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Abu Dhabi, UAEMonday 21 January 2019

Ghosn's arrest may spur global backlash against Japan

When the former Nissan chief is finally released from prison - his face is shown in the news and people see his condition - there is going to be an uproar.

Poster showing former Nissan CEO Carlos Ghosn in Beirut, Lebanon. Many Lebanese have rallied around him. AP
Poster showing former Nissan CEO Carlos Ghosn in Beirut, Lebanon. Many Lebanese have rallied around him. AP

A prediction: l’affaire Carlos Ghosn is not going to end well for the Japanese.

Yes, that’s right: I’m convinced that Mr Ghosn, the former chairman of Nissan who was arrested November 19 on suspicion of underreporting his compensation, is going to come out of this looking a lot better than either the Japanese prosecutors who arrested him or the Japanese automaker that so plainly turned on him.

Let’s start with the prosecutors. More than two weeks after his arrest, Mr Ghosn remains confined to a small cell. Prosecutors interrogate for hours at a time, urging him to confess his crimes. Occasionally, his Japanese lawyer is allowed a short visit, as are diplomats from France and Lebanon, where Mr Ghosn has citizenship. But his American lawyers have no access to him, nor does his family. He has asked for additional food, as well as a blanket. It is unknown whether those wishes have been granted.

As has been well-documented since Mr Ghosn’s arrest, his treatment would not be unusual in Japan. Under the country’s criminal justice system, prosecutors can detain a suspect for up to 23 days before charging him, letting him go or detaining him again on a different allegation. Mr Ghosn will hit the 23-day mark on December 10, but the Japanese newspaper Sankei reported Monday that the prosecutors plan to accuse him of a second crime so they can start the clock again. Meaning that Mr Ghosn will very likely remain in prison until at least early 2019.

The purpose of this harsh approach is to break a suspect down, to force a confession out of him. The centrepiece of most Japanese criminal trials is not the introduction of evidence or the examination of witnesses; it’s the confession by the accused. As a result, when Japanese prosecutors take a case to trial, they win 99 per cent of the time, a success rate that ranks with Russia and China.

So far, Mr Ghosn has adamantly insisted on his innocence, which is why the prosecutors have not let up in their treatment of him. So has Greg Kelly, his longtime consigliere who was also arrested November 19, accused of masterminding the under-reporting as well as other supposed financial crimes committed by Mr Ghosn.

Normally, when a Japanese suspect confesses, even if it’s the result of duress, no one much cares besides the suspect’s family. But this is going to be very different. Suppose prosecutors fail to break the 64-year-old Mr Ghosn, and he continues to assert his innocence. Will they hold him for a third 23-day period? A fourth? At some point, there will simply be too much outside pressure, especially from France, where Mr Ghosn is the chief executive of Renault. Japan can’t hold him forever.

Or suppose he does confess – as many people do under such dire circumstances – and then, once he’s freed, tells the world that his confession was coerced. Will the prosecutors rearrest him as they might a Japanese citizen? Again, I doubt it. The scrutiny from the rest of the world will be too intense.

Most importantly, think for a moment what it’s going to be like when Mr Ghosn finally gets out. He’s going to look haggard, thin, utterly depleted, more like a prisoner of war than a captain of industry. He might need to spend some time in a hospital to recover. Once his face is shown in the news, once people see his condition, there is going to be an uproar.

In Lebanon, citizens have already rallied around Mr Ghosn, whose grandparents are Lebanese and holds Lebanese citizenship.

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People who know nothing about the Japanese justice system are going to start asking aloud how Mr Ghosn’s ordeal can possibly be justified. They’ll ask why Japanese executives who have been embroiled in far bigger scandals – the ones who cooked the books at Olympus, say, or oversaw the faulty airbags at Takata – weren’t treated as harshly as Mr Ghosn. They’ll ask, finally, whether the whole thing was a ruse, designed to get Mr Ghosn out of the way so that Nissan’s Japanese executives could reassert control of the company.

Because there’s a pretty good chance that’s what’s really happened here. According to the Japanese news media, a Nissan whistleblower informed prosecutors of Mr Ghosn’s alleged crimes. If so, the timing was awfully convenient. As Bloomberg reported earlier this year, Mr Ghosn was pushing for Renault and Nissan – which had been part of a Mr Ghosn-led alliance since 1999 – to merge into a single company. Most Nissan executives, starting with CEO Hiroto Saikawa, vehemently opposed the merger.

Two decades earlier, Mr Ghosn created the alliance to help Nissan avoid bankruptcy; he had Renault invest $5 billion in the Japanese company in return for a one-third stake. (Renault currently owns 43 per cent of Nissan, while Nissan owns 15 per cent of Renault.) With Nissan now bigger and more profitable than Renault, the Japanese executives bristle at the alliance. And they deeply resent having to take orders from the often high-handed Mr Ghosn.

My theory – and I’m hardly the only one who believes this – is that Nissan’s executives, unable to fire their chairman, had him arrested instead, along with Mr Kelly. Mr Saikawa, who had been Mr Ghosn’s protégé, wasted no time throwing his former mentor under the bus. At a news conference held within hours of the arrest, Mr Saikawa described himself as “indignant” at Mr Ghosn’s supposed crimes, and added that Mr Ghosn’s reign as chairman had had a “negative impact” on the company’s operations. Mr Saikawa is now the favourite to become Nissan’s new chairman. Imagine that. (Nissan has declined to comment on suggestions that allegations against Mr Ghosn were intended to push him out of the company.)

It is possible, of course, that Mr Ghosn and Mr Kelly did what they’re being accused of in the media. In Japan, Mr Ghosn’s compensation ($16.9 million in 2017, of which $6.5m came from Nissan) was criticised as exorbitant; maybe he really did feel the need to hide some of it. But it doesn’t make any sense. How exactly does a company chairman sneak part of his compensation past the board that must vote on it, and the finance department that has to allocate the money?

And what would be the point? Mr Kelly’s explanation that he and Mr Ghosn were devising a deferred comp plan that they planned to take to the board strikes me as a far more likely scenario.

A final thought: Saikawa might think his company’s “whistleblowing” has gotten Mr Ghosn out of his – and Nissan’s – hair, but that’s not quite true. With France’s backing, Renault has refused to cut him loose, and Mr Ghosn remains the company’s titular chief executive. And Nissan’s alliance with Renault remains in force.

So consider one last scenario. Mr Ghosn is finally freed by the prosecutors, and makes his way back to France. He retakes the helm at Renault, and calls for an immediate meeting of the alliance members. In France. I wonder if Mr Saikawa will dare show up.

Updated: December 8, 2018 01:56 PM

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