colin P.A. Jones is a professor at Doshisha Law School in Kyoto and primary author of “The Japanese Legal System” (West Academic Publishing, co-authored with Frank Ravitch). The views expressed are those of the author alone.