A backlash is coming to Carlos Ghosn’s arrest

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

Yes, that’s right: I’m convinced that Ghosn, the former chairman of Nissan Motor Co who was arrested on Nov 19 on suspicion of under-reporting 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. Seventeen days after his arrest, 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 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 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. Ghosn will hit the 23-day mark on Dec 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 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% of the time, a success rate that ranks with Russia and China.

So far, 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 on Nov 19, accused of masterminding the under-reporting as well as other supposed financial crimes committed by 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 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 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 re-arrest him as they might a Japanese citizen? Again, I doubt it. The scrutiny from the rest of the world will be too intense.

Most important, think for a moment what it’s going to be like when 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.

People who know nothing about the Japanese justice system are going to start asking aloud how 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 Corp., say, or oversaw the faulty airbags at Takata Corp – weren’t treated as harshly as Ghosn. They’ll ask, finally, whether the whole thing was a ruse, designed to get 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 Ghosn’s alleged crimes. If so, the timing was awfully convenient. As Bloomberg reported earlier this year, Ghosn was pushing for Renault and Nissan – which had been part of a 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, Ghosn created the alliance to help Nissan avoid bankruptcy; he had Renault invest US$5bil in the Japanese company in return for a one-third stake. (Renault currently owns 43% of Nissan, while Nissan owns 15% 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 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 Kelly. Saikawa, who had been Ghosn’s protege, wasted no time throwing his former mentor under the bus. At a news conference held within hours of the arrest, Saikawa described himself as “indignant” at Ghosn’s supposed crimes, and added that Ghosn’s reign as chairman had had a “negative impact” on the company’s operations. Saikawa is now the favourite to become Nissan’s new chairman. Imagine that. (Nissan has declined to comment on suggestions that allegations against Ghosn were intended to push him out of the company.)

It is possible, of course, that Ghosn and Kelly did what they’re being accused of in the media. In Japan, Ghosn’s compensation (US$16.9mil in 2017, of which US$6.5mil 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? Kelly’s explanation that he and Ghosn were devising a deferred comprehensive 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 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 Ghosn remains the company’s titular chief executive. And Nissan’s alliance with Renault remains in force.

So consider one last scenario. 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 Saikawa will dare show up. — Bloomberg

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