National / Crime & Legal

Carlos Ghosn continues to deny wrongdoing as experts question prosecutors' framing of case

Kyodo, AP

Ousted Nissan Motor Co. Chairman Carlos Ghosn has continued to deny allegations of financial misconduct, saying he cannot accept making what he said would be a false confession as doing so would harm his reputation, sources said Monday.

The 64-year-old, who is known for rescuing Nissan from the brink of bankruptcy in the 1990s, was arrested last month for allegedly understating his compensation. He was subsequently removed as chairman of the automaker.

He is suspected of breaching the Financial Instruments and Exchange Law by reporting only ¥5 billion ($44 million) of his ¥10 billion in compensation during the five years through March 2015.

Ghosn’s annual compensation had been set at around ¥2 billion, but he is charged with failing to report around half of the amount, which he was to receive after stepping down.

Ghosn has told prosecutors that it was unnecessary to report some of his remuneration as the payment had yet to be settled, according to different sources with knowledge of the investigation. He was also quoted as saying that the remaining remuneration was just an amount he had hoped to receive.

According to the sources, Ghosn said he consulted with close aide Greg Kelly, 62, a former Nissan representative director who was arrested along with Ghosn for alleged conspiracy, and was told by Kelly that it was legal even if he did not report the post-retirement payment.

The post-retirement compensation that went unreported for eight years through March 2018 is believed to have totaled more than ¥8 billion. Prosecutors are also considering charging Ghosn over ¥3 billion he failed to disclose during the three years through this March.

Ghosn and Kelly were arrested Nov. 19 and their detention period will expire next Monday.

As the detention period has grown longer, experts have questioned the way prosecutors have framed the case.

One of the biggest mysteries surrounding Ghosn’s arrest is over how he allegedly could have underreported his income by millions of dollars for years and why the company is going after the suspected wrongdoing now.

“Wait a minute. Who wrote the financial statements? The accountants. Who audited them? The auditors,” Christopher Richter, auto analyst for CLSA Securities Japan Co., said of the case. “How do you do this without other people being complicit?”

Prosecutors say Ghosn and Kelly were arrested because of flight risks. But the timing of the scandal, given the length and scale of the alleged wrongdoing, is raising questions.

Why did Nissan choose to come forward now, asked Eric Schiffer, chief executive of Reputation Management Consultants in the Los Angeles area.

“If Nissan knew about this all along and decided to pull the trigger, such Machiavellian tactics will significantly backfire on the brand,” Schiffer said.

Media reports have said that two other company employees contacted authorities as whistleblowers and sought plea deals. Ghosn has not made any public statements about the case.

Kelly’s American lawyer, Aubrey Harwell, said his client, who was dismissed as a Nissan executive director after his arrest, did nothing wrong.

Kelly acted “according to the law and according to company policy,” Hartwell said. “He had talked to people in the company and to outsiders, and he believed everything he did was done totally legally,” he said in a telephone interview from his office in Nashville, Tennessee.

Prosecutors have released very little information. Neither man has been officially charged. Under Japan’s criminal justice system, suspects can be held for weeks and months for questioning without any charges being formally filed.